DOB: Summer-Fall 2006 Securities Bulletin

Securities and Business Investments Division

Securities Bulletin

Vol. XX  Nos. 2 and 3 Summer and Fall 2006

Features

Enforcement and Other Highlights
Contributors

Ralph Lambiase, Division Director
Cynthia Antanaitis, Assistant Director and Bulletin Editor
Eric Wilder, Assistant Director
Helen Crane, Subscription Coordinator


A WORD FROM THE BANKING COMMISSIONER

After a twelve year tenure as Commissioner of the State of Connecticut Department of Banking, John P. Burke retired from state service effective October 1, 2006.   Having known Commissioner Burke professionally for a great many years, I know I speak for many in saying that he will be genuinely missed.   It is my hope that I can fill his shoes in providing investors and the securities industry with the level of service they have come to expect from our agency in  promoting investor protection and legitimate capital formation. 

The registration period is now open for the department’s annual Securities Forum to be held on Thursday, October 26, 2006 at the Crowne Plaza Hotel and Conference Center in Cromwell, Connecticut.  A complete program agenda and fillable registration form is available for download from our website at www.ct.gov/dob.  This year’s program features a luncheon keynote address by Zachary J. Bagdon, Executive Director of the International Center for Finance at the Yale School of Management.  Among other areas, Mr. Bagdon directs the International Center for Finance’s hedge fund initiatives.  Prior to joining Yale University, Mr. Bagdon was associated with Azimuth Advisory Partners.  During his distinguished career, Mr. Bagdon has raised over $500 million in investment capital for early to mid-stage companies, and has served on several boards including the Connecticut Hedge Fund Association.  His expertise has been featured in publications such as the Wall Street Journal and Investor’s Business Daily.  Securities Forum 2006 features 6 panel presentations (plus an Opening General Session) organized into general tracks to address the concerns of broker-dealers, investment advisers and the bar.  The panels are offered during morning and afternoon sessions to give you maximum flexibility in planning your day.  We would encourage you to attend this very worthwhile program.  The program cost is an affordable $65 per person (discounts available for two or more attendees from the same organization), and includes course materials as well as a luncheon.  Among the topics to be discussed will be the regulation of hedge funds, a $1 trillion industry that has captured the interest of pension funds, retail investors and regulators at both the state and federal levels.

 As always, we welcome your comments and suggestions.


Howard F. Pitkin
Banking Commissioner


International Vacations, Ltd. (CRD # 72785) Fined $20,000 for Unregistered Stock Sales

On September 29, 2006, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2006-7146-S) against International Vacations, Ltd. of 1875 Century Park East, #H-3522, Los Angeles, California.  The Order Imposing Fine had been preceded by a May 19, 2006 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2006-7146-S) alleging that from November 2000 to December 2000, the respondent violated Section 36b-16 of the Connecticut Uniform Securities Act by selling its unregistered stock to Connecticut investors.   The Order to Cease and Desist, being uncontested, had become permanent on June 14, 2006.

In fining the respondent $20,000, the Commissioner found that the respondent committed two violations of Section 36b-16 of the Act.  The respondent did not appear or contest the imposition of the fine.

Tax Recovery Group, Inc. Fined $10,000 for Sales of Unregistered Tax Service Business Opportunities

On September 27, 2006, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2006-818-B) against Tax Recovery Group, Inc. of 1880 Office Club Point, #2FLSW, Colorado Springs, Colorado.  The Order Imposing Fine had been preceded by a May 19, 2006 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2006-818-B) alleging that, from at least April 2004 forward, the respondent sold unregistered tax service business opportunities in violation of the Connecticut Business Opportunity Investment Act.   The Order to Cease and Desist, being uncontested, had become permanent on June 19, 2006.

In fining the respondent $10,000, the Commissioner found that the respondent violated Section 36b-67(1) of the Connecticut Business Opportunity Investment Act.  The respondent did not appear or contest the imposition of the fine.

V.W. Eimicke Associates, Inc. – Unregistered Note Sales Found to Violate Securities Law, No Fine Imposed in Light of Pending Bankruptcy

On September 26, 2006, the Commissioner issued a Final Decision in the matter of V.W. Eimicke Associates, Inc. a/k/a The VWE Group, Inc. of 35 East Grassy Sprain Road, Yonkers, New York.  The respondent had been the subject of a June 28, 2006 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2006-7085-S) alleging that at various times between January 1998 and October 2001, the respondent offered and sold unregistered notes in violation of Section 36b-16 of the Connecticut Uniform Securities Act.  The June 28, 2006 action had also recited that, on June 1, 2004, the respondent filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York.   The Order to Cease and Desist, being uncontested, had become permanent on July 20, 2006.

While finding that the respondent had violated Section 36b-16 of the Act, the Commissioner declined to fine the respondent in light of the pending bankruptcy proceeding.

