DOB: Fall and Winter 2015 Securities Bulletin

Securities and Business Investments Division

Securities Bulletin

Vol. XXIX  Nos. 3 and 4 
Fall and Winter 2015

Features

Enforcement and Other Highlights 
Contributors

Eric Wilder, Director
Cynthia Antanaitis, Assistant Director 


James E. Neilsen (CRD No. 4825841) Fined $300,000; Order to Cease and Desist and Order to Make Restitution Made Permanent

On December 1, 2015, the Banking Commissioner entered Findings of Fact, Conclusions of Law and an Order by default against James E. Neilsen of Norwalk, Connecticut.  Neilsen, a former broker-dealer agent, provided tax and accounting services and did business as Neilsen Financial Services.  Neilsen had been the subject of a March 31, 2015 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-15-8175-S) alleging that 1) respondent Neilsen entered into investment agreements with at least two investors who gave Neilsen at least $243,000 to invest; 2) respondent Neilsen represented to the investors that the investment would generate a 9% return with no risk of loss; 3) respondent Neilsen used investor monies to cover his personal expenses and failed to provide investors with written disclosures concerning investment risks; 4) respondent Neilsen violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act; 5) respondent Neilsen sold unregistered securities in violation of Section 36b-16 of the Act; and 6) respondent Neilsen made a material misrepresentation to the agency in conjunction with an investigation.


Incorporating the allegations of the March 31, 2015 action into his Findings of Fact and Conclusions of Law, the Commissioner rendered permanent the March 31, 2015 Order to Cease and Desist and Order to Make Restitution.  In addition, the Commissioner directed respondent Neilsen to pay a $300,000 fine to the agency.


Respondent Neilsen had also been the subject of a November 13, 2014 Order of the Commissioner (Docket No. CRF-13-8014-S) based on similar conduct.  The 2014 action resulted in a $25,000 fine and a directive to pay restitution in connection with activities conducted through Ulysses Partners, LLC of which Neilsen was the founding member.  The fine and restitutionary amount imposed in the 2014 proceeding remain unpaid.


Martinez-Ayme Financial Group Incorporated d/b/a Martinez-Ayme Securities (CRD No. 109838) - Notice of Intent to Revoke Broker-dealer Registration Issued

On November 23, 2015, the Banking Commissioner issued a Notice of Intent to revoke the broker-dealer registration of Martinez-Ayme Financial Group Incorporated d/b/a Martinez-Ayme Securities (Docket No. NR-15-8244-S).  The firm is located at 9495 Sunset Drive, Suite B275, Miami, Florida 33173.  The basis for the Notice of Intent was a series of sanctions entered by the Financial Industry Regulatory Authority (FINRA), including 1) a September 19, 2013 Acceptance, Waiver and Consent (Case No. 2013037419101) censuring the firm and fining it $25,000 for placing market maker bid quotations and making securities purchases during restricted periods; 2) a March 9, 2015 Acceptance, Waiver and Consent (Case No. 2013035307701) censuring the firm and fining it $25,000 for net capital and related issues; 3) a June 10, 2015 FINRA expulsion based on the firm's failure to pay the fine imposed by Case No. 2013035307701); and 4) a September 14, 2015 additional FINRA expulsion based on the firm's failure to pay the fine imposed in Case No. 2013037419101.  Martinez-Ayme Financial Group Incorporated was afforded an opportunity to request a hearing on the allegations.

