DOB: Independent Securities - REV BD-FINE

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IN THE MATTER OF:

INDEPENDENT SECURITIES
INVESTORS CORPORATION
CRD NO. 43598

    ("Respondent")

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ORDER REVOKING REGISTRATION
AS BROKER-DEALER

AND

ORDER IMPOSING FINE

DOCKET NO. RF-2006-7155-S

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, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, conducted an investigation pursuant to Section 36b-26(a) of the Act, as amended by Public Act 05-177, into the activities of Respondent, to determine whether Respondent had violated, was violating or was about to violate any provisions of the Act or Regulations;

WHEREAS, on January 6, 2006, the Commissioner, acting pursuant to Section 36b-15 of the Act, as amended by Public Act 05-177, Section 4-182(c) of the Connecticut General Statutes and Section 36b-27(d) of the Act, as amended by Public Act 05-177, issued a Notice of Intent to Revoke Registration as Broker-Dealer (“Revocation Notice”), Notice of Intent to Fine (“Fine Notice”) and Notice of Right to Hearing against Respondent (collectively “Notice”), which Notice is incorporated by reference herein;

WHEREAS, the Fine Notice stated that the Commissioner intended to impose a fine against Respondent; that a hearing would be held on February 23, 2006, on the matters alleged in the Fine Notice, and that if Respondent failed to appear at the hearing, the Commissioner may order that a maximum fine of Two Million Six Hundred Thirty Thousand Dollars ($2,630,000) be imposed upon Respondent;

WHEREAS, on January 13, 2006, the Notice was received by Respondent;

WHEREAS, on January 23, 2006, the Commissioner received Respondent’s request for a hearing on the matters set forth in the Notice (“Hearing”);

WHEREAS, on February 23, 2006, Respondent failed to appear at the Hearing;

WHEREAS, the Commissioner alleged in the Notice that Respondent employed at least two individuals as “cold callers” who were not registered with the National Association of Securities Dealers, Inc. (“NASD”), which constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a(b) of the Regulations, in that it is conduct proscribed by NASD Membership and Registration Rule 1031(a), which forms a basis for the revocation of Respondent’s registration as a broker-dealer pursuant to Section 36b-15(a)(2)(H) of the Act, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s payment of commissions to Charter One constitutes a dishonest or unethical practice in the securities business in that it is conduct proscribed by NASD Conduct Rule 2420(b), which forms a basis for the revocation of Respondent’s registration as a broker-dealer pursuant to Section 36b-15(a)(2)(H) of the Act, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s employment of 24 associated people in violation of its Membership Agreement with the NASD, constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a(b) of the Regulations, in that it is conduct proscribed by NASD Membership and Registration Rule 1017(a), which forms a basis for the revocation of Respondent’s registration as a broker-dealer pursuant to Section 36b-15(a)(2)(H) of the Act, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s unauthorized sale of securities to two Connecticut customers constitutes a dishonest or unethical practice in the securities business within the meaning of subdivisions (5) and (6) of subsection (a) of Section 36b-31-15a of the Regulations, which forms a basis for the revocation of Respondent’s registration as a broker-dealer pursuant to Section 36b-15(a)(2)(H) of the Act, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent effected 51 offers and sales of 16 securities, which were not registered in Connecticut under the Act, to at least three Connecticut customers, which constitutes a willful violation of Section 36b-16 of the Act and forms a basis for the revocation of Respondent’s registration as a broker-dealer pursuant to Section 36b-15(a)(2)(B) of the Act, as amended, and for the imposition of a fine against Respondent under Section 36b-27(d) of the Act, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to maintain complete and accurate books and records constitutes a willful violation of Section 36b-14(a) of the Act and forms a basis for the revocation of Respondent’s registration as a broker-dealer pursuant to Section 36b-15(a)(2)(B) of the Act, as amended, and for the imposition of a fine against Respondent under Section 36b-27(d) of the Act, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s employment of at least two unregistered agents constitutes a willful violation of Section 36b-6(b) of the Act and forms a basis for the revocation of Respondent’s registration as a broker-dealer pursuant to Section
36b-15(a)(2)(B) of the Act, as amended, and for the imposition of a fine against Respondent under Section 36b-27(d) of the Act, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s withholding of material information from the Commissioner forms a basis for the revocation of Respondent’s registration as a broker-dealer pursuant to Section 36b-15(a)(2)(L) of the Act, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s conduct as described in paragraphs 11, 12, 14, 16 through 53, inclusive, and 56 constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a(b) of the Regulations in that it is conduct proscribed by NASD Conduct Rule 2110 which forms a basis for the revocation of Respondent’s registration as a broker-dealer pursuant to Section
36b-15(a)(2)(H) of the Act, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to establish, enforce and maintain a system for supervising the activities of its agents that is reasonably designed to achieve compliance with applicable securities laws and regulations, constitutes a willful violation of Section 36b-31-6f(b) of the Regulations and forms a basis for the revocation of Respondent’s registration as a broker-dealer pursuant to Sections 36b-15(a)(2)(B) and 36b-15(a)(2)(K) of the Act, as amended, and for the imposition of a fine against Respondent under Section 36b-27(d) of the Act, as amended;

WHEREAS, Section 36a-1-31(b) of the Regulations provides, in relevant part, that “[w]hen a party fails to appear at a scheduled hearing, the allegations against the party may be deemed admitted”;