Steven Hadley Haynes (CRD # 1032930) Barred from Applying for Agent and Investment Adviser Agent Registration for Five Years, Assessed $2,500 for Improper Commission Splitting

On September 21, 2006, the Banking Commissioner entered a Consent Order (Docket No. ND-2006-7172-S) with respect to Steven Hadley Haynes.  The Consent Order had been preceded by an April 6, 2006 Notice of Intent to Deny Registration as a broker-dealer agent and an investment adviser agent (Docket No. ND-2006-7172-S).  Although respondent Haynes had withdrawn his application for registration as an agent of Bannon, Ohanesian & Lecours, Inc., Connecticut law permits the Commissioner to initiate denial proceedings within one year following the withdrawal.  The Notice of Intent to Deny had alleged that, between September 2003 and March 2005, respondent Haynes engaged in a dishonest or unethical practice by improperly splitting commissions with one David Faubert and Faubert Financial Group, Inc. while respondent Haynes was employed by the brokerage firm of Tower Square Securities, Inc.  The Notice of Intent to Deny had also alleged that the respondent had been the subject of a November 2, 2005 NASD bar from association predicated on the respondent’s failure to appear for an on-the-record interview in connection with an NASD investigation.

The Consent Order barred respondent Haynes from applying for registration in Connecticut as an agent or an investment adviser for five years, with leave to reapply after two years had elapsed from the entry of the Consent Order.  In addition, the Consent Order directed respondent Haynes to reimburse the agency $2,500 for its investigative costs.

Justin Matthew Dever (CRD # 4085987) Permanently Barred from Securities Activities in Connecticut; Fined $3,500

On September 20, 2006, the Banking Commissioner entered a Consent Order (Docket No. RF-2006-7155-S) with respect to Justin Matthew Dever, a former broker-dealer agent of Independent Securities Investors Corporation (CRD number 43598).  The Consent Order followed a May 4, 2006 Notice of Intent to Revoke Registration as Agent and Notice of Intent to Fine against the respondent.  The Notice of Intent to Revoke Registration as Agent and Notice of Intent to Fine had alleged that the respondent 1) violated Section 36b-16 of the Connecticut Uniform Securities by selling unregistered securities of Bio-Solutions Manufacturing and Stake Technology to Connecticut investors; 2) engaged in unauthorized trading and effected transactions for a Connecticut customer who was then deceased; 3) violated Section 36b-31-6e of the Regulations under the Act by engaging in private securities transactions involving a promissory note issued by Charter One Capital Holding, Inc.; and 4) withheld material information from the department in conjunction with an investigation.

The Consent Order acknowledged that the respondent had demonstrated economic hardship such that he was financially incapable of paying the maximum fine permitted under the Act.  In resolving the pending allegations against the respondent, the Consent Order permanently barred him from applying for registration or acting in Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent, with leave to apply for registration in such capacities after ten years had elapsed.  In addition, the Consent Order required that respondent Dever pay a $3,500 fine to the department.

Friends With Benefits, Limited Partnership Extends $99,000 Rescission Offer Following Unregistered Sales of Securities; Fined $1,000

On September 11, 2006, the Banking Commissioner entered a Consent Order (No. CO-06-7307-S) with respect to Friends With Benefits, Limited Partnership, an issuer of securities located at 205 Thornton Street, Hamden, Connecticut.  The Consent Order alleged that, to finance its filmmaking business, the issuer offered and sold limited partnership interests at a time when the securities were not registered under the Connecticut Uniform Securities nor the subject of an exemptive filing or a filing claiming covered security status.  Pursuant to the Consent Order, the issuer extended to the two purchasers of its securities a rescission offer totaling approximately $99,000 in the aggregate.  In addition, the Consent Order directed the issuer 1) to not accept funds for investment purposes from public or private investors without first consulting with legal counsel; and 2) to refrain from regulatory violations.  The Consent Order also required that Friends With Benefits, Limited Partnership pay a $1,000 fine to the department.

Jefferies & Company, Inc. (CRD # 2347) Assessed $14,450 for Employing Unregistered Broker-dealer Agents

On September 8, 2006, the Banking Commissioner entered a Consent Order (No. CO-06-7312-S) with respect to Jefferies & Company, Inc. of 11100 Santa Monica Boulevard, 11th Floor, Los Angeles, California.  The firm is registered as a broker-dealer under the Connecticut Uniform Securities Act.  The Consent Order alleged that, from 1999 to 2006, the firm employed unregistered broker-dealer agents at its branch office located at One Station Place, Suite Three North, Stamford, Connecticut.  The Consent Order directed the firm to refrain from regulatory violations; implement revised supervisory and compliance procedures; and pay $14,450 to the department.  Of the amount assessed, $10,000 constituted an administrative fine and $4,450 represented reimbursement for past due registration fees.

The Huntington Investment Company (CRD # 16986) Assessed $13,150 for Unregistered Broker-dealer Activity

On August 29, 2006, the Banking Commissioner entered a Consent Order (No. CO-06-7315-S) with respect to The Huntington Investment Company, an applicant for broker-dealer registration located at 41 South High Street, Seventh Floor, Columbus Ohio.  The Consent Order alleged that from at least October, 2000 through February 2006, the firm transacted business as a broker-dealer absent registration under the Connecticut Uniform Securities Act and employed unregistered broker-dealer agents.  The firm claimed that, during 2005, a back office employee of the firm had circumvented internal procedures governing Connecticut broker-dealer registration requirements and had received a reprimand for such conduct.  The Consent Order directed the firm to 1) cease and desist from regulatory violations; 2) engage an experienced consultant to conduct a compliance audit of the firm’s operations; and 3) provide the department with quarterly reports for two years describing any complaints, actions or proceedings involving Connecticut residents.  In addition, the Consent Order required that the firm pay $13,150 to the department.  Of that amount, $10,000 constituted an administrative fine, $1,950 represented past due registration fees; $700 represented the disgorgement of known commissions earned during the period of unregistered activity; and $500 constituted reimbursement for agency investigative costs.  The firm became registered as a broker-dealer in Connecticut on August 29, 2006.

