DOB: Summer 2002 Securities Bulletin

Securities and Business Investments Division

Securities Bulletin

Vol. XVI  No. 2 Summer 2002

Features:

Enforcement Highlights:

Contributors:

Ralph Lambiase, Division Director
Cynthia Antanaitis, Assistant Director and Bulletin Editor
Eric Wilder, Assistant Director
Marge Kagan, Subscription Coordinator

A WORD FROM THE BANKING COMMISSIONER

As this Bulletin issue was ready to go to print, the stock market had fallen by roughly 25%, costing investors an estimated $7 trillion. Pundits have attributed the precipitous decline, in the midst of otherwise positive economic news, to investors' badly shaken confidence in the wake of high profile corporate scandals. According to a July, 2002 Wall Street Journal/NBC News poll, Americans, by a 49%-40% margin, said the stock market is "no longer a fair and open way to invest one's money."

In response, Congress, with broad bipartisan support, has just enacted sweeping securities legislation to address accounting reform and corporate accountability. President Bush commended the action, and quickly signed the legislation into law.

Against this backdrop, an ill-advised industry amendment to the corporate governance bill was circulated in Congress that would have limited the ability of state securities regulators to take appropriate enforcement action against fraud, under the guise of preventing "balkanization" of regulation.

At a time when there is a widely acknowledged urgency to reassure investors that they can again feel confident in the integrity of our markets, it is troubling that some would seek to undermine states' ability to investigate wrongdoing and weaken investor protection.

State securities regulators have long played a vital role as the frontline "local cops on the beat." Since states are closest to the investing public and the first to receive complaints, we've been able to quickly identify nascent problems and bring enforcement actions.

Through the past fiscal year, the Securities Division opened 279 investigations in Connecticut involving issues such as promissory note fraud, boiler rooms promoting "guaranteed" FOREX investments, and abusive sales practices. Seven matters were referred to the Chief State's Attorney's Office for criminal prosecution.

Unlawful activity, whether perpetrated on a local or a national level, can only harm investor confidence. The best way to restore investor confidence, the foundation of our capital markets, is to strengthen, not diminish, the complementary federal/state securities regulatory system that has served the country so well for the past 60-plus years.

The new securities legislation and other important policy and practical issues will certainly be topics of discussion at the department's annual conference, Securities Forum 2002. The event will be held on Monday, October 7th at the Radisson Hotel and Conference Center mid-state in Cromwell. Mark the date on your calendar, and visit our Web site soon for a complete program agenda and registration information.


John P. Burke
Banking Commissioner


{Newspaper Box} Great News for
IARD Participants


Due to the enormous success of the Securities Listserv (announced in the Spring 2002 issue of the Securities Bulletin), the Securities and Business Investments Division is proposing to make electronic delivery a primary distribution channel for the Bulletin. We are proposing to expand our listserv to ALL IARD participants (both Connecticut-registered investment advisers and SEC-regulated advisers filing notice in Connecticut) whose Form ADV includes an e-mail address. Not only will this enable you to receive quicker delivery of the Securities Bulletin, but electronic delivery will help us reduce rising mailing costs. This issue of the Securities Bulletin will be provided to IARD participants in both print and electronic form as a "test" run.

In the event you do not wish to participate in the listserv, 1) please follow the instructions for unsubscribing and 2) send an e-mail to marge.kagan@ct.gov if you wish to continue to receive the Securities Bulletin in print form. Right now, this special service is only available to the investment advisory community. We hope to shift IARD participants over to exclusive electronic delivery in time for the Fall 2002 issue of the Securities Bulletin.

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Reminder to
Non-IARD Filers
{Hourglass Running Out}


Currently, Connecticut does not require IARD participation for investment adviser agents and state-registered investment advisers. Nonetheless, thousands of investment adviser agents associated with SEC-regulated firms and registered in Connecticut have transitioned over to electronic filing. In the Spring 2002 issue of the Securities Bulletin, we noted that Congress was considering a bill (H.R. 1408, the Financial Services Antifraud Network Act of 2001) that would prohibit state securities regulators from accessing an antifraud database unless they both 1) participate in a centralized registration database for broker-dealers, broker-dealer agents, investment advisers and investment adviser representatives; and 2) require broker-dealers, broker-dealer agents, investment advisers and investment adviser representatives to file their registration applications, amendments and renewals through that database. The legislation gave state securities regulators three years from enactment of the bill to comply with this provision.

If the bill is enacted, Connecticut will comply with Congress' directive to require that all investment advisers and investment adviser agents make their filings through the Investment Adviser Registration Depository effective January 1, 2003. It is our hope that the majority of state-registered investment advisers and their investment adviser agents will take advantage of IARD filing well before the 2003 renewal season.

 

{Mark Your Calendar!}

COMING SOON!

