DOB: Fall 2002 Securities Bulletin

Securities and Business Investments Division

Securities Bulletin

Vol. XVI  No. 3 Fall 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

Regulators and industry alike today face a challenge in working to restore investor confidence in our financial marketplace. Despite an October, 2002 rally that sent the Dow Jones Industrial Average to its best monthly gain since 1987, American families are still deeply mistrustful of the stock market, and are either withdrawing their assets or sitting on the sidelines.

Many leaders are loudly calling for action and there is a pervasive sense of urgency to "do something." As this Bulletin edition goes to print, various reform proposals are being forcefully discussed and developed. While such focused attention to the issue is admirable, a more fundamental response may, in the end, do more to restore public confidence.

Just as a strong law enforcement presence persuades pedestrians to confidently stroll our city streets with their families, a strong securities enforcement presence will encourage investors to again approach Wall Street without fear.

Government and industry must maintain an effective balance between regulation and healthy commerce. A rush to "quick fix" closure on issues shouldn't overtake thoughtful and deliberate consideration of the long-term impact of regulatory decisions. Nor should political or other means be sought to interfere with or limit the legitimate efforts of "cops on the beat" to protect citizens.

As part of that balance and to ease unneeded regulation, the department recently adopted an order to exempt registered broker-dealers and investment advisers from the requirement that they maintain an on-site manager at each Connecticut branch office.

The order reflects the reality that some agents, for family reasons or otherwise, actively conduct business from their homes. Despite the cited exemption, the department firmly believes that every business location, whether a residence or not, should be subject to basic licensing, inspection and supervisory safeguards. We hope, for the sake of investor protection and regulatory uniformity, that the NASD and the NYSE will adopt a similar approach to branch office regulation, particularly in formulating a uniform definition of "branch office."

In closing, I am very pleased to congratulate Ralph Lambiase, Director of the department's Securities Division, who was recently voted President-elect of the North American Securities Administrators Association ("NASAA"). In September, 2003, Ralph will automatically succeed Christine Bruenn, of Maine, to become NASAA President for a one-year term.


John P. Burke
Banking Commissioner


Order Exempting Registered Broker-dealers and
Registered Investment Advisers from the Requirement
That They Maintain an On-Site Manager at Each Connecticut Branch Office


WHEREAS
, the Commissioner of Banking ("Commissioner") is charged with administering Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act ("Act"), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies ("Regulations") promulgated under the Act;

WHEREAS, Section 36b-31(a) of the Act provides, in pertinent part, that: "[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of . . . [the Act] . . . . For the purpose of . . . orders, the commissioner may classify securities, persons and matters within his jurisdiction, and prescribe different requirements for different classes";

WHEREAS, Section 36b-31(b) of the Act provides, in pertinent part, that: "[n]o . . . order may be made . . . unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of . . . [the Act]";

WHEREAS, the Commissioner finds that the issuance of this Order is necessary and appropriate in the public interest and for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act;

WHEREAS, Section 36b-31-6f of the Regulations provides, in pertinent part, that: "(b) Each registered broker-dealer and investment adviser shall establish, enforce and maintain a system for supervising the activities of its agents, investment adviser agents and Connecticut office operations that is reasonably designed to achieve compliance with applicable securities laws and regulations. (c) The supervisory system shall provide, at a minimum, for the following: . . . (3) For each Connecticut branch office . . . the designation of a manager who shall be responsible for its day-to-day operation and supervision and . . . who shall be located on the premises of such office on a full time basis" (emphasis added);

WHEREAS, Section 36b-31-31c of the Regulations provides that: "[t]he commissioner may exempt a person, security or transaction from a specified provision of sections 36b-31-2 to 36b-31-33, inclusive, of the regulations upon a finding that such exemption is in the public interest";

WHEREAS, the Commissioner acknowledges that the regionalization of Connecticut's business environment combined with technological advances in supervisory support may not justify a requirement that each branch office be staffed by an on-site manager in all instances;

AND WHEREAS, the Commissioner finds that the exemption provided by this Order is in the public interest.