Donatas Belys Vildzius (CRD # 2202883) – Agent Registration Conditioned Following NASD Suspension

On August 29, 2006, the Banking Commissioner entered a Consent Order Conditioning Registration as an Agent (No. CO-06-7298-S) with respect to Donatas Vildzius, an applicant for broker-dealer agent registration under the Connecticut Uniform Securities Act.  The Consent Order was predicated on claims that, in 2006, Donatas Vildzius had been suspended by the National Association of Securities Dealers for 30 days and ordered to pay $16,000 in restitution to a Connecticut customer following allegations that he engaged in excessive trading and had exercised discretion without the customer’s prior written authorization (Acceptance Waiver and Consent; Docket/Case No. E112003069901).  Vildzius’ employing firm, Source Capital Group, Inc., signed off on various supervisory obligations as a precondition to registering Vildzius in Connecticut.

The Consent Order required that Vildzius adhere to the restitutionary payment schedule mandated by the NASD, and file periodic status reports with the department concerning payments made to the Connecticut investor.  In addition, the Consent Order prescribed specific supervisory controls to be implemented by Source Capital Group, Inc. with respect to Vildzius’ securities activities.  Source Capital Group, Inc. was also required for two years to notify the department each quarter of any complaints, actions or proceedings involving Vildzius.  Donatas Belys Vildzius became registered as a broker-dealer agent of Source Capital Group, Inc. in Connecticut on August 29, 2006.

Charter One Capital Holding, Inc. Fined $200,000 in Conjunction with Promissory Note Sales

On August 14, 2006, the Banking Commissioner entered an Order Imposing Fine (Docket No. RF-2006-7155-S) with respect to Charter One Capital Holding, Inc. of 11 Broadway, Suite 1015, New York, New York.  The action had been preceded by an April 27, 2006 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. RF-2006-7155-S) alleging that the respondent issued and sold unregistered promissory notes from January 2003 to October 2005 in violation of Section 36b-16 of the Connecticut Uniform Securities Act, and violated the antifraud provisions of the Act by 1) failing to disclose to investors the risks associated with the investment in light of the issuer’s precarious financial position and the fact that the issuer had not been paying interest on the notes; and 2) misrepresenting that certain individuals were associated with the respondent when, in actuality, those individuals had declined the respondent’s request for them to become officers or directors.   Since the respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist had become permanent on June 1, 2006.

In fining the firm $200,000, the Commissioner found that the respondent had committed one violation of Section 36b-16 of the Act and one violation of Section 36b-4 of the Act.  The respondent did not contest the imposition of the fine.

Stephen Roy Desiderio (CRD # 2833627) Fined $100,000 For Engaging in Private Securities Transaction

On August 14, 2006, the Banking Commissioner entered an Order Imposing Fine (Docket No. CF-2006-7250-S) with respect to Stephen Roy Desiderio of Staten Island, New York.  The respondent was formerly a broker-dealer agent of Independent Securities Investors Corporation (CRD number 43598).  The action had been preceded by an April 27, 2006 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2006-7250-S) alleging that the respondent engaged in a private securities transaction in violation of Section 36b-31-6e of the Regulations under the Connecticut Uniform Securities Act.   Since the respondent did not request a hearing on the Order to Cease and Desist, the Order to Cease and Desist had become permanent on June 14, 2006.  In fining the respondent $100,000, the Commissioner found that the respondent had committed one violation of Section 36b-31-6e of the Regulations.  The respondent did not contest the imposition of the fine.

Andrew Savvas Constantinou (CRD # 2915862) Permanently Barred from Connecticut Securities Activity; $10,000 Fine Imposed

On August 10, 2006, the Banking Commissioner entered a Consent Order resolving certain allegations in a May 19, 2006 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2006-6176-S) issued against Andrew Savvas Constantinou of Farmington, Connecticut.  The respondent was a former broker-dealer agent of Metlife Securities Inc. and A. CH. Securities, Inc.   The Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing had alleged that between July 1999 and November 2001, the respondent transacted business as an unregistered agent of issuer in violation of Section 36b-6(a) of the Connecticut Uniform Securities Act by offering and selling payphone-related securities issued by Alpha Telcom, Inc. a/k/a Alpha TelCom, Inc. and by American Telecommunications Company, Inc. f/k/a ATC, Inc.  In addition, the Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing had claimed that the securities were not registered under Section 36b-16 of the Act and that, in participating in the sales, the respondent violated Section 36b-31-6e of the Regulations under the Act governing private securities transactions by broker-dealer agents.

The Consent Order directed the respondent to pay a $10,000 fine and permanently barred him from acting as a broker-dealer, agent, investment adviser, investment adviser agent or agent of issuer in Connecticut.

