DOB: Gray, Steven-REV-FINE

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IN THE MATTER OF:

STEVEN GRAY
CRD NO. 2665911

    ("Respondent")

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FINDINGS OF FACT,
CONCLUSIONS OF LAW
AND ORDER

FINDINGS OF FACT

1) On March 2, 2006, John P. Burke, Banking Commissioner of the State of Connecticut (“Commissioner”), issued a Notice of Intent to Revoke Registration as Agent, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Notice”) against Respondent.  (Ex. H.O. 2.)
2) The Notice provides that a hearing will be held in accordance with Section 36b-27(d)(2) of the 2006 Supplement to the General Statutes and Chapter 54 of the Connecticut General Statutes.  (Ex. H.O. 2.)
3) On March 2, 2006, the Notice was sent by registered mail, return receipt requested, to Respondent, 2552 East 11 Street, Brooklyn, New York 11235, registered mail number RB028032913US; Independent Securities Investors Corporation, 11 Broadway, Suite 1015, New York, New York 10004, registered mail number RB028032860US; and Independent Securities Investors Corporation, 795 Main Street, Chipley, Florida 32428, registered mail number RB028032873US.  (Ex. H.O. 2.)
4)
The Notice asserted that:

a.
From at least September 24, 2004 to May 26, 2005, Respondent has been registered in Connecticut under Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (“Act”) as an agent.
b. Independent Securities Investors Corporation (“Independent”) is a corporation whose current principal place of business is in Chipley, Florida.  From at least July 2001, Independent has been registered in Connecticut under the Act as a broker-dealer. 
c. Respondent is President and a majority shareholder of Charter One Capital Holding, Inc. (“Charter One”), a holding company that owns and operates a branch of Independent located at 11 Broadway, Suite 1015, New York, New York (“New York Branch”), and another branch of Independent in Boca Raton, Florida (“Boca Raton Branch”).
d. On March 10 and 11 and April 7, 2005, the Commissioner, through employees of the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an investigation of Independent, pursuant to Section 36b-26(a) of the Act, and an examination of Independent’s books and records pursuant to Section 36b-14(d) of the Act.  The investigation and examination were conducted at the New York Branch.
e. Respondent managed the New York Branch and exercised supervisory authority at such branch on behalf of Independent.  Respondent also exercised supervisory authority over at least one agent at the Boca Raton Branch (“Agent”) on behalf of Independent.
f. From at least March to June 2005, the New York Branch employed at least two individuals as “cold callers”, who, inter alia, pre-qualified customers as to financial status and investment history.
g. The “cold callers” referred to in paragraph 12 of the Notice were not, at all times relevant hereto, registered with the National Association of Securities Dealers, Inc. (“NASD”), as representatives of Independent.
h. The NASD is a self-regulatory organization registered with the United States Securities and Exchange Commission (“SEC”) pursuant to Section 15A of the Securities Exchange Act of 1934.
i. From at least December 2004 through April 2005, the Agent made three sales of Bio-Solutions Manufacturing securities to at least two Connecticut customers.
j. The Bio-Solutions Manufacturing securities were never registered in Connecticut as required by Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they covered securities.
k. In at least November 2004, the Agent, made three sales of Stake Technology securities to at least three Connecticut customers.
l. Stake Technology securities were never registered in Connecticut as required by Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they covered securities.
m. On at least February 9, 2005, at least one agent at the New York Branch effected a sale of Nuvelo Inc., securities for the account of at least one person located in Connecticut absent registration in Connecticut.
n. From at least November 2004 through April 2005, the Agent effected an aggregate of at least three unauthorized transactions on behalf of two Connecticut customers.
o. “Section 510:  Registration” of Independent’s “OSJ Manual” (“Supervisory Manual”) provides, in pertinent part, that “[t]he OSJ Manager should review the activities in the office in order to prevent any of the following: . . . no . . . [registered representative] may solicit transactions . . . with residents of a state in which the . . . [registered representative] is not registered”.
p. Respondent failed reasonably to supervise the Agent and Independent’s agents at the New York Branch to prevent the violative conduct described in paragraphs 12 through 20, inclusive, of the Notice.
q. Respondent made sales of Charter One securities in the form of promissory notes (“Notes”) to at least 50 investors, including a Connecticut customer, raising an aggregate of over $1 million from such investors.
r. The Notes were never registered in Connecticut as required by Section 36b-16 of the Act, nor were they exempt from registration under Section 36b-21 of the Act, nor were they covered securities.
s. The interest payable on the Notes was 10% per annum, payable quarterly with the principal due one year from the date of the Notes.  Respondent failed to pay the investors interest or principal in accordance with the terms of the Notes.  Only one investor was paid part of the interest owed.
t. Respondent and the Agent who referred the Connecticut customer to Respondent failed to inform the customer of any risks associated with investing in Charter One, even though Charter One had not paid earlier investors the monies owed on the Notes and had experienced a substantial net loss from inception and had substantial working capital deficiency, which, according to the Report of Independent Auditor, raised substantial doubt about its ability to continue as a going concern.
u. In connection with the sale of Charter One securities, Respondent and agents and cold callers over whom Respondent exercised supervisory authority provided some potential investors with a document containing biographies and profiles of individuals purportedly associated with Charter One when at least three of the individuals whose biographies were included in the document had declined Respondent’s request to become an officer/director of Charter One.
v. The sales of the Charter One securities were transactions that were outside the regular course or scope of Respondent’s employment with Independent.  Such transactions did not go through the books and records of Independent and Respondent did not provide Independent written notice describing in detail the proposed transactions, his proposed role in such transactions and stating whether he had received or would receive compensation in connection with the transactions.
w. Respondent was, at all times relevant to this matter, a member of the NASD.  NASD Conduct Rule 2110 states that a “member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade”.
x. During and subsequent to the investigation and examination, the Division requested Respondent, both verbally and in writing, to provide numerous material documents.  Despite repeated requests, Respondent has not provided the Division with all of the requested documents.
y. On January 6, 2006, the Commissioner gave Respondent written notice pursuant to Section 4-182(c) of the Connecticut General Statutes that he may have engaged in conduct which would provide a basis for the suspension or revocation of his agent registration in Connecticut and gave Respondent the opportunity to show compliance with all lawful requirements for the retention of his agent registration in Connecticut.  To date, Respondent has failed to respond to such notice.  (Ex. H.O. 2.)

5) The Notice asserted that Respondent’s failure reasonably to supervise the activities of Independent’s agents as more fully described in paragraphs 11 through 20, inclusive, of the Notice forms a basis for the revocation of Respondent’s registration as an agent pursuant to Section 36b-15(a)(2)(K) of the 2006 Supplement to the General Statutes.  (Ex. H.O. 2.)
6) The Notice asserted that Respondent effected at least one offer and sale of a security, which was not registered in Connecticut under the Act, to at least one Connecticut customer, as more fully described in paragraphs 23 and 24 of the Notice.  The offer and sale of such security absent registration constitutes a wilful violation of Section 36b-16 of the Act, and such violation forms a basis for the revocation of Respondent’s registration as an agent pursuant to Section 36b-15(a)(2)(B) of the 2006 Supplement to the General Statutes, and for the imposition of a fine against Respondent under Section 36b-27(d) of the 2006 Supplement to the General Statutes.  (Ex. H.O. 2.)
7) The Notice asserted that Respondent, in connection with the offer and sale of the Notes, directly or indirectly employed a device scheme or artifice to defraud; omitted to state a material fact necessary in order to make statements made in light of the circumstances under which they were made, not misleading and engaged in a practice or course of business that operated as a fraud or deceit upon investors including the Connecticut investor.  Such violation forms a basis for the revocation of Respondent’s registration as an agent pursuant to Section 36b-15(a)(2)(B) of the 2006 Supplement to the General Statutes, and for the imposition of a fine against Respondent under Section 36b-27(d) of the 2006 Supplement to the General Statutes.  (Ex. H.O. 2.)
8) The Notice asserted that Respondent’s offers and sales of the Notes, as more fully described in paragraphs 23 and 28 of the Notice, constitute private transactions in violation of Section 36b-31-6e of the Regulations of Connecticut State Agencies (“Regulations”) and a dishonest or unethical business practice under Section 36b-31-15b(2) of the Regulations.  Such conduct forms a basis for the revocation of Respondent’s registration as an agent pursuant to Sections 36b-15(a)(2)(B) and 36b-15(a)(2)(H) of the 2006 Supplement to the General Statutes, and for the imposition of a fine against Respondent under Section 36b-27(d) of the 2006 Supplement to the General Statutes.  (Ex. H.O. 2.)
9) The Notice asserted that Respondent’s conduct as described in paragraphs 22 through 28, inclusive, of the Notice 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.  Such a dishonest and unethical practice in the securities business by Respondent forms a basis for the revocation of Respondent’s registration as an agent pursuant to Section 36b-15(a)(2)(H) of the 2006 Supplement to the General Statutes.  (Ex. H.O. 2.)
10)

The Notice asserted that Respondent’s withholding of material information from the Commissioner, as more fully described in paragraph 30 of the Notice, forms a basis for the revocation of Respondent’s registration as an agent pursuant to Section 36b-15(a)(2)(L) of the 2006 Supplement to the General Statutes.  (Ex. H.O. 2.)

