DOB: Summer 2015 Securities Bulletin

Securities and Business Investments Division

Securities Bulletin

Vol. XXIX  No. 2
Summer 2015

Features

Enforcement and Other Highlights 
Contributors

Eric Wilder, Director
Cynthia Antanaitis, Assistant Director 


Dale Joseph Quesnel, Sr., Overtime Marketing, LLC, Overtime Sports Southeast, LLC, Overtime Sports Southwest, LLC, Kenneth Hansmire and Floridel, LLC - Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine Issued

On June 22, 2015, the Banking Commissioner entered an Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine (Docket No. CRF-15-8110-S) against Dale Joseph Quesnel, Sr., a former broker-dealer agent and insurance licensee.  Also named in the Order were Overtime Marketing, LLC and Overtime Sports Southeast, LLC, both of 4455 LBJ Freeway, Dallas, Texas; Overtime Sports Southwest, LLC of 502 North Austin, Comanche, Texas; Kenny Hansmire  of 501 North Austin Street, Comanche, Texas; and Floridel, LLC of 13574 Village Park Drive, Orlando, Florida.  Hansmire, the control person of Overtime Marketing, LLC, Overtime Sports Southeast, LLC and Overtime Sports Southwest, LLC (collectively, “Overtime”), was in the business of promoting an all-star football game for college athletes.  Floridel, LLC owns a Florida taco franchise.


The action alleged that, from approximately February 2009 to May 2012, respondents Hansmire and Quesnel sold approximately $1.9 million of securities consisting of notes issued by Overtime to at least ten investors in Connecticut and other states.  The notes were not registered under the Connecticut Uniform Securities Act.  The action also alleged that Quesnel received approximately $166,000 in compensation from Overtime for his role in offering and selling the notes, and that Quesnel was not registered as an agent of issuer in violation of Section 36b-6(a) of the Act.  In addition, respondents allegedly failed to provide investors with any offering document or other written disclosure describing the risks associated with the note investment and, in so doing, violated the antifraud provisions of the Act.


The action further alleged that respondents Quesnel and Floridel, LLC offered and sold approximately $250,000 of Floridel, LLC promissory notes to finance Floridel, LLC’s taco business expansion.  The Floridel, LLC notes were not registered under the Act, and Quesnel allegedly received $8,000 from Floridel, LLC in conjunction with the note offering.  As with the offering of the Overtime notes, the action alleged that the prospective investors were not provided with critical disclosures, and that Quesnel was not registered as an agent of issuer.


In connection with both the Overtime and the Floridel, LLC offerings, the action further alleged that:  1) Quesnel violated Section 36b-23 of the Act by representing to the Division that he did not receive sales-related compensation for selling the Overtime notes and the Floridel, LLC notes; and 2) Quesnel violated Section 36b-31-6e(c) of the Regulations under the Act by not disclosing to his employing broker-dealer his involvement in the note offerings.


As a separate matter, the action also alleged that from August 2011 to December 2013, Quesnel violated Section 36b-6(c)(1) of the Act by providing securities research and technical analysis on a compensated basis to two broker-dealer agents at a time when Quesnel was not registered as an investment adviser in Connecticut.


Each of the respondents 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.


Greenberg International Law & Tax Advisory, Mike James, Robert Dunn and Richard Fox - Order to Cease and Desist Issued

On May 20, 2015, the Banking Commissioner issued an Order to Cease and Desist and Notice of Right to Hearing (Docket No. CD-15-8202-S) against Greenberg International Law & Tax Advisory (“GILTA”), a purported law firm which held itself out as being located at One Constitution Plaza, Kinsley Street, Hartford, Connecticut.  Also named in the Order were Mike James, a Senior Investment Recovery Manager and “broker” at the firm; Robert Dunn, the firm's Senior Tax Attorney; and Richard Fox, Senior Investment Recovery Manager. Online records of the State of Connecticut Judicial Branch do not appear to contain any reference to GILTA.