Provectus Pharmaceuticals, Inc. Assessed $1,500, Leslie Neil Bocskor and Venture Catalyst, LLC Assessed $7,250 in Connection With Unregistered “Finder” Activity
 
On August 7, 2006, the Banking Commissioner entered into a Stipulation and Agreement with Provectus Pharmaceuticals, Inc., an issuer of securities located at 7327 Oak Ridge Highway, Suite A, Knoxville, Tennessee.  Also named as parties to the Stipulation and Agreement were Venture Catalyst, LLC of 170 East 77th Street, Apt. 10F, New York, and its principal, Leslie Neil Bocskor.  The Stipulation and Agreement recited that the department had received from the issuer a Rule 506 notice filing disclosing that the issuer would incur expenses for “Finders’ Fees and State Filing Fees”; that Leslie Bocskor would represent the issuer in offering or selling the securities in Connecticut; that Leslie Bocskor was in the business of effecting securities transactions; and that Bocskor would be applying for agent of issuer registration in Connecticut.  The Stipulation and Agreement further stated that Leslie Bocskor did not pursue agent of issuer registration, and that Venture Catalyst LLC and Bocskor received a total of $3,750 in finder’s fees plus warrants for introducing one Connecticut investor to the issuer.  The Stipulation and Agreement added that Venture Catalyst LLC was not registered as a broker-dealer under Section 36b-6(a) of the Connecticut Uniform Securities Act, and that Leslie Bocskor was last registered as a broker-dealer agent of an unrelated broker-dealer in 1998.

Pursuant to the Stipulation and Agreement, Leslie Bocskor agreed to refrain from transacting business as an agent or a broker-dealer in connection with the offer or sale of securities in or from Connecticut unless registered under the Act or subject to a definitional exclusion.  Leslie Bocskor also agreed to pay $3,625 to the department.  Of that amount, $1,500 constituted an administrative fine; $1,875 represented the partial disgorgement of remuneration earned for effecting the sale of the issuer’s securities to the Connecticut investor and $250 represented reimbursement for agency investigative costs.  Venture Catalyst LLC agreed to refrain from transacting business as a broker-dealer in connection with the offer or sale of securities in or from Connecticut unless registered or subject to a definitional exclusion.  In addition, Venture Catalyst LLC agreed to pay $3,625 to the department.  Of that amount, $1,500 constituted an administrative fine; $1,875 represented the partial disgorgement of remuneration earned for effecting the sale of the issuer’s securities to the Connecticut investor and $250 represented reimbursement for agency investigative costs.  Pursuant to the Stipulation and Agreement, Provectus Pharmaceuticals, Inc. agreed to pay a $1,500 fine and to refrain from employing an unregistered agent of issuer or engaging an unregistered broker-dealer in connection with future offers or sales of securities in or from Connecticut.

Alpine Securities Corporation (CRD  # 14952) – Broker-dealer Registration Denied
 
On July 14, 2006, the Banking Commissioner entered an Order Denying Registration as Broker-dealer (Docket No. ND-2006-7246-S) with respect to Alpine Securities Corporation of 440 East 400 South, Suite 200, Salt Lake City, Utah.  The respondent had been the subject of a May 19, 2006 Notice of Intent to Deny Registration as Broker-dealer  predicated on multiple sanctions imposed against the respondent by the National Association of Securities Dealers, Inc. between 2001 and 2005, including fines imposed for failing to implement effective anti-money laundering procedures and failing to exercise supervisory controls.  In denying the respondent’s broker-dealer registration, the Commissioner incorporated as findings the allegations made in the May 19, 2006 Notice of Intent to Deny Registration as Broker-dealer.  Although the respondent had initially requested a hearing on the Notice of Intent to Deny Registration as Broker-dealer, that request was later withdrawn.

Vision Securities, Inc. (CRD  # 35001) Fined $15,000, Suspended for 30 Days For Alleged Violations of Agency Order
 
On July 14, 2006, the Banking Commissioner entered a Consent Order (No. CO-06-78299-S) with respect to Vision Securities, Inc., a Connecticut-registered broker-dealer having its principal office at 20 Broadhollow Road, Melville, New York.  The Consent Order alleged that Vision Securities, Inc. violated the terms of a 2003 Consent Order issued by the Commissioner in conjunction with sales of Deltathree, Inc. and Nanodymanics, Inc. securities, and that such securities were sold in violation of Section 36b-16 of the Connecticut Uniform Securities.  The Consent Order fined Vision Securities, Inc. $15,000 and suspended the firm’s broker-dealer registration for 30 days commencing five business days after the entry of the Consent Order.  In addition, the Consent Order restricted the firm’s future securities business to transactions effected for accredited investors as defined in Rule 501 of Regulation D.  The Consent Order also required that the firm reimburse the agency up to $2,500 for the costs associated with one or more future examinations of the firm’s offices to be conducted within 24 months following the Commissioner’s entry of the Consent Order.

Asset & Financial Planning Ltd. (CRD # 110709) Assessed $1,850 for Engaging Unregistered Investment Adviser Agents
 
On July 14, 2006, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-06-7289-S) with Asset & Financial Planning Ltd. of 11 Raymond Avenue, Poughkeepsie, New York.  The firm is registered as an investment adviser with the Securities and Exchange Commission.  The Stipulation and Agreement alleged that, from January 1, 2001 through December 31, 2005, the firm had engaged two investment adviser agents who were not registered under the Connecticut Uniform Securities Act.  The Stipulation and Agreement required that the firm pay $1,850 to the department.  Of that amount, $1,500 constituted an administrative fine and $350 constituted reimbursement for past due investment adviser agent registration fees.