11) The Notice stated that, in accordance in accordance with Section 36b-27(d)(2) of the 2006 Supplement to the General Statutes and Chapter 54 of the Connecticut General Statutes, a hearing would be held on April 18, 2006, concerning the imposition of a fine.  (Ex. H.O. 2.)
12) The Notice stated that a hearing would be granted to Respondent concerning the revocation of registration, if a written request for a hearing was received by the Department’s Legal Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following Respondent’s receipt of the Notice.  (Ex. H.O. 2.)
13) By letter dated April 11, 2006, Attorney Stuart A. Jackson notified the Department that his firm, Stuart A. Jackson, P.C., represents Respondent, requested a hearing and asked that the hearing be rescheduled to afford the Respondent time to prepare for the hearing.  (Ex. H.O. 3.)
14) On June 16, 2006, the Commissioner issued a Notification of Hearing and Designation of Hearing Officer.  (Ex. H.O. 1.)
15) Pursuant to the Notification of Hearing and Designation of Hearing Officer, William Nahas, Jr., was appointed as Hearing Officer and the hearing was rescheduled to July 24, 2006.  (Ex. H.O. 1.)
16) By letter dated July 21, 2006, Hearing Officer Nahas rescheduled the hearing to August 23, 2006.  (Ex. H.O. 11.)
17) By letter dated August 23, 2006, Hearing Officer Nahas rescheduled the hearing to September 25, 2006.  (Ex. H.O. 13.)
18) The hearing was held on September 25, 2006, October 16, 2006, October 17, 2006, November 28, 2006, November 29, 2006, and April 11, 2007, at the Department.  (Tr. 9-25-06, 10-16-06, 10-17-06, 11-28-06, 11-29-06, 4-11-07.)
19) Attorney Jackson and Attorney Stacey R. J. Perkins appeared at the hearing on behalf of Respondent.  (Ex. H.O. 18; Tr. at 8.)
20) Attorneys Stacey Serrano Sarlo and Nirja Savill appeared at the hearing on behalf of the Department.  (Ex. H.O. 17; Tr. at 9.)
21) Independent was a Securities Broker/Dealer with a main office at 1402 Royal Palm Beach Blvd., Building #700, Royal Palm Beach, Florida 33411.  (Ex. 1, Tr. at 32-33, 681.)
22) Dennis Jordan was the CEO, President, Chief Compliance Officer, 100% owner and a Director of Independent.  (Ex. 1.)
23) Independent became registered in Connecticut as a Securities Broker/Dealer on July 17, 2001.  (Ex. 1.)
24) Charter One is a corporation that was located at 11 Broadway, Suite 1015, New York, New York 10004, that was incorporated in the State of New York on July 18, 2003.  (Ex. 5.)
25) Respondent was the President, CEO, majority shareholder and a Director of Charter One.  (Ex. 5; Tr. at 281, 417, 680, 700.)
26) Fred Fleisher was employed at Independent from July 7, 2004 until October 19, 2005.  (Ex. 28; Tr. at 288.)
27) Mr. Fleisher was the branch operations manager at Independent.  (Ex. 29; Tr. at 246, 254, 289, 291-294, 547.)
28) Mr. Fleisher was located in Independent’s New York Branch.  (Ex. 28; Tr. at 288.)
29) Charter One and Independent entered into a Office of Supervisory Jurisdiction Agreement (“OSJ Agreement”) on April 30, 2004.  (Ex. 27, Ex. 48; Tr. at 32, 265, 266, 414.)
30) Pursuant to the OSJ Agreement, Independent granted Charter One a right to establish and operate an office of Independent “in the City of New York or such other place as may be mutually agreed upon.” (Ex. 27.)
31) In accordance with the OSJ Agreement, Charter One operated an office on behalf of Independent at 11 Broadway, Suite 1015, New York, New York 10004.  (Ex. 2; Tr. at 32, 281, 685.)
32) In accordance with the OSJ Agreement, Charter One operated an office on behalf of Independent at 40 SE 5th Street, Suite 400, Boca Raton, Florida 33432.  (Ex. 52; Tr. at 32, 33, 281, 685.)
33) Independent through Charter One employed numerous individuals including sales agents, broker trainees, and operations managers.  (Ex. 6; Tr. at 56-59, 698.)
34) Independent employed approximately twenty (20) agents at its New York Branch.  (Tr. at 523, 698.)
35) The OSJ Agreement between Charter One and Independent contained numerous supervisory procedures that Respondent was supposed to follow which include “510: Registration, The OSJ Manager should review the activities in the office in order to prevent any of the following:  -any person that is not properly registered as an RR with ISIC and has a signed RR agreement on file should not accept an order from a customer, receive any commissions, or open any new accounts on behalf of ISIC.  –no RR may solicit transactions or new accounts with residents of a state in which the RR is not registered; - no RR may sell any products or perform any duties which require a registration status above that of the RR; i.e, (sic) sell corporate equities when only licensed as a Series 6.” (Ex. 48; Tr. at 876-877.)
36) Respondent was the branch manager of Independent’s New York Branch and Boca Raton Branch.  (Tr. at 160, 281, 282, 546.)
37) Respondent filed for registration in Connecticut as a broker-dealer agent while employed by Independent on July 15, 2004.  (Ex. 3; Tr. at 233.)
38) Respondent’s application for registration in Connecticut as a broker-dealer agent for Independent was approved on September 24, 2004.  (Ex. 3; Tr. at 234.)
39) Respondent’s representative number is 1729.  (Ex. 31.)
40) Respondent’s registration in Connecticut as a broker-dealer agent with Independent terminated on May 26, 2005.  (Ex. 3; Tr. at 234.)
41) A private placement generally occurs prior to a company going public and is used to raise capital to start a business by getting money from private investors.  (Tr. at 102.)
42) Depending on who’s being solicited, the type of solicitation and the type of investment, a private placement may need to be registered in Connecticut unless it is exempt from registration.  (Tr. at 102.)
43) The individuals who gave Charter One funds in the private placement would be classified as investors.  (Tr. at 102-103.)
44) Item 7 on page 3 of the Minutes of the First Meeting of the Board of Directors for Charter One states: “[h]ave counsel draft a private placement memorandum to raise up to $3,000,000.00 at the discretion of the President which money is to be used for the good welfare of the corporation.”  (Ex. 5.)
45) Charter One conducted a private placement of securities in the form of promissory notes.  (Tr. at 417.)
46) The sale of the Notes predates Charter One’s affiliation with Independent.  (Tr. at 437-438.)
47) Respondent was in charge of Charter One’s private placement of securities.  (Tr. at 417.)
48) The Notes were not registered in Connecticut nor had Charter One filed with the Department any exemptive or notice filing pursuant to Section 36b-21 of the Act.  (Ex. 15; Tr. at 418.)
49) The Department began a compliance investigation and examination (“Examination”) at the New York Branch in March of 2005.  (Tr. at 64.)
50) Respondent acknowledged that unregistered agents of Independent sold the Notes.  (Ex. 49; Tr. at 420.)
51) Agents of Independent who sold the Notes were paid commissions.  (Ex. 49; Tr. at 423.)
52) Respondent had sole discretion concerning all forms of compensation for all employees of Independent and Charter One in the New York, New York, and Boca Raton, Florida, offices.  (Ex. 49; Tr. at 422-423.)
53) On numerous occasions including during their second visit to the New York Branch in April of 2005, Department employees asked Respondent to provide the Department with information concerning commissions payable to all the sales agents and sales assistants.  (Tr. at 143.)
54) Respondent was the only one who had information regarding Charter One sales agent and sales assistant commissions.  (Tr. at 143.)
55) Although the Department made several requests, Respondent never provided the Department with the information the Department requested concerning Charter One sales agent and sales assistant commissions.  (Tr. at 143.)
56) Section 36b-31-6e(a)(2) of the Regulations defines “selling compensation” to mean:  “any compensation paid directly or indirectly from whatever source in connection with or as a result of the purchase or sale of a security, including but not limited to, commissions, finder’s fees, securities and rights to acquire securities, rights of participation in profits, tax benefits, and dissolution proceeds, as a general partner and otherwise, or expense reimbursements.”
57)
Section 36b-31-6e of the Regulations addresses private securities transactions and states, in pertinent part that:
(c)  Before participating in any private securities transaction, an agent shall provide written notice to the broker-dealer by whom he is employed describing in detail the proposed transaction and his proposed role therein and stating whether he has received or may receive selling compensation in connection with the transaction; provided, in the case of a series of related transactions in which no selling compensation has been or will be received, an agent may provide a single written notice.
 
(d)  In the case of a transaction in which the agent has received or may receive selling compensation, a broker-dealer which has received notice pursuant to subsection (c) of this section shall advise the agent in writing concerning whether the broker-dealer approves or disapproves of the agent’s participation in the proposed transaction.  If the broker-dealer approves the agent’s participation in the transaction, the transaction shall be recorded on the books and records of the broker-dealer and the broker-dealer shall supervise the agent’s participation in the transaction as if the transaction were executed on behalf of the broker-dealer.  If the broker-dealer disapproves the agent’s participation, the agent shall not participate in the transaction in any manner, directly or indirectly.
 
(e)  A copy of the notice and written statement required by subsections (c) and (d) of this section shall be maintained at the office of the broker-dealer from which the agent conducts activities on behalf of the broker-dealer and shall be open to inspection by the commissioner.
(Ex. 16)

58) Charter One and Independent entered into an agreement dated May 3, 2004, which acknowledged that Charter One was in the process of doing a private placement to raise working capital and to purchase books of business from other brokers.  (Ex. 19)
59) The agreement Charter One and Independent entered into on May 3, 2004, in and of itself, does not  fulfill the requirements for a private placement set forth in Section 36b-31-6(e) of the Regulations.  (Ex. 16, Ex. 19; Tr. at 144-147.)
60) On numerous occasions the Department asked for any notice provided to Independent by Charter One concerning the sale of the Notes and such notice was never provided.  (Tr. at 128, 129.)
61) Mr. Jordan indicated that Independent had never given Charter One final approval to offer the Charter One private placement.  (Tr. at 144-147, 489.)
62) Mr. Jordan indicated that Independent had never received any information from Charter One concerning the sale of the Notes.  (Tr. at 146, 489.)
63)

Independent did not supervise the Charter One private placement nor did Respondent provide Independent with information concerning the purchase of promissory notes by the investors in the Charter One private placement.  (Tr. at 146, 601.)