NOW THEREFORE, THE COMMISSIONER ORDERS AS FOLLOWS:

1. A registered broker-dealer or registered investment adviser that has implemented a system of adequate supervisory controls over its branch office operations, designed to ensure a level of oversight comparable to that which would exist had its managers been located on-site, shall be exempt from the requirement in Section 36b-31-6f(c)(3) of the Regulations that each Connecticut branch office be staffed by a manager located on the premises of such branch office on a full time basis. A system of adequate supervisory controls may include, without limitation, a computerized tracking system relating to branch office activity, designation of regional managers, and/or frequent visits to the location by an off-site manager;
2. Nothing in this Order shall eliminate or diminish the obligation of a registered broker-dealer or registered investment adviser under Section 36b-31-6f(b) of the Regulations to establish, enforce and maintain a system for supervising the activities of its agents, investment adviser agents and Connecticut office operations that is reasonably designed to achieve compliance with applicable securities laws and regulations;
3. Nothing in this Order shall preclude the Commissioner from requiring on-site branch office supervision for any registered broker-dealer or registered investment adviser whose supervisory system exhibits deficiencies or whose business conduct or disciplinary record warrants that a higher level of supervision be imposed; and
4. This Order shall remain in effect until modified, superseded or vacated by the Commissioner or other lawful authority.
So ordered at Hartford, Connecticut
this 4th day of October 2002
John P. Burke
Banking Commissioner

{ }

Enforcement Highlights

 Administrative Actions

Stephen P. Funk (CRD 2224312) Ordered to Cease and Desist from Unregistered Activity in Connection With Promissory Note Sales; Notice of Intent to Fine Issued

On September 25, 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-2002-6277-S) against Stephen P. Funk of 196 Fern Avenue, Litchfield, Connecticut. The action alleged that, from at least January 1999 to June 2001, the respondent offered and sold unregistered non-exempt promissory notes of Wellesley Services, LLC to Connecticut investors in violation of Section 36b-16 of the Connecticut Uniform Securities Act; that, in so doing, the respondent transacted business as an unregistered agent of the issuer in violation of Section 36b-6(a) of the Act; and that the respondent violated Section 36b-23 of the Act by making a false statement during the course of the department's investigation with respect to the respondent's involvement in the promissory note sales. 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 has been set for November 14, 2002.

Wellesley Services, LLC Ordered to Cease and Desist from Unregistered Promissory Note Sales; Notice of Intent to Fine Issued

On September 25, 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-2002-6277-S) against Wellesley Services, LLC of 75 Chestnut Ridge Road, Montvale, New Jersey. The action alleged that, from at least January 1999 forward, the respondent violated Sections 36b-16 and 36b-6(b) of the Connecticut Uniform Securities Act by offering and selling unregistered non-exempt promissory notes to eleven Connecticut investors through at least one unregistered agent of issuer. Since the respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent on October 21, 2002. A hearing on the Notice of Intent to Fine has been scheduled for November 14, 2002.

Georges Trading Corp. Ordered to Cease and Desist from Allegedly Fraudulent Note Sales; Notice of Intent to Fine Issued

On August 2, 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-2002-6387-S) against Georges Trading Corp., also known as G's Trading Corp., G's Capital Investments, G's Investment Club and B & S Investment Club. The corporation maintains its principal place of business at 800 Summer Street, Suite 207, Stamford, Connecticut. The action alleged that, from at least February 2000 forward, the respondent sold $906,650 of its promissory notes to at least 63 Connecticut investors; that the notes were not registered under Section 36b-16 of the Connecticut Uniform Securities Act; and that the respondent violated Section 36b-6(b) of the Act by employing unregistered agents in selling the notes. In addition, the Order to Cease and Desist and Notice of Intent to Fine claimed that the respondent violated the antifraud provisions of the Act by a) mailing inaccurate account statements to Connecticut investors; b) presenting subsequently dishonored checks to Connecticut investors as refunds; and c) falsely representing that the note proceeds would be invested in the stock market, that the investments were safe, secure and insured; that investors would receive up to 70% in interest per month; that the respondent had 3,000 members in over 5 countries; that respondent had over $2,500,000 in total assets; and that the respondent would pay taxes on the investment returns of certain Connecticut investors. The action further alleged that no investor monies were invested as promised by the respondent, and that, while the respondent had returned approximately $78,939 to investors, the remaining $827,711 had been used to pay the personal expenses of the respondent's president and vice president as well as payroll and office expenses.