Terry Lee Feibus (CRD  # 2923404)  - Order to Cease and Desist and Notice of Intent to Fine Issued

On June 6, 2006, the Banking Commissioner issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2006-7155-S) against Terry Lee Feibus of 18429 Old Princton Lane, Boca Raton, Florida.  The action alleged that at various times in 2003 and 2004, respondent Feibus sold unregistered securities of Advanced Optics Electronics, Deltagen Inc., GoAmerica Inc., Hop-On.com, Loudeye Technologies, Paradigm Med Inds, Peregrine Pharmaceuticals Inc., Predictive Systems Inc., Robotic Vision Systems Inc., Sagent Tech Inc., Skyway Communications, Tellium Inc., Valicert Inc. and Vodavi Technology (the “Unregistered Securities”) in violation of Section 36b-16 of the Connecticut Uniform Securities Act.  The action also alleged that respondent Feibus violated Section 36b-6 of the Act by transacting business as an unregistered agent in conjunction with sales and purchases of the Unregistered Securities as well as securities of 1st Investors Blue Chip FD-1, 1st Investors Growth & Inc.-A, 1st Investors Tot Return FD A, 1st Investors USA Midcap Opp A, Charter Communication CL A, Federated Growth Strategy FD-B, Federated Hi Inc. BD FD CL-B, Federated Kaufmann B, Lantronix Inc., Lucent Technologies Inc., Prosoft I-net Solutions Inc., Radview Software Ltd., RAE Systems Inc., Redback Networks Inc., Silicon Graphics Inc. (DE), Sirius Satellite Radio Inc., Transwith Corp. and Viragen Inc.  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.

Harbor Financial Services, LLC (CRD  # 25700) Assessed $12,750 for Unregistered Broker-dealer Activity

On May 31, 2006, the Banking Commissioner entered a Consent Order with respect to Harbor Financial Services, LLC, an applicant for broker-dealer registration located at 1555 University Boulevard South, Suite B, Mobile, Alabama.  The Consent Order alleged that, contrary to representations made in its registration application, the firm had transacted business in Connecticut absent registration under the Connecticut Uniform Securities Act and had employed unregistered agents.  The Consent Order also alleged that the firm’s unregistered activity continued while the registration was pending, and that the firm had transacted business from an unregistered branch office.  The firm maintained that a large portion of its Connecticut brokerage activity had consisted of automatic dividend reinvestment in mutual fund shares for clients who had transferred their accounts to the firm from another broker-dealer.

The Consent Order directed the firm to cease and desist from regulatory violations and required that it pay $12,750 to the department.  Of that amount, $10,000 constituted an administrative fine, $2,000 represented disgorgement of commissions earned as a result of the unregistered activity, $250 represented past due broker-dealer and agent registration fees and $500 constituted reimbursement for agency investigative costs.  In addition, the Consent Order required that the firm implement revised supervisory and compliance procedures and provide the department with quarterly reports for two years concerning any securities-related complaints, actions or proceedings involving Connecticut residents.  The firm became registered as a broker-dealer under the Connecticut Uniform Securities Act on May 31, 2006.

Ernest P. Lamonica (CRD # 1277052), Digital Entertainment Corp. and Pacific Rim Investment Partners Fined $350,000 in the Aggregate for Violations of State’s Securities Laws

On May 19, 2006, the Banking Commissioner entered an Order Imposing Fine (Docket Nos. CF-2006-7111-S and CF-2006-7186-S) against Digital Entertainment Corp. and Pacific Rim Investment Partners, both of 3702 South Virginia Street, #G12, Reno, Nevada, and Ernest P. Lamonica of 6200 Meadwood #131, Reno, Nevada.  The parties had been the subject of a February 9, 2006 Order to Cease and Desist and Notice of Intent to Fine (Docket Nos. CF-2006-7111-S and CF-2006-7186-S).  Respondent Lamonica was the president and CEO of Digital Entertainment Corp. and Pacific Rim Investment Partners.  The February 9, 2006 action had alleged that 1) the respondents sold unregistered, non-exempt securities consisting of Digital Entertainment Corp. stock and notes and Pacific Rim Investment Partners stock to Connecticut investors in violation of Section 36b-16 of the Connecticut Uniform Securities Act; 2) respondent Lamonica violated Section 36b-6(a) of the Act by transacting business as an unregistered agent of issuer; and 3) respondents Lamonica and Digital Entertainment Corp. violated Section 36b-4(a)(2) of the Act by failing to disclose to Connecticut investors that they had been the subject of cease and desist orders issued by the states of Iowa and Tennessee alleging violations of the antifraud provisions of those states’ securities laws.  In fining respondent Lamonica $230,000, the Commissioner found that respondent Lamonica had committed one violation of the antifraud provisions in Section 36b-4(a)(2) of the Act, two violations of Section 36b-6(a) of the Act and two violations of Section 36b-16 of the Act.  In fining respondent Digital Entertainment Corp. $20,000, the Commissioner found that Digital Entertainment Corp. committed one violation of Section 36b-4(a)(2) of the Act and one violation of Section 36b-16 of the Act.  The Commissioner also fined respondent Pacific Rim Investment Partners $100,000 for committing one violation of Section 36b-16 of the Act.  The respondents did not appear or contest the imposition of the fines.