64) Unless a security falls within an exemption, a security is required to be registered in a state where the security is either purchased or sold.  (Tr. at 330-331, 487.)
65) Cynthia Antanaitis, Assistant Director of the Division, conducted a review of computer database records maintained by the Department and did not find any entries reflecting any current or previous securities registration filing or entries reflecting any exemptive or notice filing for “Bio-Solutions Manufacturing”, “Sunopta, Inc.”, “Stake Technology Ltd.” or “Charter One Capital Holding, Inc.”  (Ex. 15; Tr. at 122-126.)
66) One of the exemptions to registration relates to Regulation D of the Securities Act of 1933.  (Tr. at 487.)
67) The SEC conducted a review of its records and files as of April 28, 2006, which failed to disclose that any Form D had been filed with the SEC under the name Charter One Capital Holding, Inc., pursuant to Regulation D of the Securities Act of 1933.  (Ex. 55.)
68) The NASD is the largest self-regulatory organization for the securities industry in the United States. NASD is responsible for the operation and regulation of Nasdaq and over-the-counter securities markets.  Under federal law, every securities firm doing business with the public is a member of NASD.  Roughly 5,500 brokerage firms, nearly 90,000 branch offices and more than 650,000 registered securities representatives come under its jurisdiction.  (Tr. at 76, www.nasd.com.)
69) NASD notice to members 88-50 Registration of Persons Soliciting on Behalf of Members Under Schedule C of the NASD By-Laws, states under the heading “Permissible Activities of Unregistered Persons”, that: Unregistered persons may contact prospective customers for the purpose of: extending invitations to firm-sponsored events at which any substantive presentations and account or order solicitation will be conducted by appropriately registered personnel; inquiring whether the prospective customer wishes to discuss investments with a registered person; and determining whether the prospective customer wishes to receive investment literature from the firm.”  (Ex. 9.)
70) NASD notice to members 88-50 Registration of Persons Soliciting on Behalf of Members Under Schedule C of the NASD By-Laws, states, in pertinent part, under the heading “Permissible Activities of Unregistered Persons”, that: “Firms employing unregistered persons to perform these functions should observe the following guidelines: (1) Pursuant to Section (1)(b), Part n of Schedule C to the By-Laws, unregistered persons may not discuss general or specific investment products or services offered by the firm, pre-qualify prospective customers as to financial status and investment history an objectives, or solicit new accounts or orders.” (Ex. 9.)
71) NASD notice to members 88-24 states, in pertinent part, “[t]he NASD reminds members that Schedule C to the NASD By-Laws requires that members register any person who contacts potential customers of the firm for the purpose of opening accounts, soliciting orders, or qualifying potential customers for the firm, i.e. any person engaged in “cold calling.” (Ex. 9.)
72) Principal Examiner Mark Hornyack of the Division testified that a script is a tool that is used by either a broker or a broker trainee to “help them get their sales presentation down pat before they get on the phone” with clients or perspective clients.  (Tr. at 74-75.)
73) Principal Examiner Hornyack testified that a script used by a broker should be balanced, give “not only the pros but the cons of any particular investment” and it should not give guarantees.  (Tr. at 75.)
74) Charter One used scripts to market the Charter One private placement.  (Tr. at 530.)
75) During the course of the Examination at the New York Branch, the Department found scripts.  (Tr. at 69.)
76) During the course of the Examination at the New York Branch, Department employees found scripted presentations on the desk of Anthony Herrera, a broker trainee at Charter One.  (Ex. 6, Ex. 8A, Ex. 8B, Ex. 8C, Ex. 31; Tr. at 69, 75, 76)
77) A script found on Mr. Herrera’s desk contains his name written into the space between the words “this is” and “with Independent Securities” and contains the following statements:  “I would like to get back to you one time down the road just to share a recommendation in the market.  If you like it great – maybe we’ll do some business.” . . . “Just as a reference point so you know we spoke NAME me one stock that you recently picked up.” . . . “Just a ballpark figure – how much you have wrapped up in the stock market, roughly?”  (Ex. 8A.)
78) A script found on Mr. Herrera’s desk contains the following:  “Chapter 1: The Cold Call – Part 1.”  Learning to cold call properly is the most important aspect of becoming a successful broker….“In the first part of the call, you are trying to peak interest and tell prospect why he should do business with you, making him willing.” . . . “2. Bottom line, (Firm) would like to share one idea with you.  If you like the idea, maybe you’ll do business with us.  If not, you heard a good idea.”  (Ex. 8B.)
79) The name “Anthony Herrera” is written five times at the bottom of the script and the name “Anthony” is written three times at the bottom of such document.  (Ex. 8B.)
80) Mr. Herrera told Principal Examiner Hornyak that he was familiar with the scripted presentations, that he had memorized information contained in the scripts, could talk on the telephone without having to read off the scripts and that he used the type of information on the scripts when speaking to clients.  (Tr. at 70, 71, 84, 85.)
81) Mr. Herrera was a trainee at Independent under the supervision of Respondent.  (Ex. 31; Tr. at 86.)
82) Mr. Herrera was a trainee who was not registered under the securities laws.  (Tr. at 76, 248.)
83) As an unregistered person, Mr. Herrera was prohibited from discussing stocks with clients or potential clients of Independent.  (Ex. 9; Tr. at 249.)
84) Principal Examiner Hornyack testified that if Mr. Herrera asked or provided a prospective client with some type of idea or stock, it would be in violation of NASD notice to members 88-24 and 88-50.  (Ex. 9; Tr. at 82-83.)
85) Mr. Herrera was an unregistered agent of Independent who solicited investors to invest in the Charter One private placement.  (Tr. at 524, 534.)
86) During the course of the Examination, the Department examiners found a script on a desk in the room where Independent employees Fred Pearlman and Al Garcia had their desks.  (Ex. 11; Tr. at 91, 533)
87) While employed by Independent, Mr. Herrera used the script Department examiners found on the desk in the room where Mr. Pearlman and Mr. Garcia of Independent had their desks.  (Tr. at 533, 537, 538.)
88) A document that was found by Department employees on Mr. Herrera’s desk during their Examination at the New York Branch contains, in part, the following:  “SYMC Bullets”, “Fiscal 3rd Q company reported a 54% rise in net income driven by strong sales of it’s Norton antivirus software”, “For their fiscal 4th symc earned 35 sense a share  Revs rose almost 43% to $556m  net income soared 72%.”, “Revs rose 33% to $1.87b”, Revs grown 72% in 2 years earnings grown 96%”, “Expecting SYMC to announced contract with home land security department”.  (Ex. 8C; Tr. at 84-85.)
89) Mr. Herrera told Principal Examiner Hornyack that he received the above-mentioned scripts from the Respondent.  (Tr. at 85, 879.)
90) During the course of the Examination, Principal Examiner Hornyack found a script on a desk in Respondent’s office.  (Ex. 11; Tr. at 92, 93.)
91) Vladislav Kurchirko, also known as Vincent Kucher, was an agent of Independent.  (Ex. 6, Ex. 18, Ex. 31; Tr. at 93, 98, 843.)
92) Mr. Kurchirko put together the script Principal Examiner Hornyack found on a desk in Respondent’s office.  (Tr. at 93.)
93) Mr. Kurchirko told Principal Examiner Hornyack that while at Independent he had used the script but did not have to read the script because he had used it enough and could say similar things over the telephone.  (Tr. at 93, 95.)
94) On page 1 of the script found in Respondent’s office it states:  “Write check to Charter One Capital Holding, Vincent Kucher, Senior vice pres., 1) Broadway Suite, 1015, N.Y., N.Y. 10004, 866-509-2665.” (Ex. 11.)
95) In the script found in Respondent’s office it states, in part: “are you familiar with what a private placement is & how it works?...The company that I am working on now is called Charter One Capital Holding Inc. … what we do here are Mergers … Aquasitions (sic).  We buy out small brokerage firms on wall street . . . take over their business . . . get the client like you involved directly with the brokers…the brokerage firms….This is the only company now this is offering you a 10% divident (sic) for having your money in the Company!... How it works is this. The company is going Public in September at 5 dollars a share we need to hold your mone (sic) untill (sic) Sept. then we are looking to Quadrapple (sic) your money!”…right now I can get you involved at a dollar a unit I will double your investment right before the next offering is out….I will not charge you anything on the way in…when the company does go public I will charge you 5-10% on the way out.  look your down side risk is this…The company never goes public I’ll send you back your initial investment plus the money you make of the 10% dividend …I’ll sell you out commission free.  Now the upside…The company does go public I Quadrapple (sic) your dollar amount …we buid (sic) a relation ship for year’s to come…lets start off this relationship on 10 K I will not let you down.”  (Ex. 11.)
96) The script found in Respondent’s office fails to mention the risks associated with the Charter One private placement except that if Charter One never goes public the investor would get back the money they invested plus 10%.  (Ex. 11; Tr. at 101.)
97) During the course of the Examination, Principal Examiner Hornyack witnessed individuals at the New York Branch making cold calls.  (Tr. at 90.)
98) Respondent told Principal Examiner Hornyack that he was the only person who was soliciting Charter One to investors when, in fact, there were other agents at Independent who sold the Notes to investors.  (Ex. 49; Tr. at 99, 452, 453, 455, 456.)
99) Numerous agents of Independent were paid commissions and, therefore, received “selling compensation” from Charter One for selling the Notes.  (Ex. 50; Tr. at 452-456.)
100) Independent agent Alan Kaprov sold the Notes when he was not registered to engage in such activity.  (Tr. at 453.)
101) During the Examination, Respondent gave Principal Examiner Hornyack an incomplete list of Charter One investors.  (Ex. 12; Tr. at 112, 114.)
102) In response to a written request by the Department, on April 21, 2005, the Department received a second list of Charter One investors that included additional investors.  (Tr. at 114-115.)
103) Principal Examiner Hornyack testified that there were 56 individuals who invested in the Charter One private placement.  (Ex. 12, Ex. 13; Tr. at 103.)
104) Principal Examiner Hornyack testified that the 56 Charter One investors invested over one million dollars in the private placement.  (Ex. 12; Tr. at 103.)
105) During the Examination on March 6, 2005, Principal Examiner Hornyack asked Respondent for a disclosure document for the Charter One private placement.  (Tr. at 106.)
106) Respondent told Principal Examiner Hornyack during the Examination, that he was in the process of creating a disclosure document to provide to Charter One investors.  (Tr. at 106, 155, 156.)
107) At the time Respondent told Principal Examiner Hornyack that he was in the process of creating a disclosure document, individuals had already invested in the Charter One private placement.  (Ex. 12, Ex. 13; Tr. at 106.)
108) The investors of Charter One were never provided with an offering document to let them know the risks associated with investing in Charter One.  (Tr. at 101, 154, 155.)
109) Principal Examiner Hornyack testified that to his knowledge, the disclosure document was never provided to the Department.  (Tr. at 106.)
110)
Mr. Kurchirko solicited investors Joseph J. Mickey, Edward Brender and Fred Page to invest in the Charter One private placement.  (Ex. 17, Ex. 18; Tr. at 139-141.)
111) Mr. Mickey issued a check dated January 10, 2005, in the amount of $2,500 to invest in Charter One which has the name “Vince Kucher” in the “memo” section on the check.  (Ex. 17.)
112) Mr. Brender issued a check dated February 15, 2005, in the amount of $10,000 to invest in Charter One which has the name “Victor Kucher” in the “for” section on the check.  (Ex. 17.)
113) Mr. Page issued a check dated February 8, 2005 in the amount of $2,500 to invest in Charter One and “Attn Vincent Kucher To open account” is in the “for” section on the check.  (Ex. 17.)
114) The above mentioned investment checks issued to Charter One by Mr. Mickey, Mr. Brender and Mr. Page were deposited in Charter One’s bank account at Commerce Bank, New York.  (Ex. 17, Ex. 18; Tr. at 138-140.)
115) Justin Dever was an agent at Independent.  (Ex. 18, Ex. 30, Ex. 31; Tr. at 308-309, 392)
116) When employed at Independent, Mr. Dever was registered to assist investors located in the State of Connecticut with the purchase and sale of securities and his representative number was 1724.  (Ex. 31.)
117) Respondent was Mr. Dever’s supervisor at Independent.  (Ex. 31, Ex. 43; Tr. at 389, 392.)
118) On June 10, 2004, Mr. Dever entered into an Independent Contractor Agreement with Independent.  (Ex. 22.)
119) Mr. Dever’s Independent Contractor Agreement was signed by Respondent as President of Independent Securities Investors Corporation d/b/a Charter One Capital Holding, Inc., and Mr. Dever as Contractor.  (Ex. 22.)
120) On page 2 of Mr. Dever’s Independent Contractor Agreement under the heading “Compensation” it states, in part: “[T]he Company hereby agrees to pay the Contractor for the services to be rendered pursuant to this Agreement on a commission basis only.  Commissions earned shall be as follows:  A. 65% payout on all agency and principal transactions . . . B.  The company shall lend Contractor a total of $25,000; $12,500 upon execution to this Agreement, and $12,500 in 30 days upon [ ] (sic).” (Ex. 22.)
121) Mr. Dever solicited Dr. Alfred D. Morgan, of 888 Riverbank Road, Stamford, Connecticut 06903, to open an account with Independent.  (Tr. at 150, 308, 457.)
122) Mr. Dever solicited Dr. Morgan to invest in the Charter One private placement.  (Ex. 20, Ex. 51; Tr. at 148-152, 458.)
123) Dr. Morgan’s new account form for his Independent account, number 0580531114, contains an incorrect birth date of April 14, 1926.  (Ex. 51; Tr. at 757, 758.)
124) Dr. Morgan’s birth date is April 14, 1916.  (Ex. 51; Tr. at 757.)
125) Fred Perelman and Respondent solicited Dr. Morgan to invest in the Charter One private placement.  (Tr. at 553-555.)
126) Dr. Morgan invested Twenty Thousand Dollars ($20,000) in the Charter One private placement through Respondent.  (Ex. 20, Ex. 21; Tr. at 148-152, 458.)
127) Dr. Morgan signed a Promissory Note and Loan Agreement dated August 24, 2004, wherein Charter One promised to pay Dr. Morgan the sum of Twenty Thousand Dollars ($20,000) plus interest on the unpaid principal of the promissory note at the rate of 10% per annum, payable quarterly.  (Ex. 20.)
128) Respondent, as President of Charter One, signed Dr. Morgan’s Promissory Note and Loan Agreement of August 24, 2004.  (Ex. 20; Tr. at 150.)
129) The Charter One Promissory Note and Loan Agreement signed by Dr. Morgan is dated August 24, 2004.  (Ex. 20; Tr. at 783.)
130) When investing in the Charter One private placement Dr. Morgan issued a check dated August 26, 2004, to Charter One in the amount of $20,000.  (Ex. 21; Tr. at 785.)
131) Dr. Morgan’s August 26, 2004, check to Charter One has written in the lower left-hand corner, “Promissory Note *Loan Agreement of Aug 24, 04”.  (Ex. 21.)
132) When Dr. Morgan invested in the Charter One private placement, he was eighty-eight (88) years old.  (Ex. 13; Tr. at 757.)
133) The reasons Dr. Morgan invested in the Charter One private placement include what Respondent described to Dr. Morgan “about the interest that they were going to pay on my investment and that they had good experience and dealings.  And unfortunately, I don’t remember any of the deals that he actually told me he had done, but he sounded like an intelligent fellow and he had experience in the area that he was seeking my capital for, so I invested in one unit, which was the $20,000 which I gave you a copy of the check that I gave him.” (Tr. at 762-763, 768, 771, 773, 784, 789, 809.)