SECURITIES FORUM 2002

Monday, October 7, 2002

Radisson Hotel and Conference Center
Cromwell, Connecticut

Watch Our Web Site for Details

 

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Enforcement Highlights

 Administrative Actions

Ameritrust Securities, Inc. (CRD # 13384) - Notice of Intent to Cancel Registration as Broker-dealer Issued

On June 7, 2002, the Banking Commissioner issued a Notice of Intent to Cancel the broker-dealer registration of Ameritrust Securities, Inc. (Docket No. NCA-2002-6434-S). The firm has its principal place of business at 76 Blinkoff Court, Torrington, Connecticut. The Notice of Intent to Cancel Registration was based on the firm's alleged cessation of securities business. In issuing the Notice, the Commissioner noted that 1) the registration of the respondent's sole agent, Seong Y. Lee, had been declared inactive by the NASD on January 10, 2001; 2) that an examination of respondent conducted on December 20, 2001 revealed no securities business being conducted from respondent's address; 3) that the NASD had suspended the respondent on January 4, 2002 for failing to file an annual audit report; and 4) the NASD had no record of the respondent having retained a clearing broker for transacting brokerage business.

The respondent was afforded an opportunity to request a hearing on the Notice of Intent to Cancel Registration.

Seong Y. Lee (CRD # 1978121) - Notice of Intent to Cancel Registration as Agent Issued

On June 7, 2002, the Banking Commissioner issued a Notice of Intent to Cancel the registration of Seong Y. Lee as an agent of Ameritrust Securities, Inc. (Docket No. NCA-2002-6434-S). The firm has its principal place of business at 76 Blinkoff Court, Torrington, Connecticut. The Notice of Intent to Cancel Registration was based on respondent Lee's alleged cessation of securities-related activity. In issuing the Notice, the Commissioner noted that the registration of respondent Lee had been declared inactive by the NASD on January 10, 2001.

The respondent was afforded an opportunity to request a hearing on the Notice of Intent to Cancel Registration.

Eugene Arnold Chapman (CRD # 44690) - Notice of Intent to Revoke Registration as Agent Issued

On May 28, 2002, the Banking Commissioner issued a Notice of Intent to Revoke the registration of Eugene Arnold Chapman as a broker-dealer agent of Lincoln Investment Planning, Inc. (Docket No. NR-2002-6537-S). The action was based on allegations that on September 20, 2001, the NASD suspended the respondent for three months from associating with any NASD member in any capacity and fined the respondent $5,000 based on claims that the respondent engaged in private securities transactions absent notice to, and approval from, his employing broker-dealer. Both the respondent and Lincoln Investment Planning, Inc. are located in New Jersey. The respondent was afforded an opportunity to request a hearing on the Notice of Intent to Revoke Registration as Agent.

International Market Consultants, LLC Ordered to Cease and Desist from Fraudulent Conduct in Connection With Unregistered FOREX Investments; Notice of Intent to Fine Issued

On May 22, 2002, the Banking Commissioner issued an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2002-6210-S) against International Market Consultants, LLC of 2001 West Main Street, Suite 205, Stamford, Connecticut. The action alleged that, from at least November 2000 forward, the respondent, through its agents, transacted business as a broker-dealer absent registration under Section 36b-6(a) of the Connecticut Uniform Securities Act by effecting at least 12 transactions in securities involving contracts on foreign currencies ("FOREX investments"). The action also claimed that the FOREX investments were not registered as required by Section 36b-16 of the Act, and that the respondent employed unregistered agents in contravention of Section 36b-6(b) of the Act. The Order to Cease and Desist and Notice of Intent to Fine also claimed that the respondent violated statutory antifraud provisions by spending almost $41,000 of the $89,692 collected from investors for the FOREX investments on office expenses, personal expenses of the respondent's managers and agents, and fees to an international global events planner.

Since the respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent on July 9, 2002. A hearing on the Notice of Intent to Fine is pending.

Gregory Katsaros Ordered to Cease and Desist from Regulatory Violations in Connection with FOREX Investment Sales; Notice of Intent to Fine Issued

On May 22, 2002, the Banking Commissioner issued an Order to Cease and Desist and Notice of Intent to Fine (Docket No. CF-2002-6210-S) against Gregory Katsaros of 29 Hanover Street, Stamford, Connecticut. The action alleged that, from at least November 2000 forward, the respondent represented International Market Consultants, LLC, a broker-dealer, in effecting at least five transactions in securities involving contracts on foreign currencies ("FOREX investments") and that, in so doing, the respondent acted as an unregistered broker-dealer agent in violation of Section 36b-6(a) of the Connecticut Uniform Securities Act. The action also claimed that the FOREX investments were not registered as required by Section 36b-16 of the Act. In addition, the action alleged that the respondent violated statutory antifraud provisions by misrepresenting to one or more customers that he would purchase FOREX investments on their behalf through InterTrade Forex of Kissimmee, Florida when, in actuality, International Market Consultants LLC, used investor monies to pay office expenses, personal expenses of respondent Katsaros' manager and agents and fees to an international global events planner.