Rosemarie Pokorski d/b/a Second Impression - Order to Cease and Desist, Order to Make Restitution Made Permanent; $5,000 Fine Imposed

On October 6, 2015, the Banking Commissioner issued Findings of Fact, Conclusions of Law and an Order (Docket No. CRF-15-8179-S) with respect to Rosemarie Pokorski who did business under the name Second Impression.  The action had been preceded by a February 26, 2015 Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine alleging that 1) from approximately February 1, 2012 to February 1, 2013, the respondent offered and sold unregistered securities in the form of investment agreements to at least four Connecticut residents; 2) respondent Pokorski allegedly told investors that she was in the business of buying antiques and collectibles in bulk, and that she would use the invested funds to purchase the goods, sell them and divide the profits with each investor on a percentage basis; and 3) in reality, respondent Pokorski spent most, if not all, of the investment proceeds on personal expenses and, in so doing, violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act.  Although respondent Pokorski requested a hearing on the allegations, she did not appear at the resulting proceeding.  Noting that the respondent had admitted to taking investor monies and not using the funds properly, the Commissioner adopted as findings the allegations in the February 26, 2015 Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine.  The Commissioner also rendered permanent the February 26, 2015 Order to Cease and Desist and Order to Make Restitution and fined the respondent $5,000.


National Securities Corporation (CRD No. 7569) Fined $4,000

On December 29, 2015, the Banking Commissioner entered a Consent Order (No. CO-15-8256-S) with respect to National Securities Corporation, a Connecticut-registered broker-dealer with its principal office at 1001 Fourth Avenue, Suite 3750, Seattle, Washington.  The Consent Order alleged that the firm engaged in dishonest or unethical business practices by 1) employing an individual who engaged in “cold-calling” and asking qualifying questions at a time when that individual was not registered as an agent under the Connecticut Uniform Securities Act; and 2) employing one or more agents who used sales presentations in a misleading manner.  The Consent Order also alleged that the firm failed to maintain accurate and current books and records and failed to establish, enforce and maintain an adequate supervisory system.


The Consent Order fined the firm $4,000 and directed that it cease and desist from regulatory violations.  In addition, the Consent Order required that the firm reimburse the agency up to $3,500 for the cost of one or more examinations to be conducted within twenty-four months.

Cooper Capital, Inc. (CRD No. 127691) and Sara Katherine Cooper (CRD No. 5094118) Fined $10,000

On November 24, 2015, the Banking Commissioner entered a Consent Order (No. CO-15-8264-S) with respect to Cooper Capital, Inc., a Connecticut-registered investment adviser located at 4520 36th Street South, A2, Arlington, Virginia 22302.  The firm previously maintained an address at 223 Hills Point Road, Westport, Connecticut 06880.  Also named in the Consent Order was Sara Katherine Cooper, vice president of the firm and a registered investment adviser agent.


The Consent Order alleged that the firm 1) engaged in dishonest or unethical business practices in the securities business within the meaning of Section 36b-15(a)(2)(H) of the Connecticut Uniform Securities Act; 2) engaged in conduct described in Section 36b-31-15c(a)(10) of the Regulations under the Act by failing to disclose to a client in writing before any advice is rendered any material conflict of interest relating to the investment adviser or any of its investment adviser agents which could reasonably be expected to impair the rendering of unbiased and objective advice; 3) violated Section 206(3) of the Investment Advisers Act of 1940 by, while acting as a principal for its own account, knowingly selling any security to or purchasing any security from a client without disclosing to such client in writing before the completion of such transaction the capacity in which the firm was acting and obtaining the consent of the client to such transaction; 4) violated Section 36b-31-14e(a) of the Regulations by filing with the Commissioner a Form ADV application and amendment that inaccurately stated that neither the firm nor Sara Cooper, its related person, had a proprietary interest in client transactions; 5) violated Section 36b-31-14e(a) of the Regulations by filing with the Commissioner a Form ADV Part 2A containing the inaccurate statement that the firm did not participate in principal transactions; and 6) violated Section 36b-23 of the Act by filing with the Commissioner a Form ADV and amendments stating that the firm did not participate in principal transactions when such was not the case.  The Consent Order also alleged that Sara Cooper 1) engaged in dishonest or unethical practices in the securities business within the meaning of Section 36b-15(a)(2)(H) of the Act and Section 36b-31-15d(a)(2) of the Regulations by failing to disclose to clients in writing before any advice was rendered any conflict of interest relating to the investment adviser agent which could reasonably be expected to impair the rendering of unbiased advice; and 2) violated Section 36b-23 of the Act by representing and certifying through her signature on the firm’s Form ADV filings with the Commissioner that the information and statements made in such ADV filings were true and correct when that was not the case.