134) An important factor in Dr. Morgan’s decision to invest in the Charter One private placement was the 10% interest the investment was supposed to pay.  (Tr. at 763, 768, 771, 773, 782, 784, 789.)
135) Dr. Morgan never received any interest payment from Charter One.  (Tr. at 768, 784, 785, 789.)
136) Dr. Morgan was never warned that he might not receive the 10% interest on his investment in the Charter One private placement.  (Tr. at 790.)
137) As of March 10, 2005, none of the Charter One Promissory Note and Loan Agreement holders had been paid either principal or interest.  (Tr. at 151-152.)
138) Dr. Morgan was unaware that there were Charter One financial statements.  (Tr. at 808.)
139) When Dr. Morgan opened account number [          ] at Independent, he was not given any documentation such as private placement or risk disclosure memorandum or anything that outlined the risks of investing in Charter One nor was Dr. Morgan provided with any financial statements concerning Charter One.  (Ex. 54; Tr. at 461, 791, 792, 793, 801, 806, 807.)
140) Respondent never informed Dr. Morgan that there were Charter One financial statements.  (Tr. at 808.)
141) The only document Dr. Morgan received from Charter One was the Charter One Promissory Note and Loan Agreement for the private placement.  (Ex. 20; Tr. at 791.)
142) Dr. Morgan testified that if he had known that the Charter One financial statements had existed, he would have asked for them.  (Tr. at 801.)
143) Dr. Morgan testified that if he had received the Charter One financial statements that “covered the period before August 24, maybe I would not have invested with such a loss.” (Tr. at 807.)
144) When Dr. Morgan’s established his account at Independent, account number [          ], it did not provide Independent with discretionary trading authority.  (Ex. 51.)
145) On August 23, 2004, Michael T. Studer CPA P.C., issued a Report of Independent Auditor wherein it states that Charter One “has experienced a substantial net loss from inception, and at June 30, 2004, the Company has a substantial working capital deficiency and stockholders’ deficiency, which raises substantial doubt about its ability to continue as a going concern.”  (Ex. 52.)
146) The financial statements prepared by Michael T. Studer CPA P.C., state that Charter One had a net loss for the period ending June 30, 2004.  (Ex. 52.)
147) Dr. Morgan’s check to invest in Charter One is dated August 26, 2004, which is subsequent to the Report of Independent Auditor issued by Michael T. Studer CPA P.C., that is dated August 23, 2004.  (Ex. 21, Ex. 53.)
148) Louis Bruno was an agent at Independent.  (Ex. 30; Tr. at 306-307.)
149) Mr. Bruno’s representative number was number 2004 when employed at Independent.  (Ex. 31.)
150) Mr. Bruno became registered to assist clients with securities transaction in Connecticut on February 14, 2005.  (Ex. 44; Tr. at 397.)
151) Respondent was Mr. Bruno’s supervisor at Independent.  (Tr. at 403.)
152) Timothy Parola of 21 Fenwood Avenue, West Hartford, Connecticut 06110, was a client of Mr. Bruno at Independent.  (Ex. 77; Tr. at 306-307, 402, 403, 944.)
153) When Mr. Parola established his account at Independent, account number [          ], it did not provide Independent with discretionary trading authorization.  (Ex. 45; Tr. at 399-400.)
154) Mr. Bruno solicited Mr. Parola in February of 2005 to open an account at Independent prior to Mr. Bruno being registered in Connecticut to engage in such activity.  (Ex. 77; Tr. at 395, 402, 415, 416.)
155) On February 10, 2005, Mr. Parola forwarded to Mr. Bruno at Independent a check in the amount of Two Thousand Dollars ($2,000) for the purchase of 300 shares of Nuvelo Inc., stock that Mr. Bruno had recommended to Mr. Parola.  (Ex. 77.)
156) Mr. Bruno’s solicitation of Mr. Parola to open an account at Independent prior to Mr. Bruno being properly registered in Connecticut to engage in such activity was in violation of Section 510 of the OSJ Agreement.  (Ex. 48; Tr. at 415-417.)
157) Mr. Bruno’s signature appears on Mr. Parola’s new account form with Independent for account number [          ] that is dated February 10, 2005.  (Ex. 45; Tr. at 399-400.)
158) Respondent’s representative number, number 1729, appears on Mr. Parola’s new account form with Independent for account number [          ].  (Ex. 45.)
159) On February 9, 2005, Mr. Parola purchased 300 shares of Nuvelo Inc., stock through his Independent account on the solicitation and recommendation of Mr. Bruno.  (Ex. 46; Tr. at 395, 400-402.)
160) Mr. Bruno was the agent at Independent who assisted in the purchase of the Nuvelo Inc., stock for the account of Mr. Parola.  (Ex. 46; Tr. at 402-403.)
161) Respondent’s representative number, number 1729, is listed on the trade confirmation and order ticket for the purchase of the Nuvelo Inc., stock for the account of Mr. Parola at Independent.  (Ex. 46; Tr. at 403.)
162) When purchasing the Nuvelo Inc., stock for his account at Independent, Mr. Parola dealt with Mr. Bruno.  (Ex. 46, Ex. 77; Tr. at 403.)
163) Subsequent to Mr. Bruno signing Mr. Parola’s new account form on February 10, 2005, Respondent signed his name in place of Mr. Bruno’s name on Mr. Parola’s new account form.  (Ex. 45, Ex. 47; Tr. at 403-413.)
164) Mr. Parola’s new account form signed by Respondent is the same form that was signed by Mr. Bruno’s except that Respondent’s signature appears where Mr. Bruno’s signature had appeared.  (Ex. 45, Ex. 47; Tr. at 403-413.)
165) Subsequent to Mr. Parola’s new account being opened at Independent, Mr. Fleisher of Independent sent an e-mail requesting that the representative number on Mr. Parola’s account be changed from 1729 to 2104.  (Ex. 47; Tr. at 405.)
166) When Mr. Bruno solicited Mr. Parola to open an account at Independent and to purchase Nuvelo Inc., stock, Mr. Bruno was not registered in Connecticut to engage in such activity.  (Ex. 44, Ex. 45; Tr. at 395, 406-407, 412-413.)
167) While at Independent, Mr. Dever was the agent for Raymond F. Triebert of 1248 Framington Avenue, Apartment 12A, West Hartford, Connecticut 06107.  (Ex. 38, Ex. 42; Tr. at 309, 389.)
168) On January 4, 2005, 1,500 shares of Bio-Solutions Manufacturing were purchased through Mr. Triebert’s account at Independent and Mr. Dever’s representative number 1724 is listed on the trade confirmation and trade ticket as the agent who assisted with the purchase.  (Ex. 32; Tr. at 326-327.)
169) When the 1,500 shares of Bio-Solutions Manufacturing were purchased through Mr. Triebert’s account at Independent, Bio-Solutions Manufacturing was an unregistered security that had not filed, with the Department, any exemptive or notice filing pursuant to Section 36b-21 of the Act.  (Ex. 15; Tr. at 327.)
170) On December 28, 2004, 2,300 shares of Bio-Solutions Manufacturing were purchased through Dr. Morgan’s account at Independent and Mr. Dever’s representative number 1724 is listed on the trade confirmation and trade ticket as the agent who assisted with the purchase.  (Ex. 32; Tr. at 329.)
171) When the 2,300 shares of Bio-Solutions Manufacturing were purchased through Dr. Morgan’s account at Independent, Bio-Solutions Manufacturing was an unregistered security that had not filed, with the Department, any exemptive or notice filing pursuant to Section 36b-21 of the Act.  (Ex. 15; Tr. at 328.)
172) On January 25, 2005, 2,500 shares of Bio-Solutions Manufacturing were purchased through Dr. Morgan’s account at Independent and Mr. Dever’s representative number 1724 is listed on the trade confirmation and trade ticket as the agent who assisted with the purchase.  (Ex. 32; Tr. at 329.)
173) When the 2,500 shares of Bio-Solutions Manufacturing were purchased through Dr. Morgan’s account at Independent, Bio-Solutions Manufacturing was an unregistered security that had not filed, with the Department, any exemptive or notice filing pursuant to Section 36b-21 of the Act.  (Ex. 15; Tr. at 329.)
174) On April 15, 2005, 1,500 shares of Bio-Solutions Manufacturing were sold through Mr. Triebert’s account at Independent and Mr. Dever’s representative number 1724 is listed on the trade confirmation and trade ticket as the agent who assisted with the sale.  (Ex. 32, Ex. 41; Tr. at 329-330.)
175) Mr. Triebert was born on September 21, 1915, and died on February 21, 2005.  (Ex. 40.)
176) When the 1,500 shares of Bio-Solutions Manufacturing were sold through Mr. Triebert’s account at Independent by Mr. Dever on April 15, 2005, Mr. Triebert was deceased.  (Ex. 32, Ex. 40, Ex. 41.)
177) The trade conformation form for the sale of the 1,500 shares of Bio-Solutions Manufacturing sold through Mr. Triebert’s account at Independent on April 15, 2005, indicates that the transaction was made as a result of an “unsolicited order”.  (Ex. 32, Ex. 41.)
178) The order ticket for the sale of the 1,500 shares of Bio-Solutions Manufacturing sold through Mr. Triebert’s account at Independent on April 15, 2005, indicates that the transaction was made as a result of a “solicited order”.  (Ex. 32, Ex. 41.)
179) Since Mr. Triebert was deceased, the transaction could not have been as a result of either a “solicited” or “unsolicited” order.  (Tr. at 384.)
180) When Mr. Triebert’s established his account with Independent, account number [          ], it did not provide Independent with discretionary trading authorization, therefore, in order for Independent to make trades through Mr. Triebert’s account with Independent, Mr. Triebert’s authorization was necessary.  (Ex. 32, Ex. 42; Tr. at 384-387.)
181) The 1,500 shares of Bio-Solutions Manufacturing sold through Mr. Triebert’s account at Independent on April 15, 2005 were sold without authorization.  (Tr. at 384-387.)
182) When the 1,500 shares of Bio-Solutions Manufacturing were sold through Mr. Triebert’s account at Independent, Bio-Solutions Manufacturing was an unregistered security that had not filed, with the Department, any exemptive or notice filing pursuant to Section 36b-21 of the Act.  (Ex. 15; Tr. at 329-330.)
183) On November 17, 2004, 500 shares of Stake Technology Ltd., were purchased through Mr. Triebert’s account at Independent and Mr. Dever’s representative number 1724 is listed on the trade confirmation as the agent who assisted with the purchase.  (Ex. 33; Tr. at 334.)
184) When the 500 shares of Stake Technology Ltd., were purchased through Mr. Triebert’s account at Independent, Stake Technology Ltd., was an unregistered security that had not filed, with the Department, any exemptive or notice filing pursuant to Section 36b-21 of the Act.  (Ex. 15; Tr. at 334.)
185) Mr. Dever solicited Dr. Nathan DiFrancesco of 2 Sandra Drive, Branford, Connecticut 06405 to open an account at Independent.  (Ex. 39; Tr. at 308, 389.)
186) Mr. Dever was Dr. DiFrancesco’s agent at Independent.  (Ex. 39; Tr. at 389.)
187) On November 17, 2004, 500 shares of Stake Technology Ltd., were purchased through Dr. DiFrancesco’s account at Independent and Mr. Dever’s representative number 1724 is listed on the trade confirmation and trade ticket as the agent who assisted with the purchase.  (Ex. 33; Tr. at 334-335)
188) When the 500 shares of Stake Technology Ltd., were purchased through Dr. DiFrancesco’s account at Independent, Stake Technology Ltd., was an unregistered security that had not filed, with the Department, any exemptive or notice filing pursuant to Section 36b-21 of the Act.  (Ex. 15.)
189) On November 16, 2004, 700 shares of Stake Technology Ltd., were purchased through Dr. Morgan’s account at Independent and Mr. Dever’s representative number 1724 is listed on the trade confirmation and trade ticket as the agent who assisted with the purchase.  (Ex. 33; Tr. at 335.)
190) When the 700 shares of Stake Technology Ltd., were purchased through Dr. Morgan’s account at Independent, Stake Technology Ltd., was an unregistered security that had not filed, with the Department, any exemptive or notice filing pursuant to Section 36b-21 of the Act.  (Ex. 15.)
191) On Dr. DiFrancesco’s new account form at Independent, account number [          ], which he signed and dated August 24, 2004, Dr. DiFrancesco did not provide Independent with discretionary trading authority on such account.  (Ex. 35.)
192) On Dr. DiFrancesco’s new account form at Independent, account number [          ], which he signed and dated August 24, 2004, the representative number listed on the form is 1724.  (Ex. 35)
193) On November 22, 2004, 500 shares of Stake Technology Ltd., were sold through Dr. DiFrancesco’s account at Independent and Mr. Dever’s representative number 1724 is listed on the trade confirmation and trade ticket as the agent who assisted with the sale.  (Ex. 34; Tr. at 338-339.)
194) The 500 shares of Stake Technology Ltd., sold through Dr. DiFrancesco’s account at Independent on November 22, 2004, were sold by Mr. Dever without Dr. DiFrancesco’s authorization.  (Ex. 39; Tr. at 336-340.)
195) Dr. DiFrancesco never contacted Mr. Dever and told him to sell the 500 of Stake Technology Ltd.  (Ex. 39.)
196) The 500 shares of Stake Technology Ltd., that were sold through Dr. DiFrancesco’s account at Independent on November 22, 2004, were sold by Mr. Dever without Dr. DiFrancesco’s authorization.  (Ex. 39; Tr. at 362-363.)
197) On March 31, 2005, 1000 shares of Calamp Corp., were purchased through Dr. DiFrancesco’s account at Independent and Mr. Dever’s representative number 1724 is listed on the trade confirmation as the agent who assisted with the purchase.  (Ex. 34; Tr. at 339)
198) Dr. DiFrancesco never contacted Mr. Dever and told him to purchase 1000 shares of Calamp Corp.  (Ex. 39.)
199) The 1000 shares of Calamp Corp., purchased through Dr. DiFrancesco’s account at Independent on March 31, 2005, were purchased by Mr. Dever without Dr. DiFrancesco’s authorization.  (Ex. 39; Tr. at 336-340, 363.)
200) By letter dated March 18, 2005, Principal Examiner Hornyack sent Mr. Jordan, President of Independent, a letter requesting twelve (12) items to be supplied to the Department within fourteen (14) days of Mr. Jordan’s receipt of the letter.  (Ex. 23.)
201) Of the twelve (12) items the Department requested in its March 18, 2005, letter to Mr. Jordan, it did not receive either a response or a complete response to its request for the following:  completed outside business activity forms for any person who was required to complete one who worked at both the New York Branch and Boca Raton Branch; copies of any offering memorandum or similar material, with respect to Charter One’s Promissory Note and Loan Agreements; copy of any written supervisory, compliance and/or operations manual(s) utilized by ISIC; copies of any approved scripts used for cold calling; a complete list of the note holders of Charter One including the dates and amounts of their investments; copies of all approved written sales presentations used to solicit Charter One; and, copies of consulting agreements.  (Ex. 23; Tr. at 162-165.)
202) Subsequent to Principal Examiner Hornyack sending Mr. Jordan his letter dated March 18, 2005, Mr. Jordan informed Principal Examiner Hornyack that he could not respond to some of the items and that he had forwarded the March 18, 2005, letter to Respondent because Respondent had the records.  (Tr. at 176, 193, 194.)
203) Respondent told Principal Examiner Hornyack that Mr. Jordan had forwarded Principal Examiner Hornyack’s March 18, 2005, letter to Respondent.  (Tr. at 268.)
204) Principal Examiner Hornyack testified that subsequent to Mr. Jordan forwarding his March 18, 2005, letter to Respondent, he spoke to Respondent about specific items that were requested in his letter dated March 18, 2005.  (Tr. at 192, 193, 194.)
205) By letter dated April 15, 2005, Principal Examiner Hornyack sent Mr. Jordan, President of Independent a letter requesting eight (8) items to be supplied to the Department within fourteen (14) days of Mr. Jordan’s receipt of the letter.  (Ex. 24.)
206) Respondent was sent, by mail and facsimile, a copy of Principal Examiner Hornyack’s April 15, 2005 letter to Mr. Jordan.  (Ex. 26; Tr. at 170, 267, 268, 271, 272.)
207) Of the eight (8) items the Department requested in its April 15, 2005 letter to Mr. Jordan, which was also sent to Respondent, it did not receive either a response or a complete response to its request for the following:  copies of all bookkeeping records maintained by Steven Gray (i.e. logs, notes, etc…) that reveal how commissions are paid by Charter One to the brokers in the New York Branch and Boca Raton Branch; terms and/or agreements, such as purchase agreements, purchase memorandum, memorandums of understanding, etc…., for any and all attempted, pending or completed purchases of books of business from other broker-dealers as well as other business dealings of Charter One, including information on any escrow accounts used.  (Ex. 24; Tr. at 170-172.)