The respondent was afforded an opportunity to request a hearing on the Order to Cease and Desist. A hearing on the Notice of Intent to Fine is pending.

Greg W. Botte (CRD # 2790471) Ordered to Cease and Desist from Unregistered Activity in Connection With FOREX Investments; Notice of Intent to Fine Issued

On May 14, 2002, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2002-5554-S) against Greg W. Botte of 987 Steele Boulevard, Baldwin, New York. The action alleged that, from at least March 2001 forward, the respondent transacted business as an unregistered broker-dealer agent of Oxford-Dundee, Inc. and East Norwich Foreign Holding Corporation, both of 59 Broad Street, Stamford, Connecticut. The action also claimed that the respondent sold unregistered non-exempt investments involving contracts on foreign currencies (also known as FOREX investments) in Connecticut in violation of Section 36b-16 of the Connecticut Uniform Securities Act.

The respondent was afforded an opportunity to request a hearing on the Order to Cease and Desist. A hearing on the Notice of Intent to Fine is pending.

William M. Cutrone (CRD # 2542314) Ordered to Cease and Desist from Unregistered Activity Related to FOREX Investment Sales; Notice of Intent to Fine Issued

On May 14, 2002, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2002-5554-S) against William M. Cutrone of 4 Village Lane, Woodbury, New York. The action alleged that, from at least January 2000 forward, the respondent effected at least 20 transactions in securities involving contracts on foreign currencies (also known as FOREX investments) on behalf of Oxford-Dundee, Inc. and East Norwich Foreign Holding Corporation absent registration as a broker-dealer agent under Section 36b-6(a) of the Connecticut Uniform Securities Act. Oxford-Dundee, Inc. and East Norwich Foreign Holding Corporation are both located at 59 Broad Street, Stamford, Connecticut. The action also claimed that the respondent sold unregistered non-exempt FOREX investments in Connecticut in violation of Section 36b-16 of the Act.

Since the respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent on June 19, 2002. The hearing on the Notice of Intent to Fine remains pending.

Derek M. Lofton Ordered to Cease and Desist from Unregistered Activity Related to FOREX Investment Sales; Notice of Intent to Fine Issued

On May 14, 2002, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2002-5554-S) against Derek M. Lofton of 34 Brown Avenue, Hempstead, New York. The action claimed that, from at least September 2000 forward, the respondent effected at least 26 transactions in securities involving contracts on foreign currencies (also known as FOREX investments) on behalf of Oxford-Dundee, Inc. and East Norwich Foreign Holding Corporation absent registration as a broker-dealer agent under Section 36b-6(a) of the Connecticut Uniform Securities Act. The action also alleged that the respondent sold unregistered non-exempt FOREX investments in Connecticut in violation of Section 36b-16 of the Act.

The Order to Cease and Desist, being uncontested, became permanent on June 27, 2002. The hearing on the Notice of Intent to Fine remains pending.

Thomas W. Qualls (CRD # 2910168) Ordered to Cease and Desist from Unregistered Activity Related to FOREX Investment Sales; Notice of Intent to Fine Issued

On May 14, 2002, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2002-5554-S) against Thomas W. Qualls of 111 Cleveland Avenue, Long Beach, New York. The action alleged that, from at least February 2000 forward, the respondent effected at least 94 transactions in securities involving contracts on foreign currencies (also known as FOREX investments) on behalf of Oxford-Dundee, Inc. and East Norwich Foreign Holding Corporation absent registration as a broker-dealer agent under Section 36b-6(a) of the Connecticut Uniform Securities Act. The action also claimed that the respondent sold unregistered non-exempt FOREX investments in Connecticut in violation of Section 36b-16 of the Act.

Since the respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent on June 5, 2002. A hearing on the Notice of Intent to Fine is pending.

Oxford-Dundee, Inc. Ordered to Cease and Desist from Alleged Violations in Connection With FOREX Sales; Notice of Intent to Fine Issued

On April 29, 2002, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2002-5554-S) against Oxford-Dundee, Inc. of 59 Broad Street, Stamford, Connecticut. The action alleged that, from at least January 2000 forward, the respondent sold unregistered non-exempt securities in the form of contracts on foreign currencies (also known as FOREX investments) in violation of Section 36b-16 of the Connecticut Uniform Securities Act and, in so doing, transacted business as an unregistered broker-dealer in violation of Section 36b-6(a) of the Act. In addition, the action claimed that the respondent violated the antifraud provisions in Section 36b-4 of the Act by, among other things, failing to disclose to customers the existence or amount of commissions associated with the transactions, falsely representing to at least one customer that the customer's funds would be insured, falsely representing that the respondent would issue computer generated stop loss orders making the investments low risk; failing to disclose the relationship between the respondent and its various clearing firms; and mailing monthly statements to customers that did not accurately reflect the accounts' true status and transactional history.