The Order to Cease and Desist alleged that 1) in or around November, 2014, Mike James, acting on behalf of GILTA, solicited the purchase of High Line securities from a Singapore resident; 2) on December 16, 2014, James communicated to the investor that, although James had sold the High Line securities, the investor would not receive the sales proceeds without paying a $5,200 registration fee to remove restrictions on the shares; 3) the sale was evidenced by a “Sell Confirmation” listing James as broker of record and describing the transaction as being “Brokered by Greenberg International”; and 4) the investor did not pay the registration fee but forwarded the documentation to the Division for investigation.

Similarly, the Order to Cease and Desist alleged that 1) on January 22, 2015, Richard Fox, acting on behalf of GILTA, solicited the purchase of 20,000 shares of Sports Kinetix Corp. from another Singapore resident for a price of $10.88 per share; 2) GILTA would receive a 2% commission or $4,352 on the transaction; 3) the Singapore resident was instructed to direct any questions to “your representative” at the firm’s Connecticut telephone number; 4) contrary to the representations of Fox, on behalf of GILTA, Sport Kinetix Corp. shares were not currently listed and/or traded on a securities exchange; and 5) ironically, the Singapore resident did not own any shares of Sports Kinetix Corp.

In addition, the Order to Cease and Desist alleged that GILTA and Robert Dunn violated Section 36b-23 of the Connecticut Uniform Securities Act by failing to disclose the scope of the firm's transactional activity to the Division.  The action also alleged that 1) GILTA transacted business as an unregistered broker-dealer in violation of Section 36b-6(a) of the Act; 2) James and Fox violated Section 36b-6(a) of the Act by transacting business as unregistered agents; and 3) respondents GILTA, James and Fox violated the antifraud provisions in Section 36b-4(a) of the Act.

Since none of the respondents requested a hearing on the Order to Cease and Desist, the Order to Cease and Desist became permanent as to each respondent on July 22, 2015.


Peter D. Hershman (CRD # 5999754) Fined $3,500 for Unregistered Investment Adviser Agent Activity

On June 26, 2015, the Banking Commissioner entered a Consent Order (No. CO-15-8222-S) with respect to Peter D. Hershman of Branford, Connecticut.  The Consent Order alleged that commencing in 2011, Peter Hershman solicited at least one investment advisory client on behalf of Essex Financial Services, Inc., an investment adviser registered with the Securities and Exchange Commission, and that in 2012, Peter Hershman received compensation from Essex Financial Services, Inc. in connection with the solicitation activity. Peter Hershman was not registered as an investment adviser agent of Essex Financial Services, Inc. under the Connecticut Uniform Securities Act.  The Consent Order alleged that Peter Hershman violated Section 36b-6(c) of the Act by transacting business as an unregistered investment adviser agent.  The Consent Order fined Peter Hershman $3,500 and directed him to cease and desist from regulatory violations.

M.M. Dillon & Co. LLC (CRD # 19878) Assessed $4,050 for Employing Unregistered Agents

On May 19, 2015, the Banking Commissioner entered a Consent Order (No. CO-15-8221-S) with respect to M.M. Dillon & Co. LLC, a Connecticut-registered broker-dealer located at One Sound Shore Drive, Suite 101, Greenwich, Connecticut 06830.  The Consent Order alleged that the firm violated Section 36b-6(b) of the Connecticut Uniform Securities Act by employing multiple unregistered agents from early 2009 until April 2015.  M.M. Dillon & Co. has since taken curative measures to register the affected individuals as agents, with the last individual becoming registered on April 14, 2015.  The Consent Order also alleged that the firm violated Section 36b-31-6f of the Regulations under the Act by failing to establish, enforce and maintain an adequate supervisory system.


The Consent Order directed the firm to cease and desist from violative conduct; establish, implement and maintain revised written supervisory procedures; and remit $4,050 to the department.  Of that amount, $2,700 constituted an administrative fine and $1,350 represented payment for past due agent registration fees.