208) During the course of its Examination of Independent and Charter One, Department examiners requested access to Respondent’s computer and were never provided access.  (Tr. at 173-174.)
209) By letter dated May 17, 2005, Principal Examiner Hornyack sent Mr. Jordan, President of Independent a letter requesting the outstanding records that Principal Examiner Hornyack requested in his letters dated March 18, 2005 and April 15, 2005, within five (5) days of Mr. Jordan’s receipt of the letter.  (Ex. 25; Tr. at 175, 919, 920.)
210) Principal Examiner Hornyack’s May 17, 2005 letter to Mr. Jordan was sent by certified mail.  (Ex. 25; Tr. at 175.)
211) By letter dated May 17, 2005, Principal Examiner Hornyack sent to the attention of Respondent, a letter requesting the outstanding records requested in Principal Examiner Hornyack’s letters dated March 18, 2005 and April 15, 2005, within five (5) days of Respondent’s receipt of the letter.  (Ex. 25; Tr. at 175.)
212) Principal Examiner Hornyack’s May 17, 2005 letter to Respondent was sent by certified mail.  (Ex. 25; Tr. at 175, 920.)
213) On at least one occasion, Department employees talked to Respondent by telephone and asked for the records requested in Principal Examiner Hornyack’s letters dated March 18, 2005 and April 15, 2005.  (Tr. at 176.)
214) On May 17, 2005, Ralph A. Lambiase, Division Director of the Division issued a Subpoena Duces Tecum (“Subpoena”) commanding Respondent to bring certain records and documents to the Department on June 9, 2005.  (Ex. 71.)
215) Respondent never appeared before the Department pursuant to the Subpoena.  (Tr. at 926.)
216) Up to and including the time of the hearing, Respondent failed to produce all of the records that were requested by the Department in Principal Examiner Hornyack’s letters dated March 18, 2005 and April 15, 2005 and the May 17, 2005, Subpoena issued by Division Director Lambiase.  (Tr. at 176, 194, 195, 206, 207, 907, 917, 921.)
217) Charter One gave investors of the Charter One private placement a document that contained biographies of individuals which it purported to be associated with Charter One when, in fact, several of the individuals were not associated with Charter One.  (Ex. 56, Ex. 57A, Ex. 57B, Ex. 57C, Ex. 57D, Ex. 58; Tr. at 495, 498.)
218) Respondent falsely represented that Dr. Ibrahim Oudeh was associated with Charter One.  (Ex. 56; Tr. at 528.)
219) Charter One falsely represented that Brad Silver, Dr. Craig A. Zabala and Larry Forrest were on the Charter One Advisory Board.  (Ex. 57A, Ex. 57B, Ex. 57C, Ex. 57D, Ex. 58.)
220) Respondent made representations to Richard Weixelman, the son of Louis Weixelman who invested Twenty Thousand Dollars ($20,000) in Charter One promissory notes, that Dr. Zabala “…is an OSJ.  Zabala is a strategic OSJ relationship.  He gives us some advice, and we have a friendly relationship. I’ve known the man for years.”  (Ex. 13, Ex. 62; Tr. at 695.)
221) Respondent made representations to Richard Weixelman that “[t]he reason Larry Forrest is involved is because of his relationship with the syndicate desks.  When we do go public, we want the big firms to trade our stock, to buy our stock both on a retail level as well as on an institutional level.”  (Ex. 13, Ex. 62; Tr. at 695-696.)
222) Mr. Silver declined Respondent’s offer to serve on Charter One’s Advisory Board.  (Ex. 57A, Ex. 57B, Ex. 57D; Tr. at 498, 743-746.)
223) Mr. Silver told Principal Examiner Klemes Klementon of the Division that he did not authorize his name to be used by Charter One in its biographies, that he objected on a couple of occasions and his objection was set forth in letters that were sent to Respondent.  (Ex. 57B; Ex. 57D; Tr. at 745.)
224) Dr. Zabala declined Respondent’s offer to serve on Charter One’s Board of Directors or Advisory Board.  (Ex. 57B, Ex. 57D; Tr. at 743, 744, 746.)
225) The Minutes of the First Meeting of the Board of Directors of Charter One Capital Holdings, Inc., on January 10, 2004, state that Mr. Forrest was appointed Secretary of the Meeting and indicate that the Secretary of the Meeting signed the minutes.  (Ex. 58.)
226) Mr. Forrest signed an Affidavit stating that the signature of the Secretary of the Meeting of the Minutes of the First Meeting of the Board of Directors of Charter One Capital Holdings, Inc., is not his signature.  (Ex. 58.)
227) The Minutes of the First Meeting of Shareholders of Charter One and the Minutes of the First Meeting of the Board of Directors of Charter One indicate that Mr. Forrest held the Office of Secretary of Charter One and that he was a Director of Charter One.  (Ex. 58.)
228) The Minutes of the First Meeting of Shareholders of Charter One Capital Holdings, Inc., on January 10, 2004, have the title “Secretary” below a signature line on the lower right side of the second page and the name “Larry Forrest” appears under the word “Secretary”.  (Ex. 58.)
229) On page one of the Minutes of the First Meeting of Shareholders of Charter One Capital Holdings, Inc., on January 10, 2004, it states that the Secretary of Charter One “read the roll of the shareholders . . . and reported that a quorum of the shareholders was present” and that the Secretary of Charter One “read a waiver of notice of meeting signed by all the shareholders…”.  (Ex. 58.)
230) Mr. Forrest signed an Affidavit stating that he did not attend any Charter One Capital Holdings, Inc., Board of Director meetings.  (Ex. 58.)
231) Mr. Forrest was never an officer or director of Charter One nor did he ever attend any Charter One Board of Director meetings.  (Ex. 58; Tr. at 751, 752.)
232) Respondent solicited Yacov Shitrit, who was a client of Andre Delano Duncan when Mr. Duncan was an agent at Independent, to invest in the Charter One private placement. (Tr. at 616, 618.)
233) On February 8, 2005, Respondent sent Mr. Shitrit a copy of the document that contained biographies of individuals which were purported to be associated with Charter One, when, in fact, several of the individuals were not associated with Charter One.  (Ex. 56; Tr. at 650.)
234) Subsequent to receiving the document that contained biographies of individuals purported to be associated with Charter One that is referred to above, on February 14, 2005, Mr. Shitrit invested Fifteen Thousand Dollars ($15,000) in Charter One promissory notes.  (Ex. 13, Ex. 56; Tr. at 650-651.)
235) Respondent told Richard Weixelman, that he worked with Steve Schwartz and Mark Rhonda, the top investment bankers at Prime Charter who “put the initial seed money together to a little coffee house based out of Seattle, Washington…[t]hat seed money turned into Starbucks.”  (Ex. 62; Tr. at 676.)
236) Mr. Schwartz told Principal Examiner Klementon that he had did not know who Respondent was and that Respondent was not involved in the investment banking area at Prime Charter.  (Tr. at 713.)
237) Mr. Rhonda told Principal Examiner Klementon that he had did not know who Respondent was and that Respondent was not involved in the investment banking area at Prime Charter.  (Tr. at 713.)
238) Respondent told Richard Weixelman that Charter One was “buying up books of business” when, based on the Examination, there was no evidence that Charter One made any company asset purchases.  (Ex. 62; Tr. at 681, 723.)
239) Respondent told Richard Weixelman that he was a “Senior VP” at the firm of Auerbach, Pollack and Richardson” when, in fact, Bob Drake, the compliance officer at Auerbach, Pollack and Richardson told Principal Examiner Klementon that Respondent was strictly a retail broker who did not have any supervisory responsibilities.  (Ex. 62; Tr. at 679, 719, 720.)
240) Respondent’s CRD U4 Employment History lists his position at Auerbach, Pollack and Richardson as “Broker.”  (Ex. 63; Tr. at 720-721.)
241) Mr. Schwartz and Mr. Rhonda told Principal Examiner Klementon that Prime Charter had no involvement with Starbucks’ IPO, equity offerings or with Starbucks going public and that they invested in Starbucks because they were personal friends of the person who founded Starbucks.  (Tr. at 714.)
242) Respondent told Richard Weixelman that “there’s always a select group of individuals throughout the years that are the deal makers and I’m tied into that group. I am one of the deal makers.”  (Ex. 62; Tr. at 676-677.)
243) Respondent told Richard Weixelman that Charter One was looking to add in mortgages and insurance products and that it was “in talks with Mass Mutual” when, in fact, Bob Rosenthal, who was an attorney at Mass Mutual informed Principal Examiner Klementon that Mass Mutual did not have anything on their system that shows any business relationship with Charter One, Respondent or Independent.  (Ex. 62; Tr. at 682, 724.)
244) Respondent told Richard Weixelman that Charter One was “on track for seven-figure revenue year one” when, in fact, Charter one had commissions of $268,481 for the six months ended December 31, 2004 and it had a net loss for that period of $597,674 which was not disclosed to Weixelman.  (Ex. 62; Tr. at 684, 725-726.)
245) Respondent told Richard Weixelman that Charter One had “an acquisition right now in the pipeline…the contract has been signed…it’s a $25 million asset purchase based out of Miami” when, in fact, the agreement was never finalized.  (Ex. 62; Tr. at 684, 727-728.)
246) Respondent told Richard Weixelman that on November 15, 2004, Charter One made a seven and a half million dollar asset purchase to acquire an office in Buffalo, Wyoming when, in fact, the assets purchased totaled less than $2 million and the assets were purchased from an individual agent located in Buffalo, Wyoming.  (Ex. 62; Tr. 685, 728-733.)
247) Respondent told Richard Weixelman that “[w]e had another…[w]e had a deal today that I just had to break apart….I think it was an $8 million asset purchase based out of West Patterson, New Jersey called Shukla Securities.  Signed the contract, put the money in escrow…within two hours of receiving the contract, it was signed, returned by via fax, and money was placed in escrow to get the deal done, because sometimes it don’t happen.  Sellers procrastinate.”  (Ex. 62; Tr. at 685-686.)
248) Mr. Shukla told Principal Examiner Klementon that he had met Respondent once in his office very briefly and had a very preliminary conversation with Respondent, however, he never saw an asset purchase agreement, never agreed on a sales price and he never agreed to sell Charter One any assets.  (Tr. at 735, 736, 737)
249) Respondent told Richard Weixelman that “you will be receiving a dividend on your money as well…[m]ost likely a stock dividend” when, in fact, most of the investors who purchased Charter One promissory notes never received any dividends.  (Ex. 62; Tr. at 690, 738-741.)
250) Respondent asked Richard Weixelman “[w]hat do you think your comfort level is right now?” when discussing investing in Charter One promissory notes.  (Ex. 62; Tr. at 702, 703, 753, 754.)
251) On April 26, 2006, an agent of Charter One called Louis Weixelman and identified himself as Vince Kucher.  (Ex. 66)
252) Principal Examiner Klementon testified that although the agent of Charter One who spoke to Louis Weixelman during a telephone call on April 26, 2006, identified himself as Vince Kucher, it was not Vince Kucher.  (Tr. at 842, 847, 848.)
253) The agent of Charter One told investor Louis Weixelman during the telephone call on April 26, 2006, “[i]f you had the $500,000 in there right now, we’re looking to make back over $2 million.…Well Mr. Weixelman, you have to understand, I’m looking to quadruple your dollar amount, and that’s only at the beginning of when the company goes public.  No matter what, it’ll quadruple.  But then we’re looking for it to go higher.” . . . Mr. Weixelman, I promise you, you get me the $500,000 in June, you have my word as a gentleman, at the least we’re going to make is 2 million.  (Ex. 13, Ex. 66; Tr. at 836, 837, 849-850.)
254) The statements “I’m looking to quadruple your dollar amount and that’s only at the beginning of when the company goes public.  No matter what, it will quadruple.” is language that is contained in a script that was found by the Department at Charter One during the Examination.”  (Ex. 11, Ex. 66; Tr. at 850.)
255) The agent of Charter One told investor Louis Weixelman during the telephone call on April 26, 2006, that “we’re buying out small brokerage firms and taking over their business.”  (Ex. 66.)
256) The statement “we’re buying out small brokerage firms and taking over their business” is language that is contained in a script that was found by the Department at Charter One during the Examination.  (Ex. 11, Ex. 66; Tr. at 849.)
257) The agent of Charter One told investor Louis Weixelman during the telephone call on April 26, 2006, that “[t]he 50,000, we’re looking to make back 250,000.  So altogether with a 50,000 investment, we’re looking to make roughly about 300,000 back.”  (Ex. 66; Tr. at 850.)
258) Statements made by the Charter One agent who spoke to Louis Weixelman by telephone on April 26, 2006, included a profit guarantee without any discussion of the risks associated with the investment or the possibility of Mr. Weixelman losing money.  (Ex. 66; Tr. at 850)
259) On May 23, 2005, an agent of Charter One called Frank Cardin, Sr., and identified himself as Vince Kucher.  (Ex. 67.)
260) Principal Examiner Klementon testified that although the agent of Charter One who spoke to Mr. Cardin during a telephone call on May 23, 2005, identified himself as Vince Kucher, it was not Vince Kucher.  (Tr. at 865-867.)
261) Principal Examiner Klementon testified that the agent of Charter One who spoke to Mr. Cardin during a telephone call on May 23, 2005, was an unregistered agent.  (Tr. at 867.)
262) The agent of Charter One told Mr. Cardin during the telephone call on May 23, 2005, that if he purchased units in the Charter One IPO for one dollar, the unit is “actually worth 50 cents a share . . . so when it goes public on the open market at $5, it’s going to right away convert to 50 cents a share, so we’re going to make a $4.50 profit.”  (Ex. 67; Tr. at 857.)
263) The agent of Charter One told Mr. Cardin during the telephone call on May 23, 2005, that if he purchased units in the Charter One IPO for one dollar, the profit would be “about 1,000 percent.”  (Ex. 67; Tr. at 858.)
264) The agent of Charter One told Mr. Cardin during the telephone call on May 23, 2005, that “I got a client right now . . . he just sent me in $1.1 million . . . he’s going to make back around $5 million.”  (Ex. 67; Tr. at 858.)
265) The agent of Charter One told Mr. Cardin during the telephone call on May 23, 2005, “[o]h you’re going to make a lot of money on this, sir.  I promise you.”  (Ex. 67; Tr. at 859.)
266) The statements made by the Charter One agent to Mr. Cardin during the telephone call on May 23, 2005, were profit guarantees without any discussion of the risks associated with the investment or the possibility of Mr. Cardin losing money.  (Ex. 67; Tr. at 868-869.)
267) Principal Examiner Klementon reviewed Charter One bank account records and failed to find a record of an amount received from an investor to support the claim that a person invested $1.1 million.  (Tr. at 869.)
268) The agent of Charter One told Mr. Cardin during the telephone call on May 23, 2005, that “I usually send out statements about once a month.”  (Ex. 67.)
269) Principal Examiner Klementon testified that he has “never seen any statements of Charter One related to investments” being issued to support such statement.  (Tr. at 871.)
270) Principal Examiner Klementon testified that more than One Million Dollars was invested in the Charter One private placement.  (Tr. at 870.)
271) On January 6, 2006, Sidney A. Igdalsky, Banking Department Manager, at the Department, issued a letter to Respondent to provide Respondent with an opportunity to show compliance with legal requirements for retention of broker-dealer agent registration.  (Ex. 73; Tr. at 927-929.)
272) Respondent never submitted a response to the Department’s January 6, 2006 letter.  (Tr. at 929.)
273)
NASD Standards of Commercial Honor and Principals of Trade Rule 2110 states that “[a] member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.”  (Ex. 68.)
 

