DOB: GunnAllen Financial Consent Order

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IN THE MATTER OF:

GUNNALLEN FINANCIAL, INC.

    (CRD Number 17609)

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CONSENT ORDER

NO. CO-06-7238-S

PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner (the "Commissioner") is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (the "Act") and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies (the "Regulations") promulgated under the Act;
 
WHEREAS, GunnAllen Financial, Inc. (“GunnAllen”) of 5002 West Waters Avenue, Tampa, Florida is registered as a broker-dealer under the Act;
 
WHEREAS, the Commissioner, through the Securities and Business Investments Division (the "Division") of the Department of Banking, has conducted an investigation pursuant to Section 36b-26 of the Act into the activities of GunnAllen, its officers, agents, employees and representatives to determine if they, or any of them, have violated or are about to violate any provision of the Act or any Regulation or order under the Act;
 
WHEREAS, the Commissioner alleges that the Division received written notice on June 2, 2005 from GunnAllen stating that:  1) the firm’s registered branch office located at 26 Canterbury Turnpike, Norwich, Connecticut (the “Norwich Canterbury Turnpike Branch”) had closed and relocated its operations to 95 Main Street, Norwich (the “Norwich Main Street Branch”) approximately 20 months earlier, in September 2003; 2) the firm’s registered branch office located at 35 Tuckahoe Road, Easton, Connecticut (the “Easton Branch”) had closed approximately 8 months earlier, in October 2004; 3) the firm’s registered branch office located at 248 Bedford Road, Greenwich, Connecticut (the “Greenwich Branch”) had closed approximately 9 months earlier, in September 2004; 4) the firm had opened an unregistered branch office located at 191 Post Road West, Westport (the “Westport Post Road West Branch”) approximately 13 months earlier, in April 2004; 5) the unregistered Westport Post Road West Branch had closed and relocated its operations to 450 Post Road East, Westport, Connecticut (the “Westport Post Road East Branch”) approximately 8 months earlier, in October 2004; 6) the unregistered Westport Post Road East Branch had closed approximately 6 months earlier, in December 2004; 7) the firm’s unregistered branch at 168 Green Hollow, Danielson, Connecticut (the “Danielson Branch”) had closed approximately one week earlier, in May 2005; and 8) the firm’s unregistered branch at 27 River Walk, Simsbury, Connecticut (the “Simsbury Branch”) had closed and relocated its operations to 86 Atwater Road, Canton (the “Canton Branch”) approximately one months earlier, in May 2005;
 
WHEREAS, the Commissioner further alleges that GunnAllen transacted business from at least the following six locations at a time when those locations were not registered as branch offices under the Act: 1) the Norwich Main Street Branch (20 months; subsequently registered); 2) the Westport Post Road West Branch (6 months, never registered); 3) the Westport Post Road East Branch (3 months; never registered); 4) the Danielson Branch (6 months; never registered); 5) the Simsbury Branch (9 months; never registered) and 6) the Canton Branch (approximately one month; subsequently registered);

WHEREAS, Section 36b-6(d) of the Act provides, in part, that:
No broker-dealer . . . shall transact business from any place of business located within this state unless that place of business is registered as a branch office with the commissioner pursuant to this subsection.  An application for branch office registration shall be made on forms prescribed by the commissioner and shall be filed with the commissioner, together with a nonrefundable application fee of one hundred dollars per branch office.  A broker-dealer . . . shall promptly notify the commissioner in writing if such broker-dealer . . . (3) relocates a branch office in this state.  In the case of a branch office acquisition or relocation, such broker-dealer or investment adviser shall pay to the commissioner a nonrefundable fee of one hundred dollars (emphasis supplied).
WHEREAS, Section 36b-6(f) of the Act provides, in part, that:
Any broker-dealer   . . . ceasing to transact business at any branch office or main office in this state shall, in addition to providing written notice to the commissioner prior to the termination of business activity at that office, (1) provide written notice to each customer or client serviced by such office at least ten business days prior to the termination of business activity at that office or (2) demonstrate to the commissioner, in writing, the reasons why such notice to customers or clients cannot be provided within the time prescribed ... The notice to customers or clients shall contain the following information:  The date and reasons why business activity will terminate at the office; if applicable, a description of the procedure the customer or client may follow to maintain the customer’s account at any other office of the broker-dealer . . .  the procedure for transferring the customer’s or client’s account to another broker-dealer . . . and the procedure for making delivery to the customer or client of any funds or securities held by the broker-dealer . . . . ;
WHEREAS, GunnAllen has represented to the Division in writing that it had notified affected customers and clients of the office closures, but has not furnished the Division with copies of the notice provided to such customers and clients;
 
WHEREAS, Section 36b-31-6f(b) of the Regulations under the Act provides, in part, that: 
Each registered broker-dealer . . . shall establish, enforce and maintain a system for supervising the activities of . . . Connecticut office operations that is reasonably designed to achieve compliance with applicable securities laws and regulations;
WHEREAS, the Commissioner alleges that 1) GunnAllen violated Section 36b-6(d) of the Act by transacting business from six unregistered locations, to wit:  the Norwich Main Street Branch; the Westport Post Road West Branch; the Westport Post Road East Branch; the Danielson Branch; the Simsbury Branch; and the Canton Branch; 2) GunnAllen violated Section 36b-6(f) of the Act by failing to provide written notice to the Commissioner prior to the termination of business activity at the Norwich Canterbury Turnpike Branch, the Easton Branch, the Greenwich Branch, the Westport Post Road West Branch, the Westport Post Road East Branch, the Danielson Branch and the Simsbury Branch; 3) GunnAllen violated Section 36b-6(d)(3) of the Act by failing to promptly notify the Commissioner in writing of the relocation of the Norwich Canterbury Turnpike Branch, the Westport Post Road West Branch and the Simsbury Branch; and 4) GunnAllen violated 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 Connecticut office operations that was reasonably designed to achieve compliance with the branch office provisions in Section 36b-6 of the Act;
 