Meeting Street Brokerage, LLC (CRD # 34764) Fined $5,800 for Unregistered Broker-dealer and Agent Activity

On May 17, 2006, the Banking Commissioner entered a Consent Order with respect to Meeting Street Brokerage, LLC, an applicant for broker-dealer registration located at 969 Southeast Federal Highway, Suite 100, Stuart, Florida.  The Consent Order alleged that 1) from at least August 2004 through March 2005, the firm transacted business as a broker-dealer absent registration; 2) the firm employed at least one unregistered broker-dealer agent in contravention of Section 36b-6(b) of the Connecticut Uniform Securities Act; and 3) certain penny stocks were sold in contravention of Section 36b-16 of the Act.  The Consent Order directed the firm to pay $5,800 to the department.  Of that amount, $5,000 constituted an administrative fine, $300 represented past due registration fees and $500 constituted reimbursement for agency investigative costs.  In addition, the Consent Order required that the firm implement revised supervisory and compliance procedures, and provide quarterly reports to the department for two years describing any complaints, actions or proceedings involving Connecticut customers.

Anthem Asset Management, LLC (CRD # 136271) Assessed $1,700 in Connection With Unregistered Investment Advisory Activity Involving Family Investment Fund

On May 12, 2006, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-06-7260-S) with Anthem Asset Management, LLC, an applicant for investment adviser registration having its principal office at 1720 Post Road, P.O. Box 5113, Westport, Connecticut.  The Stipulation and Agreement alleged that from approximately September 2004 forward, the  firm 1) transacted business as an investment adviser to Anthem Opportunity Fund, L.P. while not registered as an investment adviser and 2) employed an unregistered investment adviser agent in contravention of Section 36b-6(c) of the Connecticut Uniform Securities Act.  The limited partners of Anthem Opportunity Fund, L.P. consisted of two individuals having a familial relationship to the sole manager of Anthem Asset Management, LLC.   Pursuant to the Stipulation and Agreement, the firm agreed to pay $1,700 to the department.  Of that amount, $1,500 constituted an administrative fine and $200 represented past due investment adviser and investment adviser agent registration fees.  In addition, the firm agreed to 1) review, revise and implement supervisory procedures necessary to ensure compliance with statutory licensing requirements; and 2) employ legal counsel in connection with future offerings of securities of Anthem Opportunity Fund, L.P. or any other fund for which Anthem Asset Management, LLC served as investment adviser.

Candy King of America, Inc. Barred From Selling Business Opportunities in Connecticut for Five Years, Fined $25,000, Ordered to Extend $100,000 Rescission Offer to Connecticut Purchaser-Investors

On April 26, 2006, the Banking Commissioner entered a Consent Order resolving allegations contained in a September 16, 2005 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2005-823-B) against Candy King of America, Inc.  The corporation, which allegedly was in the business of selling vending machines and offering location assistance, is headquartered at 7890 Peters Road, Building G-100, Plantation, Florida.  The Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing had alleged that Candy King of America, Inc. 1) sold unregistered business opportunities through its agents Harvey Wall, Alan Goodman and George Kunkel in violation of Section 36b-67(1) of the Connecticut Business Opportunity Investment Act; 2) failed to provide prospective purchaser-investors with the disclosure document required by Section 36b-63 of the Act; 3) violated Section 36b-67(3) of the Act by using the trademark of Kraft® foods without authorization; and 4) violated Section 36b-80 of the Act by making two false statements in its registration application concerning the extent of its prior offers and sales in Connecticut.

Without admitting or denying the Commissioner’s allegations, Candy King of America, Inc. agreed to the entry of a Consent Order 1) rendering the September 16, 2005 Order to Cease and Desist permanent; 2) barring Candy King of America, Inc. from offering or selling business opportunities in Connecticut for five years; 3) requiring Candy King of America, Inc. to pay a $25,000 fine; and 3) directing that Candy King of America, Inc. offer rescission in the amount of approximately $100,000 to affected Connecticut purchaser-investors and repay those purchaser-investors electing rescission.

Stanley L. Gladstone (CRD # 1837178) Barred for Five Years From Acting as an Officer or Director of Any Entity Selling Business Opportunities in Connecticut, Fined $7,500

On April 26, 2006, the Banking Commissioner entered a Consent Order resolving allegations contained in a September 16, 2005 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-2005-823-B) against Stanley L. Gladstone, president of Candy King of America, Inc.   Candy King of America, Inc., which allegedly was in the business of selling vending machines and offering location assistance, is headquartered at 7890 Peters Road, Building G-100, Plantation, Florida.  The Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing had alleged that respondent Gladstone caused two materially false statements to be made in the corporation’s application for registration under the Connecticut Business Opportunity Investment Act.  Those purportedly false statements concerned the extent of Candy King of America, Inc.’s prior offers and sales in Connecticut.

Without admitting or denying the Commissioner’s allegations, Stanley L. Gladstone agreed to the entry of a Consent Order rendering the September 16, 2005 Order to Cease and Desist permanent; fining him $7,500; and barring him for five years from acting as an officer or director of any entity that advertises, contracts, promotes, offers or sells any business opportunity in Connecticut.