Since the respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent June 19, 2002. The hearing on the Notice of Intent to Fine remains pending.

East Norwich Foreign Holding Corporation Ordered to Cease and Desist from Alleged Violations in Connection With FOREX Sales; Notice of Intent to Fine Issued

On April 29, 2002, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2002-5554-S) against East Norwich Foreign Holding Corporation of 59 Broad Street, Stamford, Connecticut. The action claimed that, from at least January 2000 forward, the respondent sold unregistered non-exempt securities in the form of contracts on foreign currencies (also known as FOREX investments) in violation of Section 36b-16 of the Connecticut Uniform Securities Act and, in so doing, transacted business as an unregistered broker-dealer in violation of Section 36b-6(a) of the Act. In addition, the action alleged that the respondent violated the antifraud provisions in Section 36b-4 of the Act by, among other things, failing to disclose to customers the existence or amount of commissions associated with the transactions, falsely representing to at least one customer that the customer's funds would be insured, falsely representing that the respondent would issue computer generated stop loss orders making the investments low risk; failing to disclose the relationship between the respondent and its various clearing firms; and mailing monthly statements to customers that did not accurately reflect the accounts' true status and transactional history.

Since the respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent on June 19, 2002. The hearing on the Notice of Intent to Fine remains pending.


Settlements

Consent Orders

LH Ross & Company, Inc. (CRD # 37920) Fined $12,500

On June 7, 2002, the Banking Commissioner entered a Consent Order (Docket No. RF-2002-6467-S) with respect to LH Ross & Company, Inc. of 2255 Glades Road, Suite 425W, Boca Raton, Florida. The firm had been the subject of a February 25, 2002 Notice of Intent to Revoke Registration as Broker-dealer and Notice of Intent to Fine (Docket No. RF-2002-6467-S). The Consent Order resolved the allegations in the prior Notice of Intent to Revoke Registration as Broker-dealer and Notice of Intent to Fine.

In entering the Consent Order, the Commissioner found that the respondent concealed material information from, and made false or misleading statements to, agency staff during the course of an investigation and examination by destroying an index card, replacing the card with another containing altered information and misrepresenting that the altered card was the original. The Commissioner also found that the respondent 1) engaged in dishonest or unethical practices by employing two "cold callers" who were not registered with the NASD; 2) wilfully violated Section 36b-6(b) of the Connecticut Uniform Securities Act by employing agents who were not registered under the Act; 3) sold unregistered non-exempt securities to Connecticut customers in violation of Section 36b-16 of the Act; and 4) wilfully violated Section 36b-31-6f(b) of the Regulations under the Act by failing to establish, enforce and maintain adequate supervisory procedures.

The Consent Order fined the firm $12,500 and directed that it file quarterly reports for two years concerning any securities-related complaints, actions or proceedings, including arbitrations, that affected Connecticut residents. In addition, the Consent Order required that the firm reimburse the department up to $2,500 for the costs associated with one or more examinations of the firm's offices to be conducted within 24 months.

Colchester Investment Counsel LLC Assessed $4,500 for Unregistered Investment Advisory Activity

On May 7, 2002, the Banking Commissioner entered a Consent Order (No. CO-02-6516-S) with respect to Colchester Investment Counsel LLC of 2 Sound View Drive, Suite 100, Greenwich, Connecticut. The Consent Order alleged that from January 2000 forward, the firm transacted business as an investment adviser and employed an unregistered investment adviser agent in purported violation of Section 36b-6(c) of the Connecticut Uniform Securities Act. The firm has since applied for investment adviser registration in Connecticut.

The Consent Order required that the firm pay $4,500 to the agency. Of that amount, $3,500 constituted an administrative fine, $500 represented reimbursement for past due registration fees and $500 constituted reimbursement for departmental investigative costs. In addition, the Consent Order directed the firm to implement revised supervisory and compliance procedures, and, for two years, to file quarterly reports with the department describing any securities-related complaints, actions or proceedings involving Connecticut residents.

Stipulation and Agreements

Huntoon Hastings Inc. (CRD # 113073) Assessed $2,250 for Notice Filing Lapse

On June 19, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6481-S) with Huntoon Hastings Inc. of 9 Old Kings Highway South, Darien, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement alleged that from 1997 until May 7, 2002, when a notice was filed, the firm failed to make the investment advisory notice filing required by Section 36b-6(e) of the Connecticut Uniform Securities Act and pay the related fees. Pursuant to the Stipulation and Agreement, the firm agreed to pay $2,250 to the agency. Of that amount, $1,500 constituted an administrative fine and $750 constituted reimbursement for past due notice filing fees.

