DOB: Stralem Stipulation and Agreement

* * * * * * * * * * * * * * * * * *


IN THE MATTER OF:

STRALEM & COMPANY, INCORPORATED
   (CRD No. 3524)

STRALEM FUND

 

* * * * * * * * * * * * * * * * * *

*
*
*
*
*
*
*
*
*
*
*

STIPULATION
AND AGREEMENT

No. ST-05-7244-S

 

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, Stralem Fund (the “Fund”), a Delaware business trust located at 645 Madison Avenue, New York, New York, is an open-end management investment company that is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940;

WHEREAS, the Fund offers two separate, no-load series portfolios:  Stralem Balanced Fund and Stralem Equity Fund;

WHEREAS, Stralem & Company, Incorporated (“Stralem”) of 645 Madison Avenue, New York is a broker-dealer and the investment adviser to the Fund;

WHEREAS, in 2005, Stralem filed an application for registration as a broker-dealer under the Act and, in connection therewith, disclosed to the Securities and Business Investments Division (the “Division”) of the Department of Banking that, from at least 2003, it had effected securities transactions while unregistered in contravention of Section 36b-6(a) of the Act, and that such activity included transactions in the Stralem Equity Fund;

WHEREAS, the Commissioner, acting pursuant to Sections 36b-8 and 36b-26 of the Act and through the Division, conducted a follow-up investigation into the activities of Stralem to assess the accuracy of the information provided by Stralem as well as the Fund’s compliance with the Act;

WHEREAS, the Commissioner ascertained, as a result of such investigation, that 1) shortly after filing for broker-dealer registration under the Act, Stralem effected securities transactions for at least one additional Connecticut person, and that such transactions included purchases of the Stralem Equity Fund; 2) that from approximately 2003 forward, Stralem employed two unregistered agents in contravention of Section 36b-6(b) of the Act; and 3) from approximately September, 2003 until April 15, 2005, when a notice was filed, the Fund failed to make the yearly investment company notice filing required by Section 36b-21(c) of the Act for the Stralem Equity Fund and failed to pay the fees required by Section 36b-21(c) of the Act;

WHEREAS, the Commissioner acknowledges that, on April 15, 2005, the Fund filed the notice and paid the fees required by Section 36b-21(c) of the Act with respect to the Stralem Equity Fund for calendar year 2005, and that a renewal filing and fee payment for the Stralem Equity Fund was received on November 10, 2005 covering calendar year 2006;

WHEREAS, Stralem maintains that 1) Stralem discovered that it inadvertently relied on a de minimis exemption, which, in many states applies to both investment advisers and broker-dealers, but which applies only to investment advisers in Connecticut, and effected securities transactions in mutual funds managed by Stralem with two customers residing in the State of Connecticut while Stralem was not registered with the State of Connecticut as a broker-dealer (although at all times Stralem was registered as a broker-dealer with NASD, Inc.); 2) Stralem self-reported the error to the Commissioner and paid all fees required; and 3) Stralem withdrew its registration as a broker-dealer with NASD, Inc. and other states;

WHEREAS, Stralem represents to the Commissioner that Stralem has wound down its broker-dealer operations such that, effective January 3, 2006, Stralem was no longer transacting business as a broker-dealer;

WHEREAS, Section 4-177(c) of Chapter 54 of the Connecticut General Statutes permits the resolution of a contested case by stipulation or agreed settlement;

WHEREAS, Stralem and the Fund desire to settle the matters described herein and, without admitting or denying the allegations herein, voluntarily enter into this Stipulation and Agreement, acknowledging that this Stipulation and Agreement is in lieu of any court action or administrative proceeding adjudicating any issue of fact or law on the matters described herein;

WHEREAS, Stralem and the Fund, through their execution of this Stipulation and Agreement, voluntarily waive any rights each may have to seek judicial review or otherwise challenge or contest the terms and conditions of this Stipulation and Agreement;

NOW THEREFORE, THE PARTIES HERETO DO MUTUALLY AGREE AS FOLLOWS:

1. No later than the date this Stipulation and Agreement is executed by the Commissioner, the Fund shall pay to the department by check payable to “Treasurer, State of Connecticut” the sum of thee thousand five hundred dollars ($3,500) representing the following: (a) two thousand five hundred dollars ($2,500) as an administrative fine; and (b) one thousand dollars ($1,000) as reimbursement for notice filing fees covering calendar years 2003 and 2004;
2.
No later than the date this Stipulation and Agreement is executed by the Commissioner, Stralem shall pay to the department by check payable to “Treasurer, State of Connecticut” the sum of four thousand one hundred fifty dollars ($4,150) representing the following: (a) three thousand five hundred dollars ($3,500) as an administrative fine; and (b) six hundred
fifty dollars ($650) for past due broker-dealer and agent registration fees; and
3. Execution of this Stipulation and Agreement by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against the Fund, Stralem or both, as the case may be, based upon a violation of this Stipulation and Agreement or the basis for its entry if the Commissioner determines that compliance is not being observed with the terms hereof or if any written representation made to the Commissioner by Stralem or the Fund in connection with the matters reflected herein is subsequently discovered to be untrue; and
4. This Stipulation and Agreement shall become binding when executed by all parties hereto.


IN WITNESS WHEREOF , the undersigned have executed this Stipulation and Agreement on the dates indicated.

Dated at Hartford, Connecticut  __________/s/__________ 
this 11th day of April 2006 John P. Burke
  Banking Commissioner 



I, Philippe Baumann, state on behalf of Stralem Fund that I have read the foregoing Stipulation and Agreement; that I know and fully understand its contents; that I am authorized to execute this Stipulation and Agreement on behalf of Stralem Fund and that Stralem Fund agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein.

               Stralem Fund 
                          ______/s/__________
By Philippe E. Baumann
  Trustee and President 


On this 5th day of April, 2006, personally appeared Philippe E. Baumann, signer of the foregoing Stipulation and Agreement, who, being duly sworn, did acknowledge to me that he was authorized to execute the same on behalf of Stralem Fund, a Delaware business trust, and acknowledged the same to be his free act and deed, before me.


_______________/s/_______________________
Notary Public/Commissioner of the Superior Court
My Commission Expires:  November 19, 2006



I, Philippe E. Baumann, state on behalf of Stralem & Company, Inc. that I have read the foregoing Stipulation and Agreement; that I know and fully understand its contents; that I am authorized to execute this Stipulation and Agreement on behalf of Stralem & Company, Inc. and that Stralem & Company, Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein.

               Stralem & Company, Inc. 
                          ______/s/__________
By Philippe E. Baumann
  Executive Vice-President 


On this 5th day of April 2006, personally appeared Philippe E. Baumann, signer of the foregoing Stipulation and Agreement, who, being duly sworn, did acknowledge to me that he was authorized to execute the same on behalf of Stralem & Company, 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:  November 19, 2006



 

 

Administrative Orders and Settlements