Michael S. Berman (CRD # 8978317) d/b/a First Capital Unlimited (F.C.U.) Barred from Connecticut Securities Activity for 7 Years, Fined $5,000, Ordered to Cease and Desist from Regulatory Violations

On April 19, 2006, the Banking Commissioner entered a Consent Order (No. CO-06-7207-S) with respect to Michael S. Berman d/b/a First Capital Unlimited.  The Consent Order alleged that, in October 2002 and August 2003, Michael S. Berman violated Section 36b-6(a) of the Connecticut Uniform Securities Act by selling common stock and preferred stock of Auctiondiner.com to Connecticut investors while Michael S. Berman was not registered as an agent of issuer or as a broker-dealer under the Act.  The Consent Order also noted that on December 12, 1996, the United States District Court for the Central District of California had permanently enjoined Michael S. Berman from offering or selling any investment unless Berman procured a $275,000 performance bond; that such bond would remain in full force and effect as long as Berman continued to engage in the activities triggering the bond requirement and for at least five years thereafter; and that, at the time the Connecticut sales of Auctiondiner.com stock were made, Berman had not procured the performance bond required by the court (FTC v. Bell Connections, Inc. et al., U.S. District Court, D. Cal., Civ. No. 96-0455 KMW (SHx).

The Consent Order barred Michael S. Berman from transacting business in or from Connecticut as an agent, investment adviser agent, broker-dealer or investment adviser for seven years, with leave to apply for relief from that restriction after five years had elapsed from the entry of the Consent Order.  In addition, the Consent Order fined Michael S. Berman $5,000 and directed that he cease and desist from regulatory violations.

Independent Securities Investors Corporation (CRD # 43598) – Broker-dealer Registration Revoked, $2.5 Million Fine Imposed

On April 17, 2006, the Banking Commissioner entered an order revoking the broker-dealer registration of Independent Securities Investors Corporation (Docket No. RF-2006-7155-S) and fining the firm $2,530,000.  The firm, which is located at 795 Main Street, Chipley, Florida, had been the subject of a January 6, 2006 Notice of Intent to Revoke Registration as Broker-dealer, Notice of Intent to Fine and Notice of Right to Hearing.   In sanctioning the firm, the Commissioner found that the respondent engaged in dishonest or unethical practices in the securities business by 1) employing as “cold callers” at least two individuals who were not registered with the NASD; 2) paying commissions to Charter One Capital Holding, Inc., an entity that was not registered with the NASD; 3) employed 24 associated persons in violation of the firm’s Membership Agreement with the NASD; and 4) engaging in unauthorized trading.  The action also found that the respondent wilfully violated Section 36b-16 of the Connecticut Uniform Securities Act by effecting 51 offers and sales of 16 unregistered securities; failed to maintain complete and accurate books and records; employed at least two unregistered agents in violation of Section 36b-6(b) of the Act; withheld material information from the Commissioner; and failed to enforce and maintain adequate supervisory procedures.  The respondent did not appear or contest the revocation or the fine.

Stralem & Company, Incorporated (CRD # 3524) Assessed $4,150 for Unregistered Broker-dealer Activity, Stralem Fund Agrees to Pay $3,500 for Investment Company Notice Filing Delinquency

On April 11, 2006, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-05-7244-S) with Stralem & Company, Incorporated, a prior applicant for broker-dealer registration under the Connecticut Uniform Securities Act, and Stralem Fund, an open-end management investment company registered under the Investment Company Act of 1940.  Both entities maintain an office at 645 Madison Avenue, New York, New York.  In entering into the Stipulation and Agreement, Stralem & Company, Incorporated represented to the Commissioner that it had wound down its broker-dealer operations such that, effective January 3, 2006, it was no longer transacting business as a broker-dealer.  The Stipulation and Agreement alleged that, from at least 2003, Stralem & Company, Incorporated effected transactions in securities of the Stralem Equity Fund at a time when Stralem & Company, Incorporated was not registered as a broker-dealer in Connecticut and that, in so doing, Stralem & Company, Incorporated employed unregistered broker-dealer agents.  The Stipulation and Agreement also alleged that, from approximately September, 2003 until April 15, 2005, when a notice was filed, Stralem Fund failed to make the yearly investment company notice filing required by Section 36b-21(c) of the Act for the Stralem Equity Fund and failed to pay the related fees.

Pursuant to the Stipulation and Agreement, Stralem & Company, Incorporated agreed to pay $4,150 to the department.  Of that amount, $3,500 constituted an administrative fine and $650 represented reimbursement for past due broker-dealer and agent registration fees.  Under the Stipulation and Agreement, Stralem Fund agreed to pay $3,500 to the agency.  Of that amount $2,500 constituted an administrative fine and $1,000 represented reimbursement for notice filing fees covering calendar years 2003 and 2004.

Donald Chapman Pratt (CRD # 367121) Fined $3,700, Suspensions Imposed Following Alleged Private Securities Transactions in Shares of NewAlliance Bancshares, Inc.

On April 7, 2006, the Banking Commissioner entered a Consent Order (No. CO-2006-6998-S) with respect to Donald Chapman Pratt, an applicant for registration as an investment adviser agent of Harvest Capital Advisers, LLC (CRD number 125920) and as a broker-dealer agent of Harvest Capital, LLC (CRD number 35723).  The Consent Order alleged that, from February 2004 to March 2004, while employed by ING Financial Partners, Inc. (CRD number 2882), Pratt wilfully violated Section 36b-31-6e of the Regulations under the Connecticut Uniform Securities Act in conjunction with private securities transactions in shares of NewAlliance Bancshares, Inc.  Although the Consent Order permitted Pratt to become registered as an investment adviser agent and a broker-dealer agent effective April 7, 2006, the Consent Order then suspended both registrations for ten days.  In addition, the Consent Order mandated that Pratt pay a $3,700 fine to the department.

