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Securities Bulletin Features
UPDATED ADVISORY COUNCIL MEMBERSHIP ANNOUNCED The Banking Commissioner recently announced new appointments to the Securities Advisory Council, a body whose members are appointed by the Commissioner and voluntarily serve without compensation or other remuneration. The purpose of the Securities Advisory Council is to provide nonbinding advice, recommendations and suggested technical assistance to the agency regarding securities and business opportunity regulation as well as investor education programs.
Barton W. Stuck, Signal Lake Management, LLC, Signal Lake Side Fund, L.P., Signal Lake Side Fund II, L.P., Signal Lake Side Fund IIA, L.P. and Signal Lake General Partner LLC (CRD No. 285438) – Order to Cease and Desist and Notice of Intent to Fine Issued On June 27, 2017, the Banking Commissioner issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CF-17-8254-S) against Signal Lake Side Fund, L.P, Signal Lake Side Fund II, L.P. and Signal Lake Side Fund IIA, L.P., all of 606 Post Road East, Westport, Connecticut 06880. Each of the investment funds was formed to invest in software and technologies companies. Also named in the action was Signal Lake Management, LLC, investment manager of the funds, Signal Lake General Partner LLC, the general partner of an affiliated nonrespondent, and Barton W. Stuck of Norwalk, Connecticut, a managing member of the funds' investment manager as well as a control person of the funds. In addition, the action alleged that Stuck and Signal Lake Management, LLC violated the antifraud provisions in Section 36b-4(a) of the Act by falsely representing to an investor in Signal Lake Side Fund II, L.P. that millions of dollars in additional investor capital had been provided to finance the partnership's operations when no such monies had, in fact, been received. Barton W. Stuck was also a managing director and majority owner of Signal Lake General Partner LLC, an exempt reporting adviser required to make a Form ADV filing with the Commissioner. Signal Lake General Partner LLC was the general partner of nonrespondent Signal Lake Operations LLC. The Order to Cease and Desist and Notice of Intent to Fine alleged that Stuck and Signal Lake General Partner LLC violated Section 36b-23 of the Act by making a misleading Form ADV filing with the agency. More specifically, the action alleged that Stuck and Signal Lake General Partner LLC repeatedly overstated the gross asset value of Signal Lake Operations LLC on Form ADV; falsely represented that Signal Lake General Partner LLC's books and records were located at a Stamford, Connecticut accounting firm; and falsely stated that Signal Lake Operations LLC's financial statements were subject to an annual audit by that accounting firm. Each of the respondents was afforded an opportunity to request a hearing on the allegations in the Order to Cease and Desist and Notice of Intent to Fine. James Albert Pettit (CRD No. 733916) – Notice of Intent to Deny Registrations as a Broker-dealer Agent and an Investment Adviser Agent, Order to Cease and Desist and Notice of Intent to Fine Issued On May 15, 2017, the Banking Commissioner issued a Notice of Intent to Deny Registrations as a Broker-dealer Agent and an Investment Adviser Agent, Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. NDCDF-17-8218-S) with respect to James Albert Pettit. The respondent was previously associated with Janney Montgomery Scott, LLC as a broker-dealer agent and an investment adviser agent. The action alleged that the respondent engaged in certain improprieties rising to the level of dishonest or unethical practices in the securities business. These included 1) borrowing money from an account carried for a brokerage customer without the customer’s prior consent and without notice to Janney Montgomery Scott, LLC; 2) borrowing money from an advisory client of Janney Montgomery Scott, LLC; and 3) engaging in outside business activity involving a firm client absent notice to his employing firm. The action also alleged that the respondent engaged in self-dealing in conjunction with a power of attorney he held over the account of an elderly client, since deceased. The respondent allegedly failed to obtain firm approval prior to accepting the power of attorney and wrote checks to himself as remuneration, notwithstanding that the power of attorney did not provide for compensation. Following the client’s death, the respondent