WHEREAS, Section 36b-27(d)(2) of the Act, as amended, provides, in relevant part, that “[i]f such person . . . fail[s] to appear at the hearing, the commissioner may, as the facts require, order that a fine . . . be imposed upon such person”;

WHEREAS, the facts as set forth in paragraphs 7 through 59, inclusive, of the Notice shall constitute findings of fact, and the statutory and regulatory basis for the revocation of registration as a broker-dealer in Connecticut and the imposition of a fine set forth in paragraphs 60 through 79, inclusive, of the Notice shall constitute conclusions of law;

WHEREAS, the Commissioner has complied with the requirements of Section 36b-15(f) of the Act and Section 4-182(c) of the Connecticut General Statutes;

WHEREAS, Section 36b-15(a) of the Act, as amended, provides, in pertinent part, that “[t]he commissioner may by order . . . revoke any registration . . . if the commissioner finds that (1) the order is in the public interest, and (2) the . . . registrant or, in the case of a broker-dealer . . . any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the broker-dealer . . . (B) has wilfully violated or wilfully failed to comply with any provision of sections 36b-2 to 36b-33, inclusive, or . . . any regulation or order under said sections . . . ; (H) has engaged in . . . dishonest or unethical practices in the securities . . . business . . . ; [or] (K) has failed reasonably to supervise the agents of such . . . registrant if the . . . registrant . . . is a broker-dealer”;

WHEREAS, the Commissioner finds that this order is in the public interest;

WHEREAS, the Commissioner finds that Respondent engaged in dishonest or unethical practices in the securities business by employing at least two individuals as “cold callers” who were not registered with the NASD in violation of NASD Membership and Registration Rule 1031(a) and Section 36b-31-15a(b) of the Regulations;

WHEREAS, the Commissioner finds that Respondent engaged in dishonest or unethical practices in the securities business by paying commissions to Charter One in violation of NASD Conduct Rule 2420(b) and Section 36b-31-15a(b) of the Regulations;

WHEREAS, the Commissioner finds that Respondent engaged in dishonest or unethical practices in the securities business by employing 24 associated people in violation of NASD Membership and Registration Rule 1017(a) and Section 36b-31-15a(b) of the Regulations;

WHEREAS, the Commissioner finds that Respondent has engaged in dishonest or unethical practices in the securities business for the unauthorized sale of securities to two Connecticut customers in violation of subdivisions (5) and (6) of subsection (a) of Section 36b-31-15a of the Regulations;

WHEREAS, the Commissioner finds that Respondent effected 51 offers and sales of 16 securities, which were not registered in Connecticut under the Act, to Connecticut customers, in violation of Section 36b-16 of the Act;

WHEREAS, the Commissioner finds that Respondent has failed to maintain complete and accurate books and records in violation of Section 36b-14(a) of the Act;

WHEREAS, the Commissioner finds that Respondent has employed at least two unregistered agents, in violation of Section 36b-6(b) of the Act;

WHEREAS, the Commissioner finds that Respondent has withheld material information from the Commissioner in violation of Section 36b-15(a)(2)(L) of the Act, as amended;

WHEREAS, the Commissioner finds that Respondent engaged in dishonest or unethical practices in the securities business within the meaning of Section 36b-31-15a(b) of the Regulations when it engaged in conduct proscribed by NASD Conduct Rule 2110;

WHEREAS, the Commissioner finds that Respondent’s failure to establish, enforce and maintain a system for supervising the activities of its agents that is reasonably designed to achieve compliance with applicable securities laws and regulations constitutes a willful violation of Section 36b-31-6f(b) of the Regulations;

WHEREAS, the Commissioner finds that the facts require the imposition of a fine against Respondent;

WHEREAS, the Commissioner finds that Respondent committed fifty-one violations of Section 36b-16 of the Act, one violation of Section 36b-14(a) of the Act, two violations of Section 36b-6(b) of the Act, one violation of Section 36b-15(a)(2)(L) of the Act and one violation of Section 36b-31-6f(b) of the Regulations;

WHEREAS, Section 36b-31(a) of the Act provides, in pertinent 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 36b-31(b) of the Act provides, in pertinent part, that “[n]o . . . order may be made . . . unless the commissioner finds that the action 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 sections 36b-2 to 36b-33, inclusive”;

AND WHEREAS, the Commissioner finds that the revocation of Respondent’s registration as a broker-dealer in Connecticut and the imposition of a fine is necessary and appropriate in the public interest and for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of Sections 36b-2 to 36b-33, inclusive, of the Act.

ORDER

1. On the date of entry of this order, the registration of Independent Securities Investors Corporation, as a Broker-Dealer in Connecticut is hereby REVOKED.
2. A fine of Two Million Five Hundred Thirty Thousand Dollars ($2,530,000) is imposed against Independent Securities Investors Corporation, to be remitted to the Department of Banking by certified check, made payable to “Treasurer, State of Connecticut”, no later than 14 days from the entry of this order.
3. This Order shall become final when entered.

Entered at Hartford, Connecticut
this 17th day of April 2006.              ________/s/_________
                                                  John P. Burke
                                                  Banking Commissioner

This Order was sent by registered
mail, return receipt requested, to
Respondent on April 18, 2006.

Independent Securities Investors     Registered Mail No. RB027865181US
Corporation
795 Main Street
Chipley, Florida 32428

 


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