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

Gerald Georges Ordered to Cease and Desist from Engaging in Fraudulent Note Sales; Notice of Intent to Fine Issued

On August 2, 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-2002-6387-S) against Gerald Georges, president of Georges Trading Corp. Gerald Georges' last known address is 1431 Iranistan Avenue, 1st Floor, Bridgeport, Connecticut. The action alleged that, from at least February 2000 forward, the respondent effected at least 68 transactions in securities consisting of notes issued by Georges Trading Corp. to at least 45 Connecticut investors, and, in so doing, transacted business as an unregistered agent of issuer in violation of Section 36b-6(a) of the Connecticut Uniform Securities Act. Georges Trading Corp. also does business under the names G's Trading Corp., G's Capital Investments, G's Investment Club and B & S Investment Club. In addition, the action alleged that the notes were not registered under Section 36b-16 of the Connecticut Uniform Securities Act. The Order to Cease and Desist and Notice of Intent to Fine also alleged that the respondent violated the antifraud provisions of the Act by a) failing to honor a personal guarantee he had made to a Connecticut investor that the investor's funds would be returned; b) presenting subsequently dishonored checks to Connecticut investors as refunds; c) mailing an inaccurate statement of account to a Connecticut investor; and d) falsely representing that the note proceeds would be invested in the stock market, that the investments were safe, secure and insured; that investors would receive up to 70% in interest per month; and that Georges Trading Corp. would generate income to cover the cost of taxes on the investments over and above the promised monthly returns when no such taxes were paid. The action further alleged that, while Georges Trading Corp. had returned a fraction of investment monies to Connecticut investors, Connecticut investors never realized the promised returns, and that the bulk of investor money was spent on Gerald Georges' personal expenses, the personal expenses of Georges Trading Corp.'s vice president and on payroll and office costs.

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

Etienne Decembre Ordered to Cease and Desist from Engaging in Fraudulent Note Sales; Notice of Intent to Fine Issued

On August 2, 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-2002-6387-S) against Etienne Decembre, vice president of Georges Trading Corp. Etienne Decembre's last known address is 43 Dora Street, #1, Stamford, Connecticut. The action alleged that, from at least July 2000 forward, the respondent effected at least 23 transactions in securities consisting of notes issued by Georges Trading Corp. to at least 15 Connecticut investors, and, in so doing, transacted business as an unregistered agent of issuer in violation of Section 36b-6(a) of the Connecticut Uniform Securities Act. Georges Trading Corp. also does business under the names G's Trading Corp., G's Capital Investments, G's Investment Club and B & S Investment Club. In addition, the action alleged that the notes were not registered under Section 36b-16 of the Connecticut Uniform Securities Act. The Order to Cease and Desist and Notice of Intent to Fine also alleged that the respondent violated the antifraud provisions of the Act by falsely representing that the note proceeds would be invested in the stock market, that the investments were safe, secure and insured; that investors would receive up to 70% in interest per month; and that Georges Trading Corp. would pay taxes on a Connecticut investor's returns, in addition to the promised monthly returns, when no such taxes were ever paid. The action further alleged that, while Georges Trading Corp. had returned a fraction of investment monies to Connecticut investors, Connecticut investors never realized the promised returns, and that the bulk of investor money was spent on Etienne Decembre's personal expenses, the personal expenses of Georges Trading Corp.'s president and on payroll and office costs.

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 has been scheduled for September 24, 2002.