CONCLUSIONS OF LAW

I.  Violation of Section 36b-15(a)(2)(K) of the 2006 Supplement to the
General Statutes – Failure to Reasonably to Supervise

Section 36b-15(a) of the 2006 Supplement to the General Statutes states, in pertinent part, that:
The commissioner may, by order, deny, suspend or revoke any registration or, by order, restrict or impose conditions on the securities or investment advisory activities that an applicant or registrant may perform in this state if the commissioner finds that (1) the order is in the public interest, and (2) the applicant or registrant or, in the case of a broker-dealer or investment adviser, 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 or investment adviser:  . . . (K) has failed reasonably to supervise:  (i) The agents or investment adviser agents of such applicant or registrant, if the applicant or registrant is a broker-dealer or investment adviser; or (ii) the agents of a broker-dealer or investment adviser agents of an investment adviser, if such applicant, registrant or other person is or was an agent, investment adviser agent or other person charged with exercising supervisory authority on behalf of a broker-dealer or investment adviser[.]
1) In the Notice it is alleged that Respondent managed the New York Branch and exercised supervisory authority at the branch on behalf of Independent and that Respondent exercised supervisory authority over at least one agent at the Boca Raton Branch on behalf of Independent.
 
The record establishes that Respondent was the President and CEO of Charter One which entered into an OSJ Agreement with Independent, a securities broker/dealer, to operate, on behalf of Independent, offices located in New York, New York and Boca Raton, Florida and that Respondent was the branch manager of the New York Branch and Boca Raton Branch responsible for implementing the terms of the OSJ Agreement including “Section 510: Registration”, and for complying with NASD notice to members 88-50 and 88-24.

2) In the Notice it is alleged that:  (a) from at least March to June 2005, the New York Branch of Independent employed two individuals as “cold callers” who were not registered with the NASD as representatives of Independent, who pre-qualified customers as to financial status and investment history and made sales of unregistered securities to Connecticut customers; (b) from at least December 2004 through April 2005, an Independent agent made three sales of Bio-Solutions Manufacturing securities to at least two Connecticut customers when such securities were not registered in Connecticut as required by Section 36b-16 of the Act, exempt from registration under Section 36b-21 of the Act or covered securities; (c) in at least November 2004, an agent of Independent made three sales of Stake Technology securities to at least three Connecticut customers when such securities were not registered in Connecticut as required by Section 36b-16 of the Act, exempt from registration under Section 36b-21 of the Act or covered securities; (d) on at least February 9, 2005, at least one agent at Independent’s New York Branch effected a sale of Nuvelo Inc., securities for the account of at least one person located in Connecticut absent registration in Connecticut; and (e) from at least November 2004 through April 2005, an agent of Independent effected an aggregate of at least three unauthorized transactions on behalf of two Connecticut customers.
a) The record establishes that during the March to June 2005 time frame Independent employed individuals as “cold callers” who were not registered with the NASD, who pre-qualified customers as to financial status and investment history and made sales of unregistered securities to Connecticut customers.  The record establishes that Mr. Herrera and Mr. Bruno, while employed at Independent, engaged in “cold calling” prior to being registered with the NASD and that Mr. Bruno solicited Mr. Parola to open an account at Independent and then assisted in the purchase of securities for Mr. Parola’s account at Independent prior to being registered with the NASD to engage in such activity in Connecticut.  Pursuant to “Section 510:Registration” of the OSJ Agreement with Independent, Respondent was charged with exercising supervisory authority on behalf of Independent at the New York Branch and Boca Raton Branch of Independent.  Mr. Bruno’s and Mr. Parola’s conduct of engaging in activity prohibited by “Section 510:Registration” of the OSJ Agreement and NASD notice to members 88-50 and 88-24, from an Independent office managed by Respondent constitutes, on the part of Respondent, a failure to reasonably supervise, in violation Section 36b-15(a)(2)(K) of the 2006 Supplement to the General Statutes.
b) The record establishes that on January 4, 2005, Mr. Dever, an Independent agent, assisted in the purchase of Bio-Solutions Manufacturing securities and on April 15, 2005, for the sale of Bio-Solutions Manufacturing securities, for Mr. Triebert’s account at Independent, when such securities were not registered in Connecticut as required by Section 36b-16 of the Act, exempt from registration under Section 36b-21 of the Act or covered securities.  In addition, on December 28, 2004, and January 25, 2005, Mr. Dever assisted in the purchase of Bio-Solutions Manufacturing securities for Dr. Morgan’s account at Independent, when such securities were not registered in Connecticut as required by Section 36b-16 of the Act, exempt from registration under Section 36b-21 of the Act or covered securities.  The fact that Mr. Dever was able to effect the purchase and sale of an unregistered security constitutes a failure, on the part of Respondent, to reasonably supervise the employees in an office that, pursuant to the OSJ Agreement, he was charged with exercising supervisory authority, in violation Section 36b-15(a)(2)(K) of the 2006 Supplement to the General Statutes.
c) The record establishes that on November 17, 2004, Mr. Dever, an Independent agent, assisted in the purchase of Stake Technology Ltd., securities for Dr. DiFrancesco’s account at Independent; on November 16, 2004, assisted in the purchase of Stake Technology Ltd. Securities, for Dr. Morgan’s account at Independent; and, on November 22, 2004, assisted in the sale of Stake Technology Ltd., securities for Dr. DiFrancesco’s account at Independent, when Dr. Morgan and Dr. DiFrancesco were Connecticut consumers and Stake Technology Ltd. was not registered in Connecticut as required by Section 36b-16 of the Act, exempt from registration under Section 36b-21 of the Act or covered securities.  The fact that Mr. Dever was able to effect the purchase and sale of an unregistered security constitutes a failure, on the part of Respondent, to reasonably supervise employees in an office that, pursuant to the OSJ Agreement, he was charged with exercising supervisory authority, in violation Section 36b-15(a)(2)(K) of the 2006 Supplement to the General Statutes.
d) The record establishes that on February 9, 2005, Mr. Bruno, an employee of Independent located at Independent’s New York Branch, assisted Mr. Parola, a Connecticut consumer, with the purchase of Nuvelo Inc. securities for his account at Independent prior to Mr. Bruno being registered with the NASD to engage in such activity in Connecticut.  The fact that Mr. Bruno was able to effect the purchase of a security prior to being registered with the NASD to engage in such activity in Connecticut, constitutes a failure, on the part of Respondent, to reasonably supervise the employees in an office that, pursuant to the OSJ Agreement, he was charged with exercising supervisory authority, in violation Section 36b-15(a)(2)(K) of the 2006 Supplement to the General Statutes.
e)
The record establishes that Mr. Dever engaged in unauthorized transactions when: on April 15, 2005, he effected the sale of Bio-Solutions Manufacturing securities through Mr. Triebert’s account at Independent when Mr. Triebert was deceased; on November 22, 2004, Mr. Dever effected the sale of Stake Technology Ltd. securities through Dr. DiFrancesco’s account at Independent without Dr. DiFrancesco’s authorization; and, on March 31, 2005, Mr. Dever effected the purchase of Calamp Corp. securities through Dr. DiFrancesco’s account at Independent without Dr. DiFrancesco’s authorization.  The fact that Mr. Dever was able to engage in such unauthorized activity constitutes a failure, on the part of Respondent, to reasonably supervise the employees in an office that, pursuant to the OSJ Agreement, he was charged with exercising supervisory authority, in violation Section 36b-15(a)(2)(K) of the 2006 Supplement to the General Statutes.
 

II.  Violation of Section 36b-16 of the Act – Sale of Unregistered Securities

Section 36b-16 of the Act states that:
No person shall offer or sell any security in this state unless (1) it is registered under sections 36b-2 to 36b-33, inclusive, (2) the security or transaction is exempted under section 36b-21, or (3) the security is a covered security provided such person complies with any applicable requirements in subsections (c), (d) and (e) of section 36b-21.
Subsection 19 of Section 36b-3 of the 2006 Supplement to the General Statutes defines the term “security “ to mean, in pertinent part, “any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement”.

1) In the Notice it is alleged that Respondent made sales of Charter One securities in the form of promissory notes to at least 50 investors, including a Connecticut investor, raising an aggregate of over one million dollars from such investors.
a) The record establishes that the Notes fall within the definition of the term “security” as defined in subsection 19 of Section 36b-3 of the 2006 Supplement to the General Statutes.
b) The record establishes that Respondent was the President, CEO, majority stockholder and a Director of Charter One.
c) The record establishes that Respondent was in charge of the sale of the Notes.
d) The record establishes that:  Respondent sold Charter One securities in the form of promissory notes; there were at least 50 investors; and the aggregate amount raised by Charter One from the investors, including a Connecticut investor, was over $1 million.  Furthermore, Respondent solicited the Connecticut consumer to invest in the Notes and signed the Connecticut investor’s Promissory Note and Loan Agreement as President of Charter One.
2)
In the Notice it is alleged that the Notes were never registered in Connecticut as required by Section 36b-16 of the Act, exempt from registration under 36b-21 of the Act or covered securities.

The Assistant Director of the Division certified that a review of such Division’s records failed to disclose any registration filing under Sections 36b-17 or 36b-18 of the Act for Charter One Capital Holding, Inc., or any entries reflecting an exemptive or notice filing pursuant to Section 36b-21 of the Act for Charter One Capital Holding, Inc.  The record establishes that Respondent offered and sold securities, Charter One promissory notes, in Connecticut without such securities being registered under sections 36b-2 to 36b-33, inclusive, of the Act, the security being exempt under section 36b-21, or the security being a covered security, which constitutes a violation of Section 36b-16 of the Act.


III.  Violation of Section 36b-4 of the Act

Section 36b-4 of the Act states that:

(a)  No person shall, in connection with the offer, sale or purchase of any security, directly or indirectly:  (1) Employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

(b)  No person shall, in connection with the offer, sale or purchase of any security, directly or indirectly engage in any dishonest or unethical practice.