allegedly paid himself $69,000 for acting as executor of the client’s estate. Ultimately, the probate court denied all but $10,000 of the executor’s fees. The action also alleged that the respondent violated Section 36b-23 of the Connecticut Uniform Securities Act by failing to provide the agency with accurate information concerning accounts over which he had signatory authority. In addition, the respondent allegedly violated Section 36b-31-14e of the Regulations under the Act by failing to amend his registration filings to disclose the existence of several tax liens. Respondent Pettit was afforded an opportunity to request a hearing on the allegations in the action. RPM Capital Management, LLC (CRD No. 164200) and Michele Mary Newland (CRD No. 6050190) Assessed $10,400 for Unregistered Investment Adviser Agent Activity On June 19, 2017, the Banking Commissioner entered a Consent Order (No. CO-17-8290-S) with respect to RPM Capital Management, LLC, an investment adviser registered with the Securities and Exchange Commission. The firm was formerly located at 2 Greenwich Office Park, Suite 300, Greenwich, Connecticut 06831 and was previously registered as an investment adviser in Connecticut. Also named in the Consent Order was Michele Mary Newland, Chief Investment Officer and Co-CEO of the firm. The Consent Order alleged that from June 2012 through March 8, 2016, when she applied for investment adviser agent registration under the Connecticut Uniform Securities Act, Newland transacted business as an unregistered investment adviser agent in violation of Section 36b-6(c)(2) of the Act and that the firm violated Section 36b-6(c)(3) of the Act by engaging an unregistered investment adviser agent. The Consent Order also alleged that RPM Capital Management, LLC 1) failed to establish and maintain written supervisory procedures as required by Section 36b-31-6(f) of the Regulations under the Act; and 2) violated Section 36b-31-14(b) of the Regulations by failing to maintain adequate books and records. The Consent Order directed RPM Capital Management, LLC and Michele Mary Newland to cease and desist from regulatory violations. In addition, the Consent Order directed the firm to pay $10,400 to the department. Of that amount, $10,000 constituted an administrative fine and $400 constituted reimbursement for past due registration fees for Michele Mary Newland. The firm had also been the subject of two prior revocation proceedings, each of which was informally resolved by Consent Order, the first Consent Order being entered on June 14, 2011 (Docket No. RCF-10-7817-S) and the second on March 24, 2015 (Docket No. CFNR-14-8132-S). Both Consent Orders contemplated that the firm would implement remedial measures to prevent future regulatory violations. The December 5, 2016 administrative action alleged that the firm failed to adhere to fundamental compliance principles. More specifically, the action alleged that Meyers Associates, L.P. 1) violated Section 36b-14(d) of the Connecticut Uniform Securities Act and Section 36b-31-14f of the Regulations thereunder by failing to make required books and records available to agency staff; 2) failed to maintain true, accurate and current books and records; 3) violated the 2015 Consent Order by selling securities listed on the OTCQB; 4) failed to establish, enforce and maintain adequate supervisory procedures; 5) violated Section 36b-16 of the Act by offering and selling unregistered securities; and 6) made materially misleading statements to the Division. Ashleigh Cooper Swayze (CRD No. 4632543) On April 21, 2017, the Banking Commissioner entered a Consent Order (No. CO-17-8290a-S) with respect to Ashleigh Cooper Swayze, the Chief Compliance Officer and a listed control person of RPM Capital Management, LLC (IARD No. 164200), an SEC-registered investment adviser that was formerly registered under the Connecticut Uniform Securities Act. The Consent Order alleged that 1) as Chief Compliance Officer of the firm, Swayze did not adequately pursue measures to ensure that a third party was in compliance with the investment adviser agent registration requirements of the Connecticut Uniform Securities Act; 2) such conduct materially aided the firm's failure to abide by supervisory requirements regarding the registration status of its personnel; and 3) Swayze’s written representations to the agency concerning the third party's activities violated Section 36b-23 of the Act.
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