DOB: Investment Management Corp. Consent Order State of Connecticut Department of Banking DOB: Investment Management Corp. Consent Order

 
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IN THE MATTER OF:

INVESTMENT MANAGEMENT CORP.
CRD NO. 37196

    ("IMC")

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CONSENT ORDER

DOCKET NO. NDCDF-2005-7164-S

PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner ("Commissioner") is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act ("Act"), and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies promulgated under the Act ("Regulations");

WHEREAS, on February 6, 2004, IMC filed an application with the Commissioner for registration in Connecticut as a broker-dealer ("2004 Application");

WHEREAS, the Commissioner, through the Securities and Business Investments Division ("Division") of the Department of Banking, conducted an investigation pursuant to Sections 36b-8 and 36b-26(a) of the Act into the activities of IMC, to determine whether IMC had violated, was violating or was about to violate any provisions of the Act or Regulations ("Investigation");

WHEREAS, as a result of the Investigation, the Division alleges that IMC transacted business as a broker-dealer in Connecticut absent registration in wilful violation of Section 36b-6(a) of the Act and employed at least one unregistered agent in wilful violation of Section 36b-6(b) of the Act;

WHEREAS, as result of the Investigation, the Division obtained evidence that on November 3, 1997, the National Association of Securities Dealers, Inc. ("NASD"), a self-regulatory organization registered with the Securities and Exchange Commission ("SEC"), issued sanctions against Kunz & Cline Investment Management, Inc. and Kevin Dee Kunz ("Kunz"), a control person of IMC, which sanctions have not been stayed or overturned;

WHEREAS, as a result of the Investigation, the Division obtained evidence that on August 23, 2002, the NASD issued sanctions against IMC and Kunz, which sanctions have not been stayed or overturned;

WHEREAS, on January 3, 2005, IMC filed an application with the Commissioner to withdraw its 2004 Application ("Withdrawal");

WHEREAS, on April 3, 2005, the Withdrawal became effective by operation of law;

WHEREAS, on June 21, 2005, the Commissioner, acting pursuant to Sections 36b-27(a), 36b-15 and 36b-27(d) of the Act, issued an Order to Cease and Desist, Notice of Intent to Deny Registration as Broker-dealer, Notice of Intent to Fine and Notice of Right to Hearing;

WHEREAS, on June 22, 2005, IMC reapplied to the Commissioner for registration in Connecticut as a broker-dealer ("2005 Application");

WHEREAS, on June 30, 2005, the Commissioner, acting pursuant to Sections 36b-27(a), 36b-15 and 36b-27(d) of the Act, issued an Amended and Restated Order to Cease and Desist, Notice of Intent to Deny Registration as Broker-dealer, Notice of Intent to Fine ("Fine Notice") and Notice of Right to Hearing (collectively, "Notice"), which Notice is incorporated by reference herein;

WHEREAS, the Fine Notice stated that the Commissioner intended to impose a fine against IMC; that a hearing will be held on July 26, 2005, on the matters alleged in the Fine Notice; and that if IMC failed to appear at such hearing, the Commissioner may order that a maximum fine of Two Hundred Thousand Dollars ($200,000) be imposed upon IMC;

WHEREAS, IMC received the Notice and requested a hearing on the matters alleged in the Notice ("Hearing");

WHEREAS, the Hearing is currently scheduled for August 23, 2005;

WHEREAS, Section 36b-27(f) of the Act provides, in relevant part, that "[a]ny time after the issuance of an order or notice provided for in subsection (a) . . . or subdivision (1) of subsection (d) of this section, the commissioner may accept an agreement by any respondent named in such order or notice to enter into a written consent order in lieu of an adjudicative hearing";

WHEREAS, Section 4-177(c) of the Connecticut General Statutes provides, in relevant part, that "[u]nless precluded by law, a contested case may be resolved by . . . consent order";

WHEREAS, Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provides, in relevant part, that "unless precluded by law, any contested case may be resolved by . . . consent order";

WHEREAS, Kunz does not have a supervisory role affecting IMC's securities business in Connecticut;

WHEREAS, IMC and the Commissioner now desire to resolve the matters alleged in the Notice;

WHEREAS, IMC agrees that the Notice may be used in construing the terms of this Consent Order and agrees to the language in this Consent Order.

CONSENT TO WAIVER OF PROCEDURAL RIGHTS

WHEREAS, IMC, through its execution of this Consent Order, voluntarily waives the following rights:

1. To be afforded an opportunity for a hearing within the meaning of Sections 36b-15(f), 36b-27(a) and 36b 27(d)(2) of the Act, and Section 4 177(a) of the Connecticut General Statutes;
2. To present evidence and argument and to otherwise avail itself of Sections 36b-15(f), 36b-27(a) and 36b 27(d)(2) of the Act, and Section 4 177c(a) of the Connecticut General Statutes;
3. To present its position in a hearing in which it is represented by counsel;
4. To have a written record of the hearing made and a written decision issued by a hearing officer; and
5. To seek judicial review of, or otherwise challenge or contest the matters described herein, including the validity of this Consent Order.

ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS

WHEREAS, IMC, through its execution of this Consent Order, acknowledges the following allegations of the Commissioner, without admitting or denying them:

1. The entry of this Consent Order is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act;
2. IMC transacted business in Connecticut as a broker-dealer absent registration in wilful violation of Section 36b-6(a) of the Act, which constitutes a basis for an order to cease and desist to be issued against IMC pursuant to Section 36b-27(a) of the Act; the denial of IMC's 2004 Application and 2005 Application pursuant to Section 36b-15(a)(2)(B) of the Act and an order imposing fine pursuant to Section 36b-27(d) of the Act;
3. IMC employed at least one unregistered agent in wilful violation of Section 36b-6(b) of the Act, which constitutes a basis for an order to cease and desist to be issued against IMC pursuant to Section 36b-27(a) of the Act; the denial of IMC's 2004 Application and 2005 Application pursuant to Section 36b-15(a)(2)(B) of the Act; and an order imposing fine pursuant to Section 36b 27(d) of the Act;
4. The NASD issued sanctions against IMC, constituting sanctions issued by a self-regulatory organization registered with the SEC against an applicant, which forms a basis for the denial of IMC's 2004 Application and 2005 Application pursuant to Section 36b-15(a)(2)(F)(iii) of the Act; and
5. The NASD issued sanctions against Kunz, constituting sanctions issued by a self-regulatory organization registered with the SEC against a control person of an applicant, which forms a basis for denial of IMC's 2004 Application and 2005 Application pursuant to Section 36b 15(a)(2)(F)(iii) of the Act.

WHEREAS, if proven, the Commissioner would have the authority to enter findings after granting IMC an opportunity for a hearing;

WHEREAS, IMC acknowledges the possible consequences of an administrative hearing and voluntarily agrees to consent to the entry of the sanctions described below.

CONSENT TO ENTRY OF SANCTIONS

WHEREAS, IMC, through its execution of this Consent Order, consents to the Commissioner's entry of a Consent Order imposing on it the following sanctions:

1. The Order to Cease and Desist set forth in the Notice shall become permanent;
2. No later than the date this Consent Order is issued by the Commissioner, IMC shall remit to the Department of Banking, by certified or cashier's check made payable to "Treasurer, State of Connecticut", the sum of Five Thousand Dollars ($5,000), of which Four Thousand Five Hundred Dollars ($4,500) shall constitute an administrative fine and Five Hundred Dollars ($500) shall constitute reimbursement for the Division's investigative costs;
3. No later than the date this Consent Order is issued by the Commissioner, IMC shall designate, and identify in writing to the Division, a full-time employee to be responsible for supervising IMC's transaction of business in Connecticut within the meaning of Section 36b-33 of the Act and ensuring IMC's compliance with all applicable Connecticut securities laws and regulations ("Connecticut Compliance Supervisor") in accordance with the following provisions:
a. The Connecticut Compliance Supervisor shall be: (1) approved by the Division, (2) an individual other than Kevin Dee Kunz, and (3) an NASD-registered principal.
b. For a two-year period commencing on the date this Consent Order is issued by the Commissioner, IMC shall ensure that any successor Connecticut Compliance Supervisor complies with the requirements of paragraph (a) and shall notify the Division of the identity of any such successor by letter postmarked no later than five business days following the succession; and
4. For each calendar quarter from the quarter ending September 30, 2005 through the quarter ending September 30, 2007, inclusive, IMC shall submit to the Division Director a written report, postmarked no later than 10 business days following the close of the quarter, that includes: (a) a brief description of any securities-related complaints, actions or proceedings, including arbitrations, involving Connecticut residents and initiated against IMC or any of IMC's officers, agents, employees or representatives during the quarter, ("Complaints"); (b) a status update as to the disposition of any such Complaints or any Complaints reflected in an earlier report filed pursuant to this paragraph; and (c) copies of any such Complaints and dispositional documents; and in the event that no securities-related Complaints exist for a quarter, shall state such in the written report.

WHEREAS, contemporaneously with the issuance of this Consent Order by the Commissioner, IMC shall be entered on the register of broker-dealers in Connecticut in accordance with Section 36b-8 of the Act;

AND WHEREAS, IMC specifically assures the Commissioner that none of the violations alleged in the Notice shall occur in the future.

CONSENT ORDER

NOW THEREFORE, the Commissioner enters the following:

1. The Sanctions set forth above be and are hereby entered;
2. The Notice of Intent to Deny Registration as Broker-dealer, Notice of Intent to Fine and Notice of Right to Hearing contained in the Notice are hereby withdrawn;
3. Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against IMC based upon a violation of this Consent Order or the matters underlying its entry, if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by IMC and reflected herein are subsequently discovered to be untrue; and
4. This Consent Order shall become final when issued.

________/s/_________
John P. Burke
Banking Commissioner

Issued at Hartford, Connecticut
this 23rd day of August 2005.

CONSENT TO ENTRY OF ORDER

I, Brian Y. Horne, state on behalf of Investment Management Corp., that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Investment Management Corp.; that Investment Management Corp., agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Investment Management Corp., consents to the issuance of this Consent Order, expressly waiving any right to a hearing on the matters described herein.

By: /s/__________________________
Name: Brian Y. Horne
Title: President
Investment Management Corp.

State of: Utah
County of: Davis

On this the 22nd day of August 2005, before me, Tammie Sparks, the undersigned officer, personally appeared Brian Y. Horne, who acknowledged himself/herself to be the President of Investment Management Corp., a corporation, and that he/she, as such President/Officer, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself/herself as Brian Y. Horne.

In witness whereof I hereunto set my hand.

/s/_________________________
Notary Public
Date Commission Expires:


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