Ameritrust Securities, Inc. (CRD # 13384) - Broker-dealer Registration Cancelled

On July 31, 2002, the Banking Commissioner entered an Order canceling the broker-dealer registration of Ameritrust Securities, Inc. (Docket No. NCA-2002-6434-S). The firm, which has its principal office at 76 Blinkoff Court, Torrington, Connecticut, had been the subject of a June 7, 2002 Notice of Intent to Cancel Registration as Broker-dealer claiming that the firm had ceased doing securities business inasmuch as 1) the registration of the respondent's sole agent, Seong Y. Lee, had been declared inactive by the NASD on January 10, 2001; 2) an examination of respondent conducted on December 20, 2001 revealed no securities business being conducted from respondent's address; 3) 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 firm did not contest the cancellation of its broker-dealer registration.

Seong Y. Lee (CRD # 1978121) - Agent Registration Cancelled

On July 31, 2002, the Banking Commissioner issued an order (Docket No. NCA-2002-6434-S) canceling the registration of Seong Y. Lee as an agent of Ameritrust Securities, Inc. (CRD number 13384). The respondent had been the subject of a June 7, 2002 Notice of Intent to Cancel Registration as Agent alleging that the respondent's securities-related activities had ceased since the NASD had declared the registration of respondent Lee inactive on January 10, 2001. The Commissioner's cancellation order was uncontested by the respondent.

Thomas W. Qualls (CRD # 2910168) Fined $20,000 for Unregistered Activity Related to FOREX Investment Sales

On July 30, 2002, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2002-5554-S) against Thomas W. Qualls of 111 Cleveland Avenue, Long Beach, New York. Respondent Qualls had been the subject of a May 14, 2002 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing.

The Order to Cease and Desist and Notice of Intent to Fine had claimed that, from 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 had also claimed 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, had become permanent on June 5, 2002. Although a hearing was scheduled on the Notice of Intent to Fine, the respondent failed to appear.

In fining the respondent $20,000, the Commissioner found that the respondent had committed one violation of Section 36b-6(a) of the Connecticut Uniform Securities Act and one violation of Section 36b-16 of the Act.

Derek M. Lofton Fined $20,000 for Unregistered Activity Related to FOREX Investment Sales

On July 30, 2002, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2002-5554-S) against Derek M. Lofton of 34 Brown Avenue, Hempstead, New York. The respondent had been the subject of a May 14, 2002 Order to Cease and Desist and Notice of Intent to Fine. The Order to Cease and Desist and Notice of Intent to Fine had alleged 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 Order to Cease and Desist and Notice of Intent to Fine had 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, had become permanent on June 27, 2002. Although a hearing was scheduled on the Notice of Intent to Fine, the respondent failed to appear.

In fining the respondent $20,000, the Commissioner found that the respondent had committed one violation of Section 36b-6(a) of the Connecticut Uniform Securities Act and one violation of Section 36b-16 of the Act.

William M. Cutrone (CRD # 2542314) Fined $20,000 for Unregistered Activity Related to FOREX Investment Sales

On July 30, 2002, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2002-5554-S) against William M. Cutrone of 4 Village Lane, Woodbury, New York. The respondent had been the subject of a May 14, 2002 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing. The Order to Cease and Desist and Notice of Intent to Fine had 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 Order to Cease and Desist and Notice of Intent to Fine had 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 had not requested a hearing on the Order to Cease and Desist, the Order to Cease and Desist had become permanent on June 19, 2002. Although a hearing had been scheduled on the Notice of Intent to Fine, the respondent failed to appear.

In fining the respondent $20,000, the Commissioner found that the respondent had committed one violation of Section 36b-6(a) of the Connecticut Uniform Securities Act and one violation of Section 36b-16 of the Act.

International Market Consultants, LLC Fined $40,000 for Fraudulent Conduct in Connection With Unregistered FOREX Investments

On July 30, 2002, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2002-6210-S) against International Market Consultants, LLC of 2001 West Main Street, Suite 205, Stamford, Connecticut. The respondent had been the subject of a May 22, 2002 Order to Cease and Desist and Notice of Intent to Fine. The Order to Cease and Desist and Notice of Intent to Fine had 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 Order to Cease and Desist and Notice of Intent to Fine had 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. In addition, the Order to Cease and Desist and Notice of Intent to Fine had alleged 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 had not requested a hearing on the Order to Cease and Desist, the Order to Cease and Desist had become permanent on July 9, 2002. Although a hearing had been scheduled on the Notice of Intent to Fine, the respondent failed to appear.

