DOB: Pennaluna Consent Order

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IN THE MATTER OF:

PENNALUNA & COMPANY, INC.

   (CRD number 11604)


 

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  CONSENT ORDER CONDITIONING
  EFFECTIVENESS OF WITHDRAWAL
  OF APPLICATION FOR
  REGISTRATION AS A
  BROKER-DEALER

  No. CO-07-7362-S

PRELIMINARY STATEMENT

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

WHEREAS, on May 23, 2006, Pennaluna & Company, Inc. (“Pennaluna”) of 421 Sherman Avenue, Suite 203, Coeur D’Alene, Idaho filed an application with the Commissioner for registration as a broker-dealer under the Act;

WHEREAS, the Commissioner, acting pursuant to Sections 36b-8 and 36b-26 of the Act and through the Division, conducted an investigation into the activities of Pennaluna to assess the accuracy of the information provided by the firm in its application as well as the firm’s compliance with the Act and the Regulations thereunder;

WHEREAS, the Division ascertained, as a result of such investigation that 1) from at least October, 2001 through August, 2004, Pennaluna transacted business as a broker-dealer absent registration and employed two unregistered