Grossman Asset Management Inc. (CRD # 108474), Grossman Asset Management Partners LP (CRD # 109157) and Quantitative Financial Strategies Inc. (CRD # 108539) Collectively Assessed $5,850 for Delinquent Investment Advisory Notice Filings

On June 19, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6478-S) with Grossman Asset Management Inc., Grossman Asset Management Partners LP and Quantitative Financial Strategies Inc., all of Four Stamford Plaza, 107 Elm Street, Suite 500B, Stamford, Connecticut. The entities, which are affiliated, are registered as investment advisers with the Securities and Exchange Commission.

The Stipulation and Agreement alleged that from November 19, 1999 until March 27, 2002, when appropriate notice filings were made, the entities failed to make the investment advisory notice filings required by Section 36b-6(e) of the Connecticut Uniform Securities Act and pay the associated fees.

Without admitting or denying the Commissioner's allegations, each of the entities agreed to pay a $1,500 fine to the agency and to reimburse the agency $450 for past due notice filing fees. The total amount assessed against the respondents collectively was $5,850.

Hart Advisers, Inc. (CRD # 105525) Assessed $2,100 for Notice Filing Lapse

On June 18, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6534-S) with Hart Advisers, Inc. of One Mill Pond Lane, Simsbury, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement alleged that from 1997 until April 11, 2002, when a notice was filed, the firm failed to make the investment advisory notice filing required by Section 36b-6(e) of the Connecticut Uniform Securities Act and pay the related fees. Pursuant to the Stipulation and Agreement, the firm agreed to pay $2,100 to the agency. Of that amount, $1,500 constituted an administrative fine and $600 represented reimbursement for past due notice filing fees.

Taurus Advisory Group LLC (CRD # 113150) Assessed $2,250 for Delinquent Notice Filing

On June 17, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6487-S) with Taurus Advisory Group LLC of Two Landmark Square, Stamford, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement claimed that from 1997 until April 18, 2002, when a notice was filed, the firm failed to make the investment advisory notice filing required by Section 36b-6(e) of the Connecticut Uniform Securities Act and pay the related fees. In entering into the Stipulation and Agreement, the Commissioner acknowledged the firm's representations that the firm did not advertise its business or otherwise hold itself out as providing investment advisory services to the public, and that the firm had not been aware of a 1997 state law change requiring that SEC-registered investment advisers file a notice with the department. Pursuant to the Stipulation and Agreement, Taurus Advisory Group LLC agreed to pay $2,250 to the agency. Of that amount, $1,500 constituted an administrative fine and $750 represented reimbursement for past due notice filing fees.

Sterneck Capital Management, LLC (CRD # 111463) Assessed $2,250 for Failure to File Investment Advisory Notice

On June 12, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6459-S) with Sterneck Capital Management, LLC. of 315 Post Road West, Westport, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement alleged that from 1997 until April 24, 2002, when a notice was filed, the firm failed to make the investment advisory notice filing required by Section 36b-6(e) of the Connecticut Uniform Securities Act. Pursuant to the Stipulation and Agreement, Sterneck agreed to pay $2,250 in resolution of the matter. Of that amount, $1,500 constituted an administrative fine and $750 represented reimbursement for past due notice filing fees.

Northern Trust Global Advisors Inc. (CRD # 110464) Assessed $1,500 for Investment Advisory Notice Filing Lapse

On June 7, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6477-S) with Northern Trust Global Advisors Inc. of 300 Atlantic Street, Suite 400, Stamford, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement alleged that from 1997 until March 27, 2002, when a notice was filed, the firm failed to make the investment advisory notice filing required by Section 36b-6(e) of the Connecticut Uniform Securities Act. The Stipulation and Agreement acknowledged that, in making the required notice filing, the firm had remitted payment for current and past due notice filing fees. Pursuant to the Stipulation and Agreement, the firm agreed to pay a monetary penalty of $1,500 to the department.

EAI Partners LP (CRD # 105934) Assessed $2,250 for Failure to File Investment Advisory Notice

On June 3, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6463-S) with EAI Partners LP of 200 Connecticut Avenue, Norwalk, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement claimed that from 1997 until April 11, 2002, when a notice was filed, the firm failed to make the investment advisory notice filing required by Section 36b-6(e) of the Connecticut Uniform Securities Act and pay the related fees. The Stipulation and Agreement required that the firm pay $2,250 to the department. Of that amount $1,500 constituted an administrative fine and $750 constituted reimbursement for past due notice filing fees.

