DOB: Fall 2014 Securities Bulletin

Securities and Business Investments Division

Securities Bulletin

Vol. XXVIII  No. 3
Fall 2014

Features

Enforcement and Other Highlights 
Contributors

Eric Wilder, Director
Cynthia Antanaitis, Assistant Director 


Nicholas John Moniodes (CRD # 1826844) d/b/a Moniodes Investments - Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine Issued

On July 9, 2014, the Banking Commissioner entered an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-8065-S) against Nicholas John Moniodes, now or formerly of Woodbury, Connecticut and Groton, Connecticut.  Respondent Moniodes, who previously worked in the information technology department of broker-dealer Millenco LLC (CRD No. 33726), did business under the name Moniodes Investments.  The action alleged that, from approximately 2004 to 2011, respondent Moniodes entered into Investment Agreements with various investors, and represented that investor monies would be invested in the stock market, with interest payments being made based upon stock market gains.  In reality, respondent Moniodes used investor monies for his personal expenses.  The action stated that, although respondent Moniodes had repaid some of the investors, one of the investors was still owed approximately $35,000.  The action alleged that, in addition to violating the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act, respondent Moniodes violated Section 36b-16 of the Act by offering and selling unregistered securities.

Respondent Moniodes was afforded an opportunity to request a hearing on the Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine.


Michael James Byl (CRD # 1204677) - Order to Cease and Desist and Notice of Intent to Revoke Registration as an Investment Adviser Agent Issued

On July 3, 2014, the Banking Commissioner issued an Order to Cease and Desist, Notice of Intent to Revoke Registration as an Investment Adviser Agent and Notice of Right to Hearing (Docket No. CR-14-8150-S) against Michael James Byl, a control person and registered investment adviser agent of LGAUS LLC d/b/a Landmark Global Advisors LLC.  The action noted that respondent Byl and others were directed to pay damages in conjunction with an April 4, 2012 FINRA arbitration award (Coleman McCarthy v. Southridge Investment Group LLC et al., Case No. 09-06667); and that, on December 18, 2013, FINRA suspended respondent Byl for failing to comply with the arbitration award or to satisfactorily respond to a FINRA information request.  The action alleged that the failure to pay the arbitration award and the FINRA suspension would support administrative proceedings against Byl.  In addition, the action alleged that Byl violated Section 36b-31-14e(a) of the Regulations under the Connecticut Uniform Securities Act by failing to update his Form U-4 to disclose the 2012 arbitration award, his failure to pay the award and his suspension by FINRA.

The respondent was afforded an opportunity to request a hearing on the Order to Cease and Desist and Notice of Intent to Revoke Registration as an Investment Adviser Agent.


    
CONSENT ORDERS

The Right Mortgage Co., Inc. and Edmund J. Ramos Sanctioned for Unregistered Note Sales

On September 30, 2014, the Banking Commissioner entered a Consent Order (No. CO-14-8041-S) with respect to The Right Mortgage Co., Inc. of 548 Boston Post Road, Milford, Connecticut.  Edmund J. Ramos, president of The Right Mortgage Co., Inc., was also a party to the Consent Order.  The Right Mortgage Co., Inc. (NMLS number 59983) was previously licensed with the department as a mortgage correspondent lender.  The Consent Order alleged that, from approximately August 8, 2007 to August 12, 2011, respondents Ramos and The Right Mortgage Co., Inc. violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered notes issued by The Right Mortgage Co., Inc.; that Ramos transacted business as an unregistered agent of issuer; and that Ramos violated Section 36b-23 of the Act by providing false or misleading information in connection with an agency investigation.  The Consent Order acknowledged that the respondents had provided documentation evidencing their inability to pay the fine that otherwise would have been assessed against them.


The Consent Order directed The Right Mortgage Co., Inc. and Edmund J. Ramos to cease and desist from regulatory violations.   In addition, the Consent Order barred Ramos for seven years from 1) transacting business in or from Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent; 2) soliciting or accepting funds for investment purposes from public or private investors in or from Connecticut; 3) engaging in any activity that would require licensure under Chapters 668 (Nondepository Financial Institutions) or 669 (Regulated Activities) of the Connecticut General Statutes; and 4) serving as a control person, qualified individual or branch manager for any entity regulated by the Commissioner under Chapter 668 of the Connecticut General Statutes.