The Consent Order directed Cooper Capital, Inc. and Sara Katherine Cooper to cease and desist from regulatory violations, and fined them $10,000, jointly and severally.

John William Rafal (CRD No. 809031) Fined $25,000, Broker-dealer Agent and Investment Adviser Agent Registrations Suspended

On November 23, 2015, the Banking Commissioner entered a Consent Order (No. CO-15-8158) with respect to John William Rafal, a Connecticut-registered broker-dealer agent and investment adviser agent of Essex Financial Services, Inc.  Rafal also served as the President and Chief Executive Officer of Essex Financial Services, Inc. from April 2003 through July 2013, and, as of November 23, 2015, was a director of the firm.  The Consent Order alleged that Rafal engaged in dishonest or unethical practices in the securities business within the meaning of Sections 36b-15(a)(2)(H) and 36b-5(f) of the Connecticut Uniform Securities Act and Section 36b-31-15d of the Regulations thereunder by 1) knowingly authorizing the payment of referral fees by the firm to an individual attorney who Rafal knew was not registered as an investment adviser agent of Essex Financial Services, Inc. in Connecticut; and 2) requesting that the unregistered attorney provide the firm with an itemized invoice for the first quarter of 2012 mischaracterizing the services that the individual performed for the firm.


The Consent Order suspended Rafal's Connecticut broker-dealer agent and investment adviser agent registration for fifteen business days commencing on the date the Consent Order was entered by the Commissioner.  In addition, the Consent Order fined Rafal $25,000 and directed that he cease and desist from regulatory violations.

Essex Financial Services, Inc. (CRD No. 127549) Fined $25,000

On November 23, 2015, the Banking Commissioner entered a Consent Order (No. CO-15-8158-S) with respect to Essex Financial Services, Inc. a Connecticut-registered broker-dealer located at 176 Westbrook Road, Essex, Connecticut 06426.  The firm is also an investment adviser registered with the Securities and Exchange Commission. The Consent Order alleged that the firm 1) violated Section 36b-6(c)(3) of the Connecticut Uniform Securities Act by engaging an attorney to whom referral fees were paid as an unregistered investment adviser agent; 2) violated Section 36b-31-14a(a) of the Regulations under the Act by failing to keep SEC required records, notably ledgers and supporting documents, true and accurate; and 3) contravened Section 36b-31-6f(b) of the Regulations under the Act by failing to establish, enforce and maintain a system for supervising the activities of its agents, investment adviser agents and Connecticut office operations that was reasonably designed to achieve compliance with applicable securities laws and regulations.   The Consent Order recited that the firm had since restructured its reporting structure to address potential compliance problems.


The Consent Order fined the firm $25,000 and directed that it cease and desist from regulatory violations.

Southridge Real Estate Partners, Limited Partnership, Ridgebury Partners, LLC, Douglas R. Esposito (CRD No. 4259805) and Stephen Murray Hicks (CRD No. 1248222)

On November 23, 2015, the Banking Commissioner entered a Consent Order (Docket No. CF-15-8113-S) with respect to Southridge Real Estate Partners, Limited Partnership (the "Fund"), a private investment fund focusing on real estate; Ridgebury Partners, LLC, general partner of the Fund; Douglas R. Esposito; and Stephen Murray Hicks.  The Fund maintains or has maintained an office at 2A Ives Street, Danbury, Connecticut. The respondents had been the subject of a July 10, 2015 Order to Cease and Desist and Notice of Intent to Fine  alleging that 1) the Fund violated Section 36b-16 of the Connecticut Uniform Securities Act by offering and selling unregistered limited partnership interests; 2) the Fund employed Esposito and Hicks as unregistered agents of issuer in contravention of Section 36b-6(b) of the Act; 3) Esposito and Hicks transacted business as unregistered agents of issuer in violation of Section 36b-6(a) of the Act; 4) the Fund's general partner transacted business as an unregistered investment adviser in violation of Section 36b-6(c)(1) of the Act and engaged Esposito and Hicks as unregistered investment adviser agents; and 5) Esposito and Hicks, in turn, violated Section 36b-6(c)(2) of the Act by transacting business as unregistered investment adviser agents.
 