Investment Solutions Inc. (CRD # 107879) Assessed $2,100 for Failing to File Investment Advisory Notice

On June 3, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6483-S) with Investment Solutions Inc. of 263 Tresser Boulevard, Tenth Floor, Stamford, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement alleged that from August 25, 1998 until March 12, 2002, when a notice was filed, the firm failed to make the investment advisory notice filing required by Section 36b-6(e) of the Connecticut Uniform Securities Act and pay the related fees. The Stipulation and Agreement required that the firm pay $2,100 to the department. Of that amount $1,500 constituted an administrative fine and $600 constituted reimbursement for past due notice filing fees.

Restructuring Capital Associates, L.P. (CRD # 105649) Assessed $2,250 for Failure to File Investment Advisory Notice

On May 21, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6482-S) with Restructuring Capital Associates, L.P. of Two Stamford Plaza, Suite 1501, 281 Tresser Boulevard, Stamford, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement claimed that from 1997 until February 26, 2002, when a notice was filed, the firm failed to make the investment advisory notice filing required by Section 36b-6(e) of the Connecticut Uniform Securities Act and pay the related fees. The Stipulation and Agreement required that the firm pay $2,250 to the department. Of that amount $1,500 constituted an administrative fine and $750 constituted reimbursement for past due notice filing fees.

Park Avenue Securities, L.L.C. (CRD # 46173) Assessed $5,000 for Unregistered Branch Office Activity

On May 14, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6517-S) with Park Avenue Securities, L.L.C., a broker- dealer having its principal office at 7 Hanover Square, New York, New York. The Stipulation and Agreement alleged that from approximately March 1999 to December 2001, the firm transacted business from two Connecticut locations at a time when those sites were not registered as branch offices under the Connecticut Uniform Securities Act.

Pursuant to the Stipulation and Agreement, the firm agreed to revise and implement supervisory and compliance procedures designed to prevent and detect violations of Connecticut law governing branch office registration. In addition, the firm agreed to pay $5,000 to the agency. Of that amount, $3,500 constituted an administrative fine and $1,500 represented reimbursement for agency investigative costs.

M.I.T. Asset Management, Inc. Assessed $2,500 for Unregistered Investment Advisory Activity

On April 22, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6469-S) with M.I.T. Asset Management, Inc. of 1171 East Putnam Avenue, Riverside, Connecticut. The Stipulation and Agreement alleged that from December 31, 1997 to December 31, 2001, the firm transacted business as an investment adviser absent registration under Section 36b-6(c) of the Connecticut Uniform Securities Act. In entering into the Stipulation and Agreement, the Commissioner acknowledged the firm's written representation that the firm's clients had been limited to four offshore private investment funds whose investments had since been liquidated and returned, and that the firm at no time provided securities-related investment advice to Connecticut residents.

Pursuant to the Stipulation and Agreement, M.I.T. Asset Management, Inc. agreed to review, revise and implement supervisory procedures needed to ensure compliance with state investment adviser registration and notice filing requirements. In addition, the Stipulation and Agreement required that the firm pay $2,500 to the department. Of that amount, $800 constituted an administrative fine, $700 represented reimbursement for past due registration filing fees and $1,000 constituted reimbursement for agency investigative costs.

Cornerstone Real Estate Advisers, Inc.(CRD # 106468) Assessed $2,100 for Delinquent Notice Filing

On April 22, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6488-S) with Cornerstone Real Estate Advisers, Inc. of One Financial Plaza, Suite 1700, Hartford, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement claimed that from 1997 until January 28, 2002, when a notice was filed, the firm failed to make the investment advisory notice filing required by Section 36b-6(e) of the Connecticut Uniform Securities Act and pay the related fees. In entering into the Stipulation and Agreement, the Commissioner acknowledged the firm's representations that it had relied upon outside legal counsel in not making the required filings, that its business was exclusively institutional in nature and that it had not been aware of 1997 changes in state law requiring that a notice be filed and a fee remitted. The Stipulation and Agreement required that the firm pay $2,100 to the department. Of that amount $1,500 constituted an administrative fine and $600 constituted reimbursement for past due notice filing fees.

Target Holdings Corp. d/b/a Target Investors (CRD # 105172) Assessed $2,100 for Notice Filing Lapse

On April 15, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6486-S) with Target Holdings Corp. d/b/a Target Investors of 15 River Road, Suite 220, Wilton, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement alleged that from 1997 until March 5, 2002, when a notice was filed, the firm failed to make the investment advisory notice filing required by Section 36b-6(e) of the Connecticut Uniform Securities Act and pay the related fees. In entering into the Stipulation and Agreement, the Commissioner acknowledged the firm's representations that the firm's client base was exclusively institutional in nature and that the firm had not been aware of 1997 state law changes requiring the filing of a notice. The Stipulation and Agreement required that the firm pay $2,100 to the department. Of that amount $1,500 constituted an administrative fine and $600 constituted reimbursement for past due notice filing fees.