In fining the respondent $40,000, the Commissioner found that the respondent committed one violation of the antifraud provisions in Section 36b-4 of the Connecticut Uniform Securities Act; one violation of Section 36b-6(a) of the Act; one violation of Section 36-6(b) of the Act; and one violation of Section 36b-16 of the Act.

Oxford-Dundee, Inc. Fined $30,000 in Conjunction With FOREX Investment Sales

On July 17, 2002, the Banking Commissioner entered an Order Imposing Fine against Oxford-Dundee, Inc. of 59 Broad Street, Stamford, Connecticut (Docket No. CF-2002-5554-S). The entity had been the subject of an April 29, 2002 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing. The Order to Cease and Desist and Notice of Intent to Fine had 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 Order to Cease and Desist and Notice of Intent to Fine had 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 on June 19, 2002.

In fining Oxford-Dundee, Inc. $30,000, the Commissioner found that the firm had committed one violation of Section 36b-4 of the Act, one violation of Section 36b-6(a) of the Act and one violation of Section 36b-16 of the Act. The respondent did not appear at the hearing preceding imposition of the fine.

East Norwich Foreign Holding Corporation Fined $30,000 in Conjunction With FOREX Investment Sales

On July 17, 2002, the Banking Commissioner entered an Order Imposing Fine against East Norwich Foreign Holding Corporation of 59 Broad Street, Stamford, Connecticut (Docket No. CF-2002-5554-S). The entity had been the subject of an April 29, 2002 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing. The Order to Cease and Desist and Notice of Intent to Fine had 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 Order to Cease and Desist and Notice of Intent to Fine had 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 on June 19, 2002.

In fining East Norwich Foreign Holding Corporation $30,000, the Commissioner found that the firm had committed one violation of Section 36b-4 of the Act, one violation of Section 36b-6(a) of the Act and one violation of Section 36b-16 of the Act. The respondent did not appear at the hearing preceding imposition of the fine.


Settlements

Consent Orders

Anthony D. Cordellos (CRD # 2625277) Barred for Five Years from Conducting Securities Business in Connecticut; Assessed $1,500 Based on Unregistered Investment Advisory Activity

On August 28, 2002, the Banking Commissioner entered a Consent Order (No. CO-02-6428-S) with respect to Anthony D. Cordellos of 17 Delafield Island Road, Darien, Connecticut. The Consent Order alleged that from at least December 2000 to January 2002, respondent Cordellos transacted business as an unregistered investment adviser in violation of Section 36b-6(c) of the Connecticut Uniform Securities Act. The Consent Order barred respondent Cordellos from transacting business as a broker-dealer, agent, investment adviser, or investment adviser agent in Connecticut for five years; directed that he cease and desist from violative conduct; and ordered that he pay $1,500 to the department. Of that amount, $1,000 constituted an administrative fine and $500 represented reimbursement for agency investigative costs.

Edward Blasco Permanently Barred from Securities Business in Connecticut; Fined $5,000

On August 14, 2002, the Banking Commissioner entered a Consent Order (No. CO-02-6379-S) with respect to Edward Blasco of 128 East Liberty Street, Danbury, Connecticut. The Consent Order alleged that in October and November 1999, Blasco violated Section 36b-16 of the Connecticut Uniform Securities Act by soliciting investors for the purchase of unregistered shares of Sebring Systems, Inc. (now known as PLX Technology, Inc.) Series C preferred stock. The Consent Order also alleged that Blasco violated Section 36b-6(a) of the Act by transacting business in Connecticut as an unregistered agent of issuer.

The Consent Order permanently barred Blasco from transacting business in Connecticut as an investment adviser, investment adviser agent, broker-dealer or agent and fined him $5,000. In addition, the Consent Order directed Blasco to provide to the Division within 30 days 1) an itemized accounting showing the number of shares due to each Connecticut investor; and 2) evidence that the transfer agent had effected the transfer of those shares to the investors involved.