In resolution of the matter and without admitting or denying the Commissioner's allegations, the respondents agreed to cease and desist from regulatory violations and to remit $9,440, jointly and severally, to the department.  Of that amount, $7,500 constituted an administrative fine and $1,940 would be applied to reimburse the agency for past due registration fees.

Andres Dario Rojo (CRD No. 2724759), Acerbus, LLC, Red Advisors LLC (IARD No. 171647), Domum Equity 1, Ltd and Domum Equity 2, Ltd

On October 26, 2015, the Banking Commissioner entered a Consent Order (No. CO-15-8252-S) with respect to Acerbus, LLC, Red Advisors LLC, Domum Equity 1, Ltd and Domum Equity 2, Ltd., all of 1 Atlantic Street, Suite 300, Stamford, Connecticut.  Also named in the Consent Order was Andres Dario Rojo, executive officer of Domum Equity 2, Ltd and manager of Acerbus, LLC, Red Advisors LLC and Domum Equity 1, Ltd.  Domum Equity 1, Ltd and Domum Equity 2, Ltd were real estate partnerships.  Red Advisors LLC was an applicant for investment adviser registration under the Connecticut Uniform Securities Act.


The Consent Order alleged that 1) from at least 2007 forward, Acerbus, LLC transacted business as an unregistered investment adviser in violation of Section 36b-6(c)(1) of the Act; 2) from at least 2007 forward, Rojo transacted business as an unregistered investment adviser agent of Acerbus, LLC in contravention of Section 36b-6(c)(2) of the Act; 3) Domum Equity 1, Ltd and Domum Equity 2, Ltd violated Section 36b-16 of the Act by failing to timely file an exemptive claim or a claim of covered security status under Section 36b-21 of the Act; and 4) grounds existed for denying the Connecticut registrations of Red Advisors LLC and Rojo as an investment adviser and investment adviser agent, respectively.


The Consent Order directed Andres Dario Rojo, Acerbus, LLC, Domum Equity 1, Ltd, Domum Equity 2, Ltd, their representatives, agents, employees, affiliates (including, without limitation, Red Advisors LLC), assigns, subsidiaries and successors in interest to cease and desist from regulatory violations.  In addition, the Consent Order required that Rojo and Acerbus, LLC jointly and severally remit $4,700 to the department.  Of that amount, $2,500 constituted an administrative fine and $2,200 represented reimbursement for past due investment adviser and investment adviser agent registration fees.  The Consent Order also required that Rojo, Domum Equity 1, Ltd and Domum Equity 2, Ltd jointly and severally remit $1,250 to the department as an administrative fine.


Red Advisors LLC became registered as an investment adviser in Connecticut on October 26, 2015.  On the same date, Andres Dario Rojo became registered as an investment adviser agent of the firm in Connecticut.

Carolyn Settzo (CRD No. 6388203)


On October 16, 2015, the Banking Commissioner entered a Consent Order (No. CO-15-8257-S) with respect to Carolyn Settzo, a Newtown Connecticut based financial planner now doing business as Carolyn Settzo Financial Plans, LLC.  The Consent Order alleged that from approximately 2009 to 2014, a number of financial plans prepared by Carolyn Settzo contained advice on securities such that registration as an investment adviser under Section 36b-6(c) of the Connecticut Uniform Securities Act would have been required.