Matthew Maounis (CRD # 1927401) Fined $5,000 for Unregistered Agent Activity

On April 5, 2002, the Banking Commissioner executed a Stipulation and Agreement (No. ST-02-6435-S) with respect to Matthew Maounis, currently a registered broker-dealer agent of Jesup & Lamont Securities Corp. f/k/a Broadmark Capital Corp. The Stipulation and Agreement alleged that between June 1998 and March 2001, respondent Maounis transacted business as an agent of Southport Securities, LLC absent registration under Section 36b-6 of the Connecticut Uniform Securities Act. Matthew Maounis had been associated with Southport Securities LLC as its managing director and as an agent from June 1998 to March 2001.

The Stipulation and Agreement acknowledged the respondent's claim that he relied upon the compliance officer of Southport Securities LLC to file for agent registration on his behalf, and that the respondent only became aware of his unregistered status as an agent of Southport Securities LLC in 2001.

Pursuant to the Stipulation and Agreement, respondent Maounis agreed to pay a $5000 fine to the department and to complete the Regulatory Element of the Securities Industry Continuing Education Program within ninety days.

Stephen Harrison Hogan d/b/a Harrison Management (CRD # 111110; SEC File No. 801-13730) Assessed $2,100 for Delinquent Investment Advisory Notice Filing

On April 2, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-01-6415-S) with Stephen Harrison Hogan d/b/a Harrison Management of 30 Maplecrest Drive, Danbury, Connecticut. Harrison Management is an investment adviser regulated by the Securities and Exchange Commission. The Stipulation and Agreement alleged that, from 1997 until April 24, 2001, when a notice was filed, Harrison Management failed to make the notice filing required of SEC-regulated investment advisers by Section 36b-6(e) of the Connecticut Uniform Securities Act. In entering into the Stipulation and Agreement, the Commissioner acknowledged Stephen Hogan's representations that since moving to Connecticut from New York in 1991, 1) he had relied upon the exclusion from the definition of "investment adviser" then contained in Section 36b-3(6)(G) of the Connecticut Uniform Securities Act for investment adviser rendering advice to no more than five non-institutional clients in Connecticut during the preceding twelve month period; 2) he had not been aware of changes in state law repealing the exclusion and requiring that a notice be filed and a fee remitted; and 3) since 1991, he had not rendered any investment advisory services directly to any Connecticut clients but only to clients and client representatives located out-of-state.

Pursuant to the Stipulation and Agreement, Harrison Management agreed to pay $2,100 to the department. Of that amount, $1,500 constituted an administrative fine and $600 represented reimbursement for past due notice filing fees.

Fairview Capital Partners LP (CRD # 106781) and Fairview Venture Management LLC (CRD # 108108) Assessed $3,400 in Total for Investment Advisory Notice Filing and Registration Lapses

On April 2, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6450-S) with Fairview Capital Partners LP and Fairview Venture Management LLC, both of 10 Stanford Drive, Farmington, Connecticut. The two entities are affiliated investment advisers regulated by the Securities and Exchange Commission.

The Stipulation and Agreement alleged that Fairview Capital Partners LP 1) transacted business as an investment adviser absent registration under Section 36b-6(c) of the Connecticut Uniform Securities Act from January 31, 1994 to 1997; and 2) from 1997 to October 4, 2001, when a notice filing was made, failed to file the notice and pay the fees required by Section 36b-6(e) of the Act. The Stipulation and Agreement also claimed that, from October 18, 1999 to October 4, 2001, when a notice filing was made, Fairview Venture Management LLC failed to make the investment advisory notice filing and pay the annual fees required by Section 36b-6(e) of the Act.

The Stipulation and Agreement required that Fairview Capital Partners LP pay $2,100 to the department. Of that amount, $1,500 constituted an administrative fine, and $600 represented reimbursement for past due notice filing fees. In addition, the Stipulation and Agreement required that Fairview Venture Management LLC remit $1,300 to the department; of that amount $1,000 constituted an administrative fine and $300 represented reimbursement for past due notice filing fees.