     
 


Lawrence R. Yurdin and First Connecticut Capital, LLC Fined $5,000 for Selling Unregistered Securities

On May 5, 2015, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-15-8037-S) with First Connecticut Capital, LLC, a previously licensed mortgage lender located at 7365 Main Street, Box 338, Stratford, Connecticut 06614.  Lawrence R. Yurdin, manager of First Connecticut Capital, LLC, was also a party to the Stipulation and Agreement.  The Stipulation and Agreement alleged that, at various times in 2005 and 2006, Lawrence R. Yurdin and First Connecticut Capital, LLC sold unregistered securities in violation of Section 36b-16 of the Connecticut Uniform Securities Act.  The securities were sold to finance the construction of certain real estate projects.  The Stipulation and Agreement imposed an aggregate fine of $5,000 against Lawrence R. Yurdin and First Connecticut Capital, LLC, and required that, for three years, they retain experienced securities legal counsel prior to engaging in the offer or sale of securities in or from Connecticut.


STATISTICAL SUMMARY

Licensing At A Glance
at the end of the quarter

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Broker-dealers Registered 2,230 2,259
 
 
Broker-dealer Agents Registered 158,467 160,822
 
 
Broker-dealer Branch Offices Registered 2,698 2,709
 
Investment Advisers Registered 524 527  
SEC Registered Advisers Filing Notice 2,074 2,107  
 
Investment Adviser Agents Registered 12,184 12,373  
Exempt Reporting Advisers
84
87
 
 
Agents of Issuer Registered 23 23  
 
Conditional Registrations
0
0
 
 
 
 

Securities and Business
Opportunity Filings

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Offerings Reviewed 32 44
 
  76
Investment Company Notice Filings 540 582
 
  1,122
Exemptions and Exemptive Notices 803 942     1,745
 
 
Examinations
     
Broker-dealers 15 23
 
  38
Investment Advisers 35 41
 
  76
 
 
Securities Investigations
 
Opened 25 26  
 
51
Closed 15 13  
 
28
Ongoing as of End of Quarter 97 110  
 
  
Subpoenas issued 18 9     27
Matters referred from Attorney General 3 0     3
Matters referred from Other Agencies 2 0     2
 
 
Business Opportunity Investigations
 
Investigations Opened 0 1     1
Investigations Closed 0 1
 
  1
Ongoing as of End of Quarter 2 2         
 
 
Enforcement: Remedies and Sanctions
 
Notices of Intent to Deny (Licensing) 0
0
 
 
0
Notices of Intent to Suspend (Licensing)
0
0
 
 
0
Notices of Intent to Revoke (Licensing)
1
0
 
 
1
Denial Orders (Licensing) 0 0
 
  0
Suspension Orders (Licensing) 1 0
 
 
1
Revocation Orders (Licensing) 0 0
 
  0
Notices of Intent to Fine 3 1
 
  4
Orders Imposing Fine 1 0
 
  1
Cease and Desist Orders 3 2
 
  5
Notices of Intent to Issue Stop Order 0 0
 
 
0
Activity Restrictions/Bars 2 0
 
 
2
Stop Orders 0 0     0
Vacating/Withdrawal/ Modification Orders 0 0     0
Restitutionary Orders 2 1
 
  3
Injunctive Relief Obtained 0 0     0
 
 

Proceedings and Settlements

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Administrative Actions
4
2
 
 
6
Consent Orders
4
2
 
 
6
Stipulation and Agreements
2
1
 
 
3
 
 

Monetary Relief*

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Monetary Sanctions Imposed
$146,600
$12,550
 
  $159,150
Portion attributable to settlements
$61,600
$12,550
 
$74,150
Attributable to Court-Ordered Penalties
0
0
0
Restitution or Other Monetary Relief
(includes rescission offer amounts)
$3,277,280
$3,577,707
 
  $6,854,987

*Cents eliminated

 

Securities Referrals

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



Securities Division