In resolution of the matter, the Consent Order directed Carolyn Settzo to refrain from engaging in violative conduct.  In addition, the Consent Order required that Carolyn Settzo remit $5,000 to the department.  Of that amount, $3,800 constituted an administrative fine and $1,200 represented payment for past due investment adviser registration fees.

Floridel, LLC


On October 15, 2015, the Banking Commissioner entered a Consent Order (Docket No. CO-15-8110-S) with respect to Floridel, LLC of 13574 Village Park Drive, Orlando, Florida.  Floridel, LLC owns a Florida taco franchise.


The respondent had been the subject of a June 22, 2015 Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine (Docket No. CRF-15-8110-S) alleging that Floridel, LLC and one Dale Quesnel, Sr. 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 Connecticut Uniform Securities Act, and Quesnel allegedly received $8,000 from Floridel, LLC in conjunction with the note offering.  The action also alleged that prospective investors were not provided with critical disclosures.


The Consent Order directed Floridel, LLC to cease and desist from regulatory violations.  Acknowledging that the company had provided documentation evidencing its current inability to pay restitution to investors, the Consent Order also temporarily stayed enforcement of the restitutionary obligation.  Among other things, the temporary stay was subject to the respondent providing periodic reports demonstrating that the respondent's financial condition warranted continuation of the stay.

Citigroup Global Markets, Inc. (CRD No. 7059) Fined $35,000 For Supervisory Lapse Involving Unregistered Sales Assistants

On October 8, 2015, the Banking Commissioner entered a Consent Order (No. CO-15-8239-S) with respect to Citigroup Global Markets Inc., a Connecticut-registered broker-dealer.  The Consent Order was the result of a multi-state investigation and global settlement involving firm sales assistants who allegedly accepted customer orders at a time when the sales assistants were not registered under state securities laws. The conduct allegedly occurred between 2007 and 2014.  The Consent Order alleged that the firm failed to establish an adequate supervisory system in contravention of Section 36b-31-6f(b) of the Regulations under the Connecticut Uniform Securities Act and that, in employing unregistered agents, the firm violated Section 36b-6(b) of the Act.  In resolution of the matter, the firm agreed to pay a $35,000 fine to the state.

Overtime Marketing, LLC, Overtime Sports Southeast, LLC, Overtime Sports Southwest, LLC and Kenneth Hansmire a/k/a Kenneth P. Hansmire a/k/a James K. Hansmire a/k/a James K. Pattillo a/k/a Kenny P. Hansmire

On September 16, 2015, the Banking Commissioner entered a Consent Order (Docket No. CO-15-8110-S) with respect to 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; and Kenneth Hansmire of 501 North Austin Street, Comanche, Texas.  Hansmire, the control person of Overtime Marketing, LLC, Overtime Sports Southeast, LLC and Overtime Sports Southwest, LLC was in the business of promoting an all-star football game for college athletes.  The settling respondents had been the subject of a June 22, 2015 Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine (Docket No. CRF-15-8110-S) alleging that 1) from approximately February 2009 to May 2012, the settling respondents violated Section 36b-16 of the Connecticut Uniform Securities Act by participating in the sale of approximately $1.9 million of unregistered notes issued by the Overtime entities; 2) that the Overtime entities employed one Dale Quesnel, Sr. as an unregistered agent of issuer in violation of Section 36b-6(b) of the Act; and 3) the settling respondents 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 Consent Order directed the settling respondents to cease and desist from regulatory violations.  In addition, the Consent Order permanently barred respondent Hansmire and any entity under his control from transacting business in or from Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent; soliciting or accepting funds for investment purposes from public or private investors in or from Connecticut; and acting as a finder for compensation or receiving referral fees or other remuneration for soliciting or otherwise procuring securities investors, customers or clients for any issuer, broker-dealer or investment adviser.  Acknowledging the settling respondents' demonstrated inability to currently pay any restitutionary amounts, the Consent Order temporarily stayed for three years the June 22, 2015 Order to Make Restitution, subject to the settling respondents providing updated financial information at least annually reflecting their most current financial status.