Eugene Arnold Chapman (CRD # 44690) Precluded from Transacting Securities Business in Connecticut for 24 Months

On July 30, 2002, the Banking Commissioner entered a Consent Order (Docket No. NR-2002-6537-S) with respect to Eugene Arnold Chapman, a broker-dealer agent of Lincoln Investment Planning, Inc. Respondent Chapman had been the subject of a May 28, 2002 Notice of Intent to Revoke Registration as an Agent alleging that on September 20, 2001, the NASD had suspended the respondent for three months from associating with any NASD member in any capacity and had 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 Consent Order resolved the allegations in the Notice of Intent to Revoke Registration.

The Consent Order required that respondent Chapman withdraw his registration in Connecticut as an agent of Lincoln Investment Planning, Inc. In addition, the Consent Order required that the respondent not apply or reapply for registration in Connecticut as an agent, broker-dealer, investment adviser or investment adviser agent for twenty-four months following the entry of the Consent Order. The Consent Order provided that, at the conclusion of such twenty-four month period, the respondent could apply or reapply for registration provided, among other things, that he procured from his employing firm a written undertaking to exercise heightened supervision over the respondent's activities.

Greg W. Botte (CRD # 2790471) Permanently Barred from Securities-Related Activity; Fined $500; Order to Cease and Desist Becomes Permanent

On July 10, 2002, the Banking Commissioner entered a Consent Order (Docket No. CF-2002-5554-S) with respect to Greg W. Botte of 987 Steele Boulevard, Baldwin, New York. The Consent Order resolved allegations against respondent Botte contained in a May 14, 2002 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing issued by the Commissioner. The Order to Cease and Desist and Notice of Intent to Fine had alleged that 1) 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; and 2) respondent Botte 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 Consent Order permanently barred respondent Botte from transacting business in Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent. The Consent Order also directed respondent Botte to assist the Securities and Business Investments Division in the division's investigation of Oxford-Dundee, Inc. and East Norwich Foreign Holding Corporation by, among other things, producing related documents, responding to division inquiries, providing sworn testimony and appearing at any related proceeding brought by the agency. Acknowledging the respondent's demonstrated inability to pay the maximum penalty sought by the Notice of Intent to Fine, the Consent Order fined the respondent $500. Pursuant to the terms of the Consent Order, the May 14, 2002 Order to Cease and Desist against respondent Botte became permanent as of July 10, 2002.

Hornblower & Weeks, Inc. (CRD # 4683) Fined $10,000

On July 1, 2002, the Banking Commissioner entered a Consent Order (File No. CO-02-6470-S) with respect to Hornblower & Weeks, Inc. of 110 Wall Street, New York, New York. The Consent Order alleged that the firm had violated Section 36b-31-14f(b)(3) of the Regulations under the Connecticut Uniform Securities Act by failing to provide records to the Commissioner, and that the firm had engaged in dishonest or unethical practices in conjunction with its cold calling practices.

The Consent Order fined the firm $10,000 and required that it reimburse the department up to $2,500 for the costs of an examination to be conducted within 36 months. In addition, the Consent Order directed the firm to review and implement supervisory procedures designed to improve regulatory compliance, particularly as they affected the registration status and conduct of cold callers prospecting for clients.

Southport Securities LLC (CRD # 37215), Dennis Gerard Boyd (CRD # 1488976) Fined $75,000 for Unregistered Broker-dealer and Agent Activity, Supervisory Deficiencies

On July 1, 2002, the Banking Commissioner entered a Consent Order (File No. CO-01-6284-S) with respect to Southport Securities LLC of 1281 East Main Street, Stamford, Connecticut, and Dennis Gerard Boyd, president and control person of the firm. The Consent Order alleged that 1) from approximately 1994 forward, the firm had transacted business as a broker-dealer absent registration in violation of Section 36b-6(a) of the Connecticut Uniform Securities Act; 2) at various times between 1994 and 2001, the firm employed unregistered agents in contravention of Section 36b-6(b) of the Act; 3) in permitting its agents to transact business absent registration, the firm failed to exercise adequate supervisory controls over the activities of its agents in violation of Section 36b-31-6f of the Regulations under the Act; 4) that, as the individual designated by the firm to ensure compliance with regulatory requirements, Boyd failed to discharge the supervisory responsibilities assigned to him by the firm; and 5) the firm's supervisory and compliance procedures were inadequate to prevent and detect violations of the Act and its regulations.