Gregory Richard Imbruce (CRD # 4392235), Hunton Oil Genpar LLC, Giddings Genpar LLC, and Asym Capital III LLC - Consent Order Entered

On August 26, 2014, the Banking Commissioner entered a Consent Order (Docket No. CF-13-8064-S) with respect to Gregory Richard Imbruce, Hunton Oil Genpar LLC, Giddings Genpar LLC and Asym Capital III LLC, four of seven respondents named in a December 17, 2013 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-13-8064-S).   Settling respondents Hunton Oil Genpar LLC, Giddings Genpar LLC and Asym Capital III LLC (the “General Partners”) were the general partners of non-settling respondents Hunton Oil Partners LP, Giddings Oil & Gas LP and Asym Energy Fund III LP (the “Investment Funds”).  The General Partners were, in turn, controlled by Glenrose Holdings LLC which was controlled by respondent Imbruce.


The December 17, 2013 action had alleged that 1) at designated times between 2009 and 2012, the Investment Funds offered and sold unregistered securities absent compliance with Section 36b-16 of the Connecticut Uniform Securities Act; 2) the General Partners transacted business as unregistered investment advisers in contravention of Section 36b-6(c)(1) of the Act; 3) Imbruce violated Section 36b-6(c)(2) of the Act by transacting business as an unregistered investment adviser agent; and 4) respondent Asym Energy Fund III LP employed an unregistered agent of issuer in violation of Section 36b-6(b) of the Act.  The action had also alleged that the respondents violated the antifraud provisions of the Act by failing to disclose material facts to prospective limited partners, including disciplinary proceedings initiated by FINRA against respondent Imbruce involving Imbruce’s activities while he was associated with Bernard L. Madoff Investment Securities LLC.  The December 17, 2013 action had also alleged that, to induce several prospective limited partners to invest, respondent Imbruce represented to them that he personally invested in the affected limited partnership when that was not the case.  In addition, the action had alleged that the subscription agreements for two of the Investment Funds falsely represented that all applicable blue sky registration requirements had been fulfilled.  On June 10, 2014, the December 17, 2013 action was amended to amplify the allegation that respondent Imbruce also violated Section 36b-23 of the Act by making materially misleading statements to the department.


The Consent Order acknowledged that, on August 25, 2014, Glenrose Holdings LLC as well as each of the General Partners had applied for investment adviser registration in Connecticut, and that an investment adviser application had also been filed for Asym Energy Partners LLC, a Delaware-based entity controlled by Imbruce.  In addition, the Consent Order acknowledged that respondent Imbruce had applied for registration as an investment adviser agent of Glenrose Holdings, LLC, Asym Energy Partners LLC and each of the General Partners.  As a precondition to the registration of Glenrose Holdings LLC and Asym Energy Partners LLC as investment advisers, the Consent Order required that Imbruce retain a regulatory consultant to perform on-site compliance reviews of each applicant and that affidavits confirming compliance be filed with the Division.


The Consent Order fined respondent Imbruce $75,000 and directed each of the settling respondents to cease and desist from regulatory violations.  In addition, the Consent Order restricted Imbruce’s securities activities.  Pursuant to the Consent Order, for three years, Imbruce would limit his investment advisory activities in or from Connecticut to advice regarding securities of issuers in the energy or energy-related industries, and refrain from offering or selling securities issued by entities that were not in the energy or energy-related industries.  The Consent Order also required Imbruce to retain experienced securities legal counsel prior to offering or selling securities in or from Connecticut, submit regulatory filings and fees through such retained counsel and support any exemption claim with a signed opinion of counsel.


The administrative proceeding remains pending with respect to the nonsettling Investment Funds.

George Jay Prussin (CRD # 1475439) Fined $5,000 For Unregistered Promissory Note Sales

On July 25, 2014, the Banking Commissioner entered a Consent Order (No. CO-14-7969-S) with respect to George Jay Prussin of Tenafly, New Jersey.  The Consent Order alleged that from December 2004 to approximately January 2012, George Prussin offered and sold unregistered securities in violation of Section 36b-16 of the Connecticut Uniform Securities Act.  The securities took the form of promissory notes.  In furtherance of his desire to resolve the matter informally, George Prussin provided the department with evidence that he had extended a $1,485,000 rescission offer to those Connecticut investors whose unmatured notes were still outstanding and remained unpaid.  The Consent Order fined George Prussin $5,000 and directed him to cease and desist from regulatory violations.