Rafferty Capital Markets, LLC (CRD No. 23682) Fined, Directed to Pay Back Fees, for Unregistered Agent Activity

On July 31, 2015, the Banking Commissioner entered a Consent Order (No. CO-15-8208-S) with respect to Rafferty Capital Markets, LLC, a Connecticut-registered broker-dealer located at 1010 Franklin Avenue, Garden City, New York 11530.  The Consent Order alleged that from approximately September 2008 to June 19, 2015, the firm violated Section 36b-6(b) of the Connecticut Uniform Securities Act by employing multiple unregistered agents, and 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 agents in question have since become registered in Connecticut.  The Consent Order directed the firm to cease and desist from regulatory violations and to pay $16,050 to the department.  Of that amount, $10,700 constituted an administrative fine and $5,350 represented reimbursement for past due agent registration fees.
 


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
2,266
2,183
Broker-dealer Agents Registered 158,467 160,822
163,516
157,900
Broker-dealer Branch Offices Registered 2,698 2,709
2,706
2,655
Investment Advisers Registered 524 527 536
508
SEC Registered Advisers Filing Notice 2,074 2,107 2,127
2,036
Investment Adviser Agents Registered 12,184 12,373 12,560
12,330
Exempt Reporting Advisers
84
87
91
94
Agents of Issuer Registered 23 23 23
22
Conditional Registrations
0
0
0
0
 
 

Securities and Business
Opportunity Filings

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Offerings Reviewed 32 44
26
 29 131
Investment Company Notice Filings 540 582
541
7,598 9,261
Exemptions and Exemptive Notices 803 942 833 840 3,418
 
 
Examinations
     
Broker-dealers 15 23
13
 17 68
Investment Advisers 35 41
37
 27 140
 
 
Securities Investigations
 
Opened 25 26 13
17
81
Closed 15 13  10
20
58
Ongoing as of End of Quarter 97 110 113
110
  
Subpoenas issued 18 9 5 12 44
Matters referred from Attorney General 3 0 0  0 3
Matters referred from Other Agencies 2 0 0 1 3
 
 
Business Opportunity Investigations
 
Investigations Opened 0 1 0 0 1
Investigations Closed 0 1
0
0 1
Ongoing as of End of Quarter 2 2 2 2     
 
 
Enforcement: Remedies and Sanctions
 
Notices of Intent to Deny (Licensing) 0
0
0
0
0
Notices of Intent to Suspend (Licensing)
0
0
0
0
0
Notices of Intent to Revoke (Licensing)
1
0
0
1
2
Denial Orders (Licensing) 0 0
0
0 0
Suspension Orders (Licensing) 1 0
0
1
2
Revocation Orders (Licensing) 0 0
0
0 0
Notices of Intent to Fine 3 1
1
0 5
Orders Imposing Fine 1 0
0
 2 3
Cease and Desist Orders 3 2
1
2 8
Notices of Intent to Issue Stop Order 0 0
0
0
0
Activity Restrictions/Bars 2 0
1
0
3
Stop Orders 0 0 0 0 0
Vacating/Withdrawal/ Modification Orders 0 0 0  0 0
Restitutionary Orders 2 1
0
2 5
Injunctive Relief Obtained 0 0  0  0 0
 
 

Proceedings and Settlements

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Administrative Actions
4
2
1
 3
10
Consent Orders
4
2
2
 9
17
Stipulation and Agreements
2
1
0
  0
3
 
 

Monetary Relief*

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Monetary Sanctions Imposed
$146,600
$12,550
$16,050
$424,390
$599,590
Portion attributable to settlements
$61,600
$12,550
$16,050
$119,390
  $209,590
Attributable to Court-Ordered Penalties
0
0
0
0
0
Restitution or Other Monetary Relief
(includes rescission offer amounts)
$3,277,280
$3,577,707
0
$237,500 $7,092,487

*Cents eliminated

 

Securities Referrals

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



Securities Division