WHEREAS the Commissioner believes that the department's allegations would support the initiation of enforcement proceedings against GunnAllen, including, without limitation, the entry of an order to cease and desist against GunnAllen under Section 36b-27(a) of the Act, the imposition of a fine of up to $100,000 per violation pursuant to Section 36b-27(d) of the Act and/or the suspension, revocation or restriction of GunnAllen’s broker-dealer registration pursuant to Section 36b-15(a) of the Act after granting GunnAllen an opportunity for a hearing;
 
WHEREAS, Section 36b-31(a) of the Act provides, in relevant part, that "[t]he commissioner may from time to time make . . . such . . . orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive";
 
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, GunnAllen and the Commissioner now desire to settle the matters described herein;


CONSENT TO WAIVER OF PROCEDURAL RIGHTS

WHEREAS, GunnAllen, 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 subsections (a) and (d) of Section 36b-27 of the Act, Section 36b-15(f) of the Act and Section 4 177c(a) of the Connecticut General Statutes;
2. To present evidence and argument and to otherwise avail itself of Sections 36b-27 and 36b-15 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;

CONSENT TO ENTRY OF FINDINGS

WHEREAS GunnAllen, through its execution of this Consent Order, accepts and consents to the entry of the following Findings by the Commissioner:

1. That the entry of this Consent Order is appropriate, in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act;
2. That GunnAllen violated Section 36b-6(d) of the Act by transacting business from six unregistered locations, to wit:  the Norwich Main Street Branch; the Westport Post Road West Branch; the Westport Post Road East Branch; the Danielson Branch; the Simsbury Branch; and the Canton Branch;
3. That GunnAllen violated Section 36b-6(f) of the Act by failing to provide written notice to the Commissioner prior to the termination of business activity at the Norwich Canterbury Turnpike Branch, the Easton Branch, the Greenwich Branch, the Westport Post Road West Branch, the Westport Post Road East Branch, the Danielson Branch and the Simsbury Branch;
4. That GunnAllen violated Section 36b-6(d)(3) of the Act by failing to promptly notify the Commissioner in writing of the relocation of the Norwich Canterbury Turnpike Branch, the Westport Post Road West Branch and the Simsbury Branch;
5. That GunnAllen violated 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 Connecticut office operations that was reasonably designed to achieve compliance with the branch office provisions in Section 36b-6 of the Act;
6. That the department's allegations would support the initiation of initiation of enforcement proceedings against GunnAllen, including, without limitation, the entry [of] an order to cease and desist against GunnAllen under Section 36b-27(a) of the Act, the imposition of a fine of up to $100,000 per violation pursuant to Section 36b-27(d) of the Act and/or the suspension, revocation or restriction of GunnAllen’s broker-dealer registration pursuant to Section 36b-15(a) of the Act after granting GunnAllen an opportunity for a hearing;


CONSENT TO ENTRY OF SANCTIONS

WHEREAS, GunnAllen, through its execution of this Consent Order, acknowledges the possible consequences of an administrative hearing and  voluntarjily consents to the Commissioner issuing an order imposing on GunnAllen the following sanctions:

1. No later than the date this Consent Order is entered by the Commissioner, GunnAllen shall remit to the department via check payable to "Treasurer, State of Connecticut" the sum of ten thousand dollars ($10,000), nine thousand dollars ($9,000) of which shall constitute an administrative fine and one thousand dollars of which shall constitute reimbursement for Division investigative costs;
2. GunnAllen shall cease and desist from engaging, directly or indirectly, in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act, including, without limitation, transacting business from any unregistered branch office in Connecticut and failing to notify the Commissioner of the closure or relocation of any Connecticut branch office in accordance with Connecticut law; and
3. GunnAllen shall implement revised supervisory and compliance procedures designed to improve regulatory compliance which procedures shall, at a minimum, provide for enhanced monitoring of Connecticut branch office requirements;

ORDER

NOW THEREFORE, the Commissioner enters the following:

1. The Sanctions set forth above be and are hereby entered;
2. Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement against GunnAllen based upon a violation of this Consent Order or the basis for its entry if the Commissioner determines that compliance is not being observed with the terms hereof or if any representation made by GunnAllen and reflected herein is subsequently discovered to be untrue; and
3. This Consent Order shall become final when issued.
 
 

               ________/s/_________
 John P. Burke
            Banking Commissioner

Dated at Hartford, Connecticut                 
this 13th day of March 2006.                         
 

CONSENT TO ENTRY OF ORDER

I, Marc Ellis, state on behalf of GunnAllen Financial, Inc., 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 GunnAllen Financial, Inc., that GunnAllen Financial, Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that GunnAllen consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.


      GunnAllen Financial, Inc.

By
       ________/s/_______________
      Marc Ellis
      Senior Vice-President and Chief Compliance Officer


On this 3rd day of March 2006, personally appeared Marc Ellis, signer of the foregoing Consent Order, who, being duly sworn, did acknowledge to me that he was authorized to execute the same on behalf of GunnAllen Financial, Inc., a corporation, and acknowledged the same to be his free act and deed, before me.


_______________/s/_______________________
Notary Public/Commissioner of the Superior Court
My Commission Expires:  09-28-2008

 


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