Syndicated Capital, Inc. (CRD # 29037) Fined $10,000 for Supervisory Violation

On July 14, 2014, the Banking Commissioner entered a Consent Order (No. CO-14-7988B-S) with respect to Syndicated Capital, Inc., a Connecticut-registered broker-dealer located at 1299 Ocean Avenue, Second Floor, Santa Monica, California.  From 2002 to 2006, the firm maintained a branch office at 152 Deer Hill Avenue, Suite 203, Danbury, Connecticut, and employed Stephen Burton Blankenship (CRD number 2234577) as a registered broker-dealer agent.  Blankenship, the sole managing member and control person of Deer Hill Financial Group, LLC, also conducted tax preparation, financial planning and investment advisory services from the Danbury location.  Following allegations of unregistered investment advisory activity, fraud and misappropriation, the Banking Commissioner entered a Consent Order (Docket No. CO-12-7988-S) with respect to Blankenship and Deer Hill Financial Group, LLC on August 31, 2012.  That consent order revoked Blankenship's registration as a broker-dealer agent and permanently barred both Blankenship and Deer Hill Financial Group, LLC from transacting securities business in or from Connecticut.  In addition, the U.S. District Court for the District of Connecticut fined Blankenship $7,500, directed Blankenship to make $607,516.81 in restitution and sentenced Blankenship to 41 months in prison following Blankenship’s guilty plea to one count of federal mail fraud and one count of federal securities fraud (United States of America v. Stephen Blankenship, D. Conn. Case No. 3:12CR197 (VLB)).


The Consent Order with Syndicated Capital, Inc. alleged that, in contravention of Section 36b-31-6f of the Regulations under the Connecticut Uniform Securities Act, the firm failed to establish, enforce and maintain a system for supervising the activities of its agents, including Blankenship, reasonably designed to achieve compliance with applicable securities laws and regulations.


The Consent Order acknowledged that Syndicated Capital, Inc. and another securities brokerage firm had reimbursed affected investors for 100% of the financial losses they incurred as a result of Blankenship's misconduct.  Specifically, Syndicated Capital, Inc. repaid affected investors $303,758.20.


In resolution of the matter, the Consent Order fined Syndicated Capital, Inc. $10,000 and directed the firm to refrain from regulatory violations.
 
      
 


STATISTICAL SUMMARY

Licensing At A Glance
at the end of the quarter

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Broker-dealers Registered 2,799   2,836
2,292
       
Broker-dealer Agents Registered 154,725 156,762
159,352
      
Broker-dealer Branch Offices Registered 2,262 2,443
2,768
      
Investment Advisers Registered 535 536 547
        
SEC Registered Advisers Filing Notice 2,006 2,049 2,076
       
Investment Adviser Agents Registered 11,765 11,917 12,093
        
Exempt Reporting Advisers
84
84
84
       
Agents of Issuer Registered 22 23 23
    
Conditional Registrations
0
1
0
     
 
 

Securities and Business
Opportunity Filings

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Offerings Reviewed 42 46
33
          121
Investment Company Notice Filings 740 496
564
         1,800
Exemptions and Exemptive Notices 858 864 839          2,561
 
 
Examinations
     
Broker-dealers 6 9
22
         37
Investment Advisers 47 31
25
         103
 
 
Securities Investigations
 
Opened 18 17 11
    
46
Closed 22 9 8
       
39
Ongoing as of End of Quarter 69 77 80
         
  
Subpoenas issued 16 10 10           36
Matters referred from Attorney General 1 0 0          1
Matters referred from Other Agencies 3 2 0          5
 
 
Business Opportunity Investigations
 
Investigations Opened 1 1 0          2
Investigations Closed 1 0
3
         4
Ongoing as of End of Quarter 4 5 2                      
 
 
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
0
1
    
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 3 3
1
          7
Orders Imposing Fine 0 0
0
          0
Cease and Desist Orders 3 3
2
         8
Notices of Intent to Issue Stop Order 0 0
0
     
0
Activity Restrictions/Bars 1 1
2
     
4
Stop Orders 0 0 0          0
Vacating/Withdrawal/ Modification Orders 0 1 0           1
Restitutionary Orders 1 0
1
         2
Injunctive Relief Obtained 0 0 0           0
 
 

Proceedings and Settlements

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Administrative Actions
2
3
2
         
7
Consent Orders
2
3
4
        
9
Stipulation and Agreements
1
0
0
         
1
 
 

Monetary Relief*

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Monetary Sanctions Imposed
$1,300
$5,073,800
$90,000
        $5,165,100
Portion attributable to settlements
$1,300
$5,053,800
$90,000
     
$5,145,100
Attributable to Court-Ordered Penalties     
$20,000
         
    
$20,000
Restitution or Other Monetary Relief
( includes rescission offer amounts)
$43,250
$1,766,556
$1,620,949
         $3,430,755

*Cents eliminated

 

Securities Referrals

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



Securities Division