1) In the Notice it is alleged that the interest payable on the Notes was 10% per annum, payable quarterly with the principal due one year from the date of the Notes.  Respondent failed to pay the investors interest or principal in accordance with the terms of the Notes.  Only one investor was paid part of the interest owed.

The record establishes that pursuant to the terms of the Notes, the interest payable was 10% per annum, payable quarterly with the principal due one year from the date of the notes.  Respondent’s failure to pay investors interest in accordance with the terms of the promissory notes, constitutes directly or indirectly, employing a device, scheme or artifice to defraud; an omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading and engaging in an act, practice, or course of business which operated as a fraud or deceit upon the investors, including the Connecticut investor, in violation of Section 36b-4 of the Act.

2) In the Notice it is alleged that Respondent and the Agent who referred the Connecticut customer to Respondent failed to inform the customer of any risks associated with investing in Charter One, even though Charter One had not paid earlier investors the monies owed on the Charter One promissory notes and had experienced a substantial net loss from inception and had substantial working capital deficiency, which, according to the Report of Independent Auditor, raised substantial doubt about its ability to continue as a going concern.

The record establishes that when the Connecticut investor was being solicited to invest in the Notes, first by Independent agent Mr. Dever and then by Respondent, neither Mr. Dever nor Respondent informed the Connecticut investor of: the risks associated with investing in Charter One; the fact that Charter One had not paid earlier investors the monies owed on the Notes; or that Charter One had experienced a substantial net loss from inception and had substantial working capital deficiency, which, according to the Report of Independent Auditor, raised substantial doubt about its ability to continue as a going concern.  The Connecticut investor was never provided with private placement or risk disclosure memorandum or anything that outlined the risks of investing in the Notes.  The Connecticut investor was unaware that the Report of Independent Auditor existed and testified that had he received the Charter One financial statements, he may not have invested in the Notes.  Respondent’s failure to inform the Connecticut investor of the risks associated with investing in Charter One, constitutes directly or indirectly, employing a device, scheme or artifice to defraud; an omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; engaging in an act, practice, or course of business which operated as a fraud or deceit upon the Connecticut investor; and engaging in a dishonest or unethical practice in connection with the offer, sale or purchase of a security, in violation of Section 36b-4 of the Act.

3) In the Notice it is alleged that in connection with the sale of Charter One securities, Respondent and agents and cold callers over whom Respondent exercised supervisory authority provided some potential investors with a document containing biographies and profiles of individuals purportedly associated with Charter One when at least three of the individuals whose biographies were included in the document had declined Respondent’s request to become an officer, director or Advisory Board member of Charter One.

The record establishes that in connection with the sale of the Notes, Respondent, Charter One agents and cold callers over whom Respondent exercised supervisory authority, provided some potential investors, including investor Mr. Shitrit, with a document containing biographies and profiles of individuals which included the biographies of Mr. Silver, Dr. Zabala, Mr. Forrest and Dr. Ibrahim Oudeh, purporting that they were associated with Charter One when, in fact, none of the above-mentioned individuals were associated with Charter One and three of them had declined Respondent’s offer to become an Advisory Board member of Charter One.  The use of a document containing biographies of individuals purportedly associated with Charter One when, in fact, some of the individuals whose biographies were included in the document had declined Respondent’s request to become a member of the Advisory Board of Charter One and were not associated with Charter One, constitutes directly or indirectly, employing a device, scheme or artifice to defraud; an omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading and engaging in an act, practice, or course of business which operated as a fraud or deceit upon potential investors; and engaging in a dishonest or unethical practice in connection with the offer, sale or purchase of a security, in violation of Section 36b-4 of the Act.


IV.  Violation of Section 36b-31-6e of the Regulations –
Participation in a Private Securities Transaction

Section 36b-31-6e of the Regulations states that:

(a)  As used in this section, (1) “private securities transaction” means any securities transaction outside the regular course or scope of an agent’s employment with a broker-dealer, including but not limited to, new offerings of securities which are not registered with the commissioner; provided, transactions executed through another broker-dealer in accordance with Article III, Section 28 of the National Association of Securities Dealers, Inc., Rules of Fair Practice, transactions among immediate family members for which no agent receives any selling compensation, and personal transactions in investment company securities and variable annuities shall be excluded, and (2) “selling compensation” means any compensation paid directly or indirectly from whatever source in connection with or as a result of the purchase or sale of a security, including but not limited to, commissions, finder’s fees, securities and rights to acquire securities, rights of participation in profits, tax benefits, and dissolution proceeds, as a general partner and otherwise, or expense reimbursements.

(b)  No agent of a broker-dealer shall participate in any manner in a private securities transaction except in accordance with this section.

(c)  Before participating in any private securities transaction, an agent shall provide written notice to the broker-dealer by whom he is employed describing in detail the proposed transaction and his proposed role therein and stating whether he has received or may receive selling compensation in connection with the transaction; provided, in the case of a series of related transactions in which no selling compensation has been or will be received, an agent may provide a single written notice.

(d)  In the case of a transaction in which the agent has received or may receive selling compensation, a broker-dealer which has received notice pursuant to subsection (c) of this section shall advise the agent in writing concerning whether the broker-dealer approves or disapproves of the agent’s participation in the proposed transaction.  If the broker-dealer approves the agent’s participation in the transaction, the transaction shall be recorded on the books and records of the broker-dealer and the broker-dealer shall supervise the agent’s participation in the transaction as if the transaction were executed on behalf of the broker-dealer.  If the broker-dealer disapproves the agent’s participation, the agent shall not participate in the transaction in any manner, directly or indirectly.

(e)  A copy of the notice and written statement required by subsections (c) and (d) of this section shall be maintained at the office of the broker-dealer from which the agent conducts activities on behalf of the broker-dealer and shall be open to inspection by the commissioner.

Section 36b-31-15b(a) of the Regulations states, in pertinent part that:

In implementing section 36b-15(a)(2)(H) of the general statutes, the following shall be deemed “dishonest or unethical practices in the securities . . . business” by agents without limiting those terms to the following practices: . . .

(2)  Engaging in conduct prohibited by section 36b-31-6e of the regulations[.]

1) In the Notice it is alleged that Respondent made sales of Charter One securities in the form of promissory notes to at least 50 investors, including a Connecticut investor, raising an aggregate amount of over one million dollars from such investors.

The record establishes that Respondent sold Charter One securities in the form of promissory notes; there were at least 50 investors; and, the aggregate amount raised by Charter One from the investors, including a Connecticut investor, was over one million dollars.  Furthermore, Respondent solicited the Connecticut investor to invest in the Notes and signed the Connecticut investor’s Promissory Note and Loan Agreement as President of Charter One.

2) In the Notice it is alleged that the Notes were never registered in Connecticut as required by Section 36b-16 of the Act, exempt from registration under 36b-21 of the Act or covered securities.

The record establishes that Respondent offered and sold securities, Charter One promissory notes, in Connecticut without such securities being registered under sections 36b-2 to 36b-33, inclusive, of the Act, the security being exempt under section 36b-21, or the security being a covered security, in violation of Section 36b-16 of the Act.

3) In the Notice it is alleged that the interest payable on the Notes was 10% per annum, payable quarterly with the principal due one year from the date of the Notes, Respondent failed to pay the investors interest or principal in accordance with the terms of the Notes, and only one investor was paid part of the interest owed.

The record establishes that pursuant to the terms of the Notes, the interest payable was 10% per annum, payable quarterly with the principal due one year from the date of the notes and that Respondent failed to pay the Charter One investors the interest it was obligated to pay in accordance with the terms of the promissory notes.

4) In the Notice it is alleged that Respondent and the Agent who referred the Connecticut customer to Respondent failed to inform the customer of any risks associated with investing in Charter One, even though Charter One had not paid earlier investors the monies owed on the Notes and had experienced a substantial net loss from inception and had substantial working capital deficiency, which, according to the Report of Independent Auditor, raised substantial doubt about its ability to continue as a going concern.

The record establishes that when the Connecticut investor was being solicited to invest in the Notes, first by Independent agent Mr. Dever and then by Respondent, neither Mr. Dever nor Respondent informed the Connecticut investor of the risks associated with investing in Charter One; the fact that Charter One had not paid earlier investors the monies owed on the Notes; or that Charter One had experienced a substantial net loss from inception and had substantial working capital deficiency, which, according to the Report of Independent Auditor, raised substantial doubt about its ability to continue as a going concern.  The Connecticut investor was never provided with private placement or risk disclosure memorandum or anything that outlined the risks of investing in the Notes.  The Connecticut investor was unaware that the Report of Independent Auditor existed and he testified that had he received the Charter One financial statements, he may not have invested in the Notes.

5) In the Notice it is alleged that in connection with the sale of Charter One securities, Respondent and agents and cold callers over whom Respondent exercised supervisory authority provided some potential investors with a document containing biographies and profiles of individuals purportedly associated with Charter One when at least three of the individuals whose biographies were included in the document had declined Respondent’s request to become an officer/director of Charter One.

The record establishes that in connection with the sale of the Notes, Respondent, Charter One agents and cold callers over whom Respondent exercised supervisory authority, provided some potential investors, including investor Mr. Shitrit, with a document containing biographies and profiles of individuals which included the biographies of Mr. Silver, Dr. Zabala, Mr. Forrest and Dr. Ibrahim Oudeh, purporting that they were associated with Charter One when, in fact, none of the above-mentioned individuals were associated with Charter One and three of them had declined Respondent’s offer to become an officer, director or Advisory Board member of Charter One.

6) In the Notice it is alleged that the sales of the Notes were transactions outside the regular course or scope of Respondent’s employment with Independent; did not go through the books and records of Independent; Respondent did not provide Independent written notice describing in detail the proposed transactions; his proposed role in such transactions and stating whether he had received or would receive compensation in connection with the sale of the Notes.

The record establishes that the offer and sale of the Notes was a private securities transaction that was outside the regular course or scope of Respondent’s employment with Independent; did not go through the books and records of Independent; Respondent did not provide Independent written notice describing in detail the proposed transactions; his proposed role in such transactions and stating whether he had received or would receive compensation in connection with the sale of the Notes.  On numerous occasions the Department asked Respondent to provide it with any notice that Charter One had given to Independent concerning the sale of the Notes and no such notice was ever provided to the Department.  The President of Independent informed the Department that Independent had never given Charter One final approval to offer the Notes and that Independent had never received any information from Charter One concerning the sale of the Notes.  There was no evidence submitted to rebut Independent’s position that it did not give final approval to Charter One to conduct the private placement, that it did not supervise the Charter One private placement and that the sale of the Notes did not go through the books and records of Independent.

Respondent’s failure to obtain final approval from Independent prior to its engaging in the Charter One private placement, a private securities transaction that was outside the regular course or scope of Respondent’s employment with Independent; Respondent’s failure to provide Independent written notice describing in detail the proposed transactions and his proposed role in such transactions; Respondent’s failure to inform Independent concerning whether he had received or would receive compensation in connection with the sale of the Notes; and, Respondent’s failure to provide Independent with the information necessary for the sale of the Notes to go through the books and records of Independent, constitutes a violation of Section 36b-31-6e of the Regulations and a dishonest or unethical business practice under Section 36b-31-15b(a)(2) of the Regulations.


V.  Violation of Section 36b-31-15a(b) of the Regulations –
Dishonest and Unethical Practices in the Securities Business –
Failure to Observe High Standards and Just and Equitable Principals

Section 36b-31-15a(b) of the Regulations states that:

In construing the term “dishonest or unethical practices in the securities . . . business” as used in this section and in section 36-15(a)(2)(H) of the general statutes, the commissioner may consider whether the conduct in question is proscribed by any rule of a national securities exchange or self-regulatory organization registered under federal securities laws administered by the United States Securities and Exchange Commission.

NASD Standards of Commercial Honor and Principals of Trade Rule 2110-states that: “[a] member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.”

In the Notice it is alleged that:  a) Respondent failed reasonably to supervise its agent Mr. Dever and Independent’s agents at the New York Branch to prevent the violative conduct described in paragraphs 12 through 20, inclusive, of the Notice; b) Respondent made sales of Charter One securities in the form of promissory notes to at least 50 investors, including a Connecticut investor, raising an aggregate amount of over one million dollars from such investors; c) the Notes were never registered in Connecticut as required by Section 36b-16 of the Act, exempt from registration under Section 36b-21 of the Act or covered securities; d) the interest payable on the Notes was 10% per annum, payable quarterly with the principal due one year from the date of the Notes. Respondent failed to pay the investors interest or principal in accordance with the terms of the Notes and only one investor was paid part of the interest owed; e) Respondent and the agent who referred the Connecticut customer to Respondent failed to inform the customer of any risks associated with investing in Charter One, even though Charter One had not paid earlier investors the monies owed on the Notes and had experienced a substantial net loss from inception and had substantial working capital deficiency, which, according to the Report of Independent Auditor, raised substantial doubt about its ability to continue as a going concern; f) in connection with the sale of Charter One securities, Respondent and agents and cold callers over whom Respondent exercised supervisory authority provided some potential investors with a document containing biographies and profiles of individuals purportedly associated with Charter One when at least three of the individuals whose biographies were included in the document had declined Respondent’s request to become an officer/director of Charter One; g) the sales of the Charter One securities were transactions that were outside the regular course or scope of Respondent’s employment with Independent, such transactions did not go through the books and records of Independent, Respondent did not provide Independent written notice describing in detail the proposed transactions, his proposed role in such transactions and stating whether he had received or would receive compensation in connection with the transactions.