Conditional Registrations

Charles Edward Dear (CRD # 1079490) d/b/a Soundview Financial Management (IARD # 117759) - Consent Order Conditioning Registration as an Investment Adviser Issued

On June 3, 2002, the Banking Commissioner issued a Consent Order (No. CO-01-6436-S) under the Connecticut Uniform Securities Act conditioning the registration of Charles Edward Dear as an investment adviser. Charles Edward Dear, who does business under the name "Soundview Financial Management", maintains a business address at 35 Boston Street, #6, Guilford, Connecticut. The Consent Order alleged that Dear 1) violated Section 36b-6(c) of the Act by transacting business as an unregistered investment adviser from January 1, 1998 forward; 2) violated Section 36b-6(c) of the Act by engaging unregistered investment adviser agents; and 3) violated Section 36b-5(a)(2) of the Act by representing in disclosure statements provided to clients that he had been registered as an investment adviser in Connecticut since 1992 when that was not the case. Dear had been the subject of a June 7, 1993 Stipulation and Agreement with the department (Docket No. ST-93-2390-S) based on allegations of unregistered investment advisory activity.

The Consent Order Conditioning Registration as an Investment Adviser required that Dear retain an independent consultant to evaluate the adequacy of his internal procedures covering investment adviser registration and compliance, and to prepare a written report on those procedures. The Consent Order also directed Dear to remit $18,900 to the department. Of that amount, $10,000 constituted an administrative fine for violating the 1993 Stipulation and Agreement with the agency; $5,000 constituted an administrative fine for failing to register as an investment adviser from January 1, 1998 through December 2001 and for engaging unregistered investment adviser agents; $1,400 represented reimbursement for past due registration fees; and $2,500 constituted reimbursement for agency investigative costs. In addition, the Consent Order required that Dear 1) cease and desist from regulatory violations; 2) notify existing clients in writing that a conditional order had been entered and provide clients with information on obtaining a copy of the order; 3) file quarterly reports with the department for two years describing any securities-related complaints, actions or proceedings involving Connecticut residents; and 4) refrain from hiring, engaging or contracting for the services of any individual to solicit investment advisory business or render investment advisory services for compensation on Dear's behalf for 36 months.


STATISTICAL SUMMARY

Licensing At A Glance
June 30, 2002
Broker-dealers Registered 2,624
Broker-dealer Agents Registered 115,200
Broker-dealer Branch Offices Registered 1,774
Investment Advisers Registered 379
SEC Registered Advisers Filing Notice 1,177
Investment Adviser Agents Registered 5,220
Investment Advisory Branch Offices Registered 105
Agents of Issuer Registered 120

{ }

  1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Securities Investigations  
Opened 91 75     166
Closed 78 90     168
Ongoing as of June 30, 2002 106 92      
Subpoenas issued 15 9     24
Cases referred from Attorney General 2 6     8
Cases referred from Other Agencies 4 1     5
{ }  
Securities Enforcement: Remedies and Sanctions  
Notices of Intent to Deny (Licensing) 0 0     0
Notices of Intent to Suspend (Licensing) 0 0     0
Notices of Intent to Revoke (Licensing) 1 1     2
Denial Orders (Licensing) 0 0     0
Suspension Orders (Licensing) 0 0     0
Revocation Orders (Licensing) 0 0     0
Notices of Intent to Fine 1 8     9
Orders Imposing Fine 4 0     4
Cease and Desist Orders 4 9     13
Notices of Intent to Issue Stop Order 0 0     0
Activity Restrictions/Bars 3 1     4
Stop Orders 0 0     0
Vacating/Withdrawal Orders 0 0     0
Censures 0 0     0
Formal Orders of Restitution 0 0     0
{ }  
Proceedings and Settlements  
Administrative Actions 6 19     25
Consent Orders 5 2     7
Stipulation and Agreements 8 19     27
{ }  
Monetary Relief  
Monetary Sanctions Imposed $153,700 80,900     $234,600
Restitution or Other Monetary Relief $200,226 10,097     $210,323
{ }  
Securities Referrals  
Criminal (Chief State's Attorney) 2 2     4
Criminal (Other) 0 0     0
Civil (Attorney General) 0 0     0
Other Agency Referrals 2 5     7
{ }  
Examinations  
Broker-dealers 23 23     46
Investment Advisers 12 14     26

The Securities and Business Investments Division is also charged with
administering the Connecticut Business Opportunity Investment Act.

  1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Business Opportunities  
Investigations Opened 1 1     2
Investigations Closed 0 3     3
Investigations ongoing as of June 30, 2002 3 1      
Cases referred by Attorney General 0 0     0
Cases referred by Other Agencies 0 0     0
Subpoenas issued 0 0     0
Cease and Desist Orders 0 0     0
Notices of Intent to Issue Stop Order 0 0     0
Stop Orders 0 0     0
Notices of Intent to Fine 0 0     0
Orders Imposing Fine 0 0     0
Consent Orders 0 0     0
Monetary Sanctions Imposed 0 0     0
Restitution or Other Monetary Relief 0 0     0
Criminal Referrals 0 0     0
Civil Referrals (Attorney General) 0 0     0
Other Agency Referrals 0 0     0

Securities Division