The Consent Order directed Boyd and Southport Securities LLC to cease and desist from violating state securities laws, and mandated that, for two years, Boyd refrain from acting in a supervisory capacity with respect to any broker-dealer or investment adviser transacting business in Connecticut. The Consent Order also fined Southport Securities LLC $25,000; fined Boyd $50,000; and required that both respondents jointly reimburse the department $5,000 for investigative costs.

Stipulation and Agreements

J.P. Morgan Securities Inc. (CRD # 18718) Fined $1,000 for Unregistered Branch Office Activity

On September 24, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6593-S) with J.P. Morgan Securities Inc., a Connecticut-registered broker-dealer having its principal office at 270 Park Avenue, New York, New York. The Stipulation and Agreement alleged that, from approximately June, 2001 forward, the firm transacted business from 191 Mason Street, Greenwich, Connecticut prior to that location being registered as a branch office under the Connecticut Uniform Securities Act.

Pursuant to the Stipulation and Agreement, the firm agreed to pay a $1,000 fine to the department and to revise and implement supervisory and compliance procedures designed to detect violations of Connecticut branch office registration requirements.

Shields & Company (CRD # 11053) Fined $1,000 for Unregistered Branch Office Activity

On September 20, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6622-S) with Shields & Company, a Connecticut-registered broker-dealer having its principal office at 140 Broadway, New York, New York. The Stipulation and Agreement alleged that, from approximately July, 2001 forward, the firm transacted business from 145 Great Neck Road, Waterford, Connecticut prior to that location being registered as a branch office under the Connecticut Uniform Securities Act.

Pursuant to the Stipulation and Agreement, the firm agreed to pay a $1,000 fine to the department and to revise and implement supervisory and compliance procedures designed to detect violations of Connecticut branch office registration requirements.

United Securities Alliance, Inc. CRD # 36487) Fined $1,000 for Unregistered Branch Office Activity

On September 20, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6621-S) with United Securities Alliance, Inc., a Connecticut-registered broker-dealer having its principal office at 7730 East Belleview Avenue, Suite AG-9, Greenwood Village, Colorado. The Stipulation and Agreement claimed that, from approximately November, 2000 forward, the firm transacted business from 10 Furnace Street, Danielson, Connecticut prior to that location being registered as a branch office under the Connecticut Uniform Securities Act.

Pursuant to the Stipulation and Agreement, the firm agreed to pay a $1,000 fine to the agency and to revise and implement supervisory and compliance procedures designed to detect violations of Connecticut branch office registration requirements.

Communications Equity Associates LLC (CRD # 13382) Fined $1,000 for Unregistered Branch Office Activity

On September 11, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6619-S) with Communications Equity Associates LLC, a Connecticut-registered broker-dealer having its principal office at 101 East Kennedy Boulevard, Suite 3300, Tampa, Florida. The Stipulation and Agreement alleged that, from approximately May, 2001 forward, the firm transacted business from One Sound Shore Drive, Suite 203, Greenwich, Connecticut prior to that location being registered as a branch office under the Connecticut Uniform Securities Act.

Pursuant to the Stipulation and Agreement, the firm agreed to pay a $1,000 fine to the department and to revise and implement supervisory and compliance procedures designed to detect violations of Connecticut branch office registration requirements.

Fintegra, LLC (CRD # 16741) Fined $500 for Unregistered Branch Office Activity

On September 9, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6620-S) with Fintegra, LLC, a Connecticut-registered broker-dealer having its principal office at 6120 Earle Brown Drive, Suite 620, Minneapolis, Minnesota. The Stipulation and Agreement alleged that, from approximately October, 2001 forward, the firm transacted business from 132 Grand Street, Waterbury, Connecticut prior to that location being registered as a branch office under the Connecticut Uniform Securities Act.