Thomas Weisel Partners LLC (CRD # 46237) Fined $52,480 Following Conflicts of Interest Claims Involving Research Analysts

On April 5, 2006, the Banking Commissioner entered a Consent Order (Docket No. CO-2006-7082-S) with respect to Thomas Weisel Partners LLC, a broker-dealer registered under the Connecticut Uniform Securities Act and having its principal office at One Montgomery Street, Suite 3700, San Francisco, California.  The Consent Order followed a coordinated investigation into firm’s research and investment banking activities conducted by a multi-state task force, and a joint task force of the Securities and Exchange Commission, New York Stock Exchange and National Association of Securities Dealers, Inc.  According to the Consent Order, Thomas Weisel Partners LLC allegedly violated Section 36b-4(b) of the Connecticut Uniform Securities Act by engaging in dishonest or unethical practices, including 1) failing to manage conflicts of interest arising from inappropriate influence exerted by the firm’s investment banking department over research analysts; 2) issuing research reports that were affected by such conflicts of interest; 3) making undisclosed payments for research to other broker-dealers not involved in underwriting transactions; and 4) receiving undisclosed payments for research from outside parties in connection with underwriting transactions.  The Consent Order also alleged that the firm violated Section 36b-31-6f(b) of the Regulations under the Act by failing to establish and implement an adequate supervisory system.

The Consent Order fined the firm $52,480 and directed it to cease and desist from regulatory violations.

Cambridge Coffee Company a/k/a Cambridge Gourmet Coffee Fined $10,000 for Unregistered Business Opportunity Sales; Cease and Desist Order Made Permanent

On December 29, 2005, the Banking Commissioner entered an Order rendering permanent a July 13, 2005 Order to Cease and Desist (Docket No. CF-2005-822-B) against Cambridge Coffee Company under the Connecticut Business Opportunity Investment Act.  The company maintains its principal office at 1714 Avenida Del Sol, Boca Raton, Florida.  The Order to Cease and Desist and accompanying Notice of Intent to Fine had alleged that, from at least February 6, 2005 forward, the respondent offered unregistered coffee distributorship business opportunities in violation of the state’s business opportunity statute.  Also on December 29, 2005, the Commissioner ordered that the respondent be fined $10,000 based on the respondent’s sale of unregistered business opportunities.  Cambridge Coffee Company did not contest the Order to Cease and Desist or the imposition of the fine.


S { } TATISTICAL SUMMARY

 

Licensing At A Glance
at the end of the quarter

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Broker-dealers Registered 2,585  2,631  2,647  
Broker-dealer Agents Registered 121,951 124,855  127,817   
Broker-dealer Branch Offices Registered 2,582 2,876   3,021  
Investment Advisers Registered 422 428   444  
SEC Registered Advisers Filing Notice 1,668 1,722  1,731   
Investment Adviser Agents Registered 7,548  7,716  7,883  
Investment Advisory Branch Offices Registered 123 66  89   
Agents of Issuer Registered 44  41 38  
 
 

Securities and Business
Opportunity Filings

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Offerings Reviewed 79  74
42
  195
Investment Company Notice Filings 456 376 
356
    1,188
Exemptions and Exemptive Notices 920 838  833    2,591
 
 
Examinations
     
Broker-dealers 25  16
15
  56
Investment Advisers 13
0
  18
 
 
Securities Investigations
 
Opened 39  27 20    86
Closed 30 27  28    85
Ongoing as of End of Quarter 121 117  103        
Subpoenas issued 16 19   41
Cases referred from Attorney General 2   8
Cases referred from Other Agencies 3  0   3
 
 
Business Opportunity Investigations
 
Investigations Opened 13  0   13
Investigations Closed 1   12
Ongoing as of End of Quarter 21 14     
 
 
Securities Enforcement: Remedies and Sanctions
 
Notices of Intent to Deny (Licensing)
0
2
0
 
2
Notices of Intent to Suspend (Licensing)
0
0
0
 
0
Notices of Intent to Revoke (Licensing)
2
1
0
 
3
Denial Orders (Licensing) 0
1
  1
Suspension Orders (Licensing) 0
1
  2
Revocation Orders (Licensing) 3
0
  4
Notices of Intent to Fine 5
0
  13
Orders Imposing Fine 0
4
  9
Cease and Desist Orders 4 10 
1
  15
Notices of Intent to Issue Stop Order 0
0
  0
Activity Restrictions/Bars 1   9
Stop Orders 0   0
Vacating/Withdrawal Orders 0   0
Censures 0
0
  0
Restitutionary Orders 0
0
  1
Cancellation Orders 1 0   1
Notices of Intent to Cancel Registration 0
0
  0
 
 

Proceedings and Settlements

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Administrative Actions
8
12
5
 
26
Carryover from 4th Quarter 2005 1
Consent Orders
3
7
8
 
18
Stipulation and Agreements
5
2
2
 
9
 
 

Monetary Relief

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Monetary Sanctions Imposed
$42,900
$3,001,580
$400,200
 
$3,454,680
Carryover from 4th Quarter 2005 $10,000
Restitution or Other Monetary Relief
$115,036
$72,870
$553,500
 
$741,406
 
 

Securities Referrals

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Criminal (Chief State's Attorney)
1
0
1
 
2
Civil (Attorney General)
0
0
0
 
0
Other Agency Referrals
2
3
5
 
10



Securities Division