The record establishes that:  a) Respondent failed to reasonably supervise its agent Mr. Dever and Independent’s agents at the New York Branch to prevent the violative conduct; b) Respondent made sales of Charter One securities in the form of promissory notes to at least 50 investors, including a Connecticut investor, raising an aggregate amount of over one million dollars from such investors; c) the Notes were never registered in Connecticut as required by Section 36b-16 of the Act, exempt from registration under 36b-21 of the Act or covered securities; d) the interest payable on the Notes was 10% per annum, payable quarterly with the principal due one year from the date of the Notes and Respondent failed to pay the investors interest or principal in accordance with the terms of the promissory notes; e) Respondent and Mr. Dever failed to inform the Connecticut investor of the risks associated with investing in Charter One, even though Charter One had not paid earlier investors the monies owed on the Notes and had experienced a substantial net loss from inception and had substantial working capital deficiency, which, according to the Report of Independent Auditor, raised substantial doubt about its ability to continue as a going concern; f) in connection with the sale of Charter One securities, Respondent and agents and cold callers over whom Respondent exercised supervisory authority provided some potential investors with a document containing biographies and profiles of individuals purportedly associated with Charter One when at least three of the individuals whose biographies were included in the document had declined Respondent’s request to become an officer, director or Advisory Board member of Charter One and were not associated with Charter One; g) the sales of the Charter One securities were transactions that were outside the regular course or scope of Respondent’s employment with Independent; such transactions did not go through the books and records of Independent; Respondent did not provide Independent written notice describing in detail the proposed transactions, his proposed role in such transactions and stating whether he had received or would receive compensation in connection with the transactions.

Respondent’s failure to reasonably supervise Mr. Dever and the Independent’s agents at the New York Branch to prevent the violative conduct; selling unregistered Charter One promissory notes; failing to pay investors interest or principal in accordance with the terms of the promissory notes; failure to inform the Connecticut investor of the risks associated with investing in Charter One, even though Charter One had not paid earlier investors the monies owed on the Notes and had experienced a substantial net loss from inception and had substantial working capital deficiency, which, according to the Report of Independent Auditor, raised substantial doubt about its ability to continue as a going concern; providing potential investors with a document containing biographies and profiles of individuals purportedly associated with Charter One when at least three of the individuals whose biographies were included in the document were not associated with Charter One; selling Charter One securities outside the regular course or scope of Respondent’s employment with Independent where the transactions did not go through the books and records of Independent; failure to provide Independent written notice describing in detail the proposed transactions, Respondent’s proposed role in such transactions or whether he had received or would receive compensation in connection with the transactions, 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.


VI.  Violation of Section 36b-15(a)(2)(L) of the 2006 Supplement to the General Statutes - Withholding of Material Information from the Commissioner

Section 36b-15(a) of the 2006 Supplement to the General Statutes states, in pertinent part, that:

The commissioner may, by order, deny, suspend or revoke any registration or, by order, restrict or impose conditions on the securities or investment advisory activities that an applicant or registrant may perform in this state if the commissioner finds that (1) the order is in the public interest, and (2) the applicant or registrant or, in the case of a broker-dealer or investment adviser, 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 or investment adviser: . . . (L) in connection with any investigation conducted pursuant to section 36b-26 or any examination under subsection (d) of section 36b-14, has made any material misrepresentation to the commissioner or upon request made by the commissioner, has withheld or concealed material information from, or refused to furnish material information to the commissioner, provided, there shall be a rebuttable presumption that any records, including, but not limited to, written, visual, audio, magnetic or electronic records, computer printouts and software, and any other documents, that are withheld or concealed from the commissioner in connection with any such investigation or examination are material, unless such presumption is rebutted by substantial evidence[.]

1) In the Notice it is alleged that despite repeated requests, Respondent failed to provide the Department with all of the documents and information that the Division requested from Respondent.

The record establishes that the Department began an Examination at the New York Branch of Independent in March 2005.  During the course of the Examination at Independent, Department employees requested access to Respondent’s computer and were never provided access.  During the course of the Examination, Department employees asked Respondent to provide the Department with information concerning commissions payable to all the sales agents and sales assistants employed by Respondent.  Although the Department made several requests, Respondent never provided the Department with the information concerning commissions payable to all the sales agents and sales assistants.  In addition, on at least one occasion, Department employees talked to Respondent by telephone and asked for the records requested in Principal Examiner Hornyack’s letters dated March 18, 2005, and April 15, 2005 that were sent to Mr. Jordan, President of Independent.  By letter dated May 17, 2005, Principal Examiner Hornyack sent to the attention of Respondent, a letter addressed to Dennis Jordan, requesting the outstanding records requested in Principal Examiner Hornyack’s letters dated March 18, 2005 and April 15, 2005, to Mr. Jordan.  On May 17, 2005, Ralph A. Lambiase, Division Director of the Division issued a Subpoena Duces Tecum (“Subpoena”) commanding Respondent to bring certain records and documents to the Department on June 9, 2005.  Respondent never appeared before the Department pursuant to the Subpoena.  Up to and including the time of the hearing, Respondent failed to produce all of the records and documents that were requested by the Department in Principal Examiner Hornyack’s letters dated March 18, 2005, April 15, 2005 and May 17, 2005, and the subpoena issued by Division Director Lambiase.  Respondent’s failure to provide the Department with all of the documents and information requested by the Department constitutes withholding material information from the Commissioner or the refusal to furnish material information to the Commissioner and forms a basis for the revocation of Respondent’s registration as an agent pursuant to Section 36b-15(a)(2)(L) of the 2006 Supplement to the General Statutes.


VII.  Authority To Revoke Registration

1)
36b-15(a) of the 2006 Supplement to the General Statutes states, in pertinent part, that:
The commissioner may, by order, deny, suspend or revoke any registration or, by order, restrict or impose conditions on the securities or investment advisory activities that an applicant or registrant may perform in this state if the commissioner finds that . . . (2) the applicant or registrant or, in the case of a broker-dealer or investment adviser, 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 or investment adviser: . . . (B) has wilfully violated or wilfully failed to comply with any provision of sections 36b-2 to 36b-33, inclusive, or a predecessor statute or any regulation or order under said sections or a predecessor statute[.]
2)
Section 36b-15(a) of the 2006 Supplement to the General Statutes states, in pertinent part, that:
The commissioner may, by order, deny, suspend or revoke any registration or, by order, restrict or impose conditions on the securities or investment advisory activities that an applicant or registrant may perform in this state if the commissioner finds that . . . (2) the applicant or registrant or, in the case of a broker-dealer or investment adviser, 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 or investment adviser: . . . (H) has engaged in fraudulent, dishonest or unethical practices in the securities or commodities business, including abusive sales practices in the business dealings of such applicant, registrant or person with current or prospective customers or clients[.]
3)
36b-15(a) of the 2006 Supplement to the General Statutes states, in pertinent part, that:
The commissioner may, by order, deny, suspend or revoke any registration or, by order, restrict or impose conditions on the securities or investment advisory activities that an applicant or registrant may perform in this state if the commissioner finds that . . . (2) the applicant or registrant or, in the case of a broker-dealer or investment adviser, 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 or investment adviser: . . . (K) has failed reasonably to supervise:  (i) The agents or investment adviser agents of such applicant or registrant, if the applicant or registrant is a broker-dealer or investment adviser; or (ii) the agents of a broker-dealer or investment adviser agents of an investment adviser, if such applicant, registrant or other person is or was an agent, investment adviser agent or other person charged with exercising supervisory authority on behalf of a broker-dealer or investment adviser[.]
4)
36b-15(a) of the 2006 Supplement to the General Statutes states, in pertinent part, that:
The commissioner may, by order, deny, suspend or revoke any registration or, by order, restrict or impose conditions on the securities or investment advisory activities that an applicant or registrant may perform in this state if the commissioner finds that . . . (2) the applicant or registrant or, in the case of a broker-dealer or investment adviser, 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 or investment adviser: . . . (L) in connection with any investigation conducted pursuant to section 36b-26 or any examination under subsection (d) of section 36b-14, has made any material misrepresentation to the commissioner or upon request made by the commissioner, has withheld or concealed material information from, or refused to furnish material information to the commissioner, provided, there shall be a rebuttable presumption that any records, including, but not limited to, written, visual, audio, magnetic or electronic records, computer printouts and software, and any other documents, that are withheld or concealed from the commissioner in connection with any such investigation or examination are material, unless such presumption is rebutted by substantial evidence[.]

VIII.  Authority To Impose Fine

Section 36b-27(d)(2) of the 2006 Supplement to the General Statutes states that:

The commissioner shall hold a hearing upon the charges made unless such person fails to appear at the hearing.  Any such hearing shall be held in accordance with the provisions of chapter 54.  After the hearing if the commissioner finds that the person has violated, caused a violation or materially aided in the violation of any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person.  If such person fails to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person.  The commissioner shall send a copy of any order issued pursuant to this subsection by registered mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, to any person named in such order.


IX.  Public Interest

Section 36b-31(b) of the Act states, in pertinent part, that:

No regulation, form or order may be made, amended or rescinded 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.

a)
The record establishes: at least one violation of Section 36b-15(a)(2)(K) of the 2006 Supplement to the General Statutes which forms the basis for a revocation of Respondent’s registration as an agent pursuant to 36b-15(a)(2)(K) of the 2006 Supplement to the General Statutes; one violation of Section 36b-16 of the Act which forms the basis for a revocation of Respondent’s registration as an agent pursuant to 36b-15(a)(2)(B) of the 2006 Supplement to the General Statutes and for the imposition of a fine against Respondent under Section 36b-27(d) of the 2006 Supplement to the General Statutes; one violation of Section 36b-4 of the Act which forms the basis for a revocation of Respondent’s registration as an agent pursuant to 36b-15(a)(2)(B) of the 2006 Supplement to the General Statutes and for the imposition of a fine against Respondent under Section 36b-27(d) of the 2006 Supplement to the General Statutes; one violation of Section 36b-31-6e and 36b-31-15b(2) of the Regulations which forms the basis for a revocation of Respondent’s registration as an agent pursuant to 36b-15(a)(2)(B) and 36b-15(a)(2)(H) of the 2006 Supplement to the General Statutes and for the imposition of a fine against Respondent under Section 36b-27(d) of the 2006 Supplement to the General Statutes; one violation of Section 36b-31-15a(b) of the Regulations which forms the basis for a revocation of Respondent’s registration as an agent pursuant to 36b-15(a)(2)(H) of the 2006 Supplement to the General Statutes; and one violation of Section 36b-15(a)(2)(L) of the 2006 Supplement to the General Statutes which forms the basis for a revocation of Respondent’s registration as an agent.

a) 
The record supports the issuance of an order to revoke Respondent’s registration.
b) The record supports the issuance of an order imposing a fine against Respondent. 
c) The record supports a finding that this action is necessary or appropriate in the public interest or for the protection of investors consistent with the purposes fairly intended by the policy and provisions of Sections 36b-2 to 36b-33, inclusive, of the Act.


ORDER

Having read the record, I HEREBY ORDER:

1)  
Pursuant to Sections 36b-15(a)(2)(B), 36b-15(a)(2)(H), 36b-15(a)(2)(K) and 36b-15(a)(2)(L) of the 2006 Supplement to the General Statutes, Respondent Steven Gray’s registration as agent is hereby REVOKED; and

2) Pursuant to Section 36b-27(d)(2) of the 2006 Supplement to the General Statutes, Steven Gray to pay a FINE in the amount of Three Hundred Thousand Dollars ($300,000).  The fine shall be paid by certified check, bank check or money order payable to “Treasurer, State of Connecticut”, not less than ninety (45) days following the issuance of this order.


Dated at Hartford, Connecticut
this 13th day of July 2007.                ________/s/_________
                                                    Howard F. Pitkin
                                                    Banking Commissioner


This order was sent by registered mail
return receipt requested, to Respondent
and Respondent’s attorneys on
July 16, 2007.


Steven Gray                           Registered Mail No. RB 027 865 495 US
2552 East 11 Street
Brooklyn, NY 11235

Steven A. Jackson, Esq.           Registered Mail No. RB 027 865 487 US
70 East 55th Street
New York, NY 10022-3222


Stacey R. J. Perkins, Esq.          Registered Mail No. RB 027 865 500 US
11 Cleft Rock Lane
Woodbridge, CT 06525
 


Administrative Orders and Settlements