Pursuant to the Stipulation and Agreement, the firm agreed to pay a $500 fine to the department and to revise and implement supervisory and compliance procedures designed to prevent violations of statutory branch office registration requirements.

Atlantic Advisors LLC (CRD # 111476) Assessed $1,950 for Notice Filing Lapse

On July 10, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6566-S) with Atlantic Advisors LLC of 2 American Lane, Greenwich, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement alleged that from June 18, 1999 until May 29, 2002, when a notice filing was made, 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 associated fees. Pursuant to the Stipulation and Agreement, the firm agreed to pay $1,950 to the agency. Of that amount, $1,500 constituted an administrative fine and $450 represented reimbursement for past due notice filing fees.

Aaron Fleck & Associates, L.L.C. (CRD # 104915) Assessed $1,300 for Notice Filing Delinquency

On July 10, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6495-S) with Aaron Fleck & Associates, L.L.C. of 289 Greenwich Avenue, Second Floor, Greenwich, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement alleged that from approximately November 2000 until April 1, 2002, when a notice filing was made, 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 fee required by that section. Pursuant to the Stipulation and Agreement, the firm agreed to pay $1,300 to the agency. Of that amount, $1,000 constituted an administrative fine and $300 represented reimbursement for past due notice filing fees.

Johnson Custom Strategies Inc. (CRD # 106290) Assessed $2,250 for Failure to File Advisory Notice

On July 10, 2002, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-02-6492-S) with Johnson Custom Strategies, Inc. of 640 West Putnam Avenue, Greenwich, Connecticut. The firm is an investment adviser registered with the Securities and Exchange Commission.

The Stipulation and Agreement claimed that from 1997 until April 1, 2002, when a notice filing was made, 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 associated 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 represented reimbursement for past due notice filing fees.


{ } STATISTICAL SUMMARY

Licensing At A Glance
September 30, 2002
Broker-dealers Registered 2,649
Broker-dealer Agents Registered 115,744
Broker-dealer Branch Offices Registered 1,796
Investment Advisers Registered 387
SEC Registered Advisers Filing Notice 1,201
Investment Adviser Agents Registered 5,562
Investment Advisory Branch Offices Registered 107
Agents of Issuer Registered 121

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  1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Securities Investigations  
Opened 91 75 61   227
Closed 78 90 55   223
Ongoing as of September 30, 2002 106 92 91    
Subpoenas issued 15 9 17   41
Cases referred from Attorney General 2 6 5   13
Cases referred from Other Agencies 4 1 3   8
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Securities Enforcement: Remedies and Sanctions  
Notices of Intent to Deny (Licensing) 0 0 0   0
Notices of Intent to Suspend (Licensing) 0 0 0   0
Notices of Intent to Revoke (Licensing) 1 1 0   2
Denial Orders (Licensing) 0 0 0   0
Suspension Orders (Licensing) 0 0 0   0
Revocation Orders (Licensing) 0 0 0   0
Notices of Intent to Fine 1 8 5   14
Orders Imposing Fine 4 0 6   10
Cease and Desist Orders 4 9 7   20
Notices of Intent to Issue Stop Order 0 0 0   0
Activity Restrictions/Bars 3 1 5   9
Stop Orders 0 0 0   0
Vacating/Withdrawal Orders 0 0 0   0
Censures 0 0 0   0
Formal Orders of Restitution 0 0 0   0
Cancellation Orders 0 0 2   2
{ }    
Proceedings and Settlements  
Administrative Actions 6 19 13   38
Consent Orders 5 2 6   13
Stipulation and Agreements 8 19 8   35
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Monetary Relief  
Monetary Sanctions Imposed $153,700 80,900 267,000   $501,600
Restitution or Other Monetary Relief $200,226 10,097 310,445   $520,768
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Securities Referrals  
Criminal (Chief State's Attorney) 2 2 2   6
Criminal (Other) 0 0 0   0
Civil (Attorney General) 0 0 0   0
Other Agency Referrals 2 5 0   7
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Examinations  
Broker-dealers 23 23 34   80
Investment Advisers 12 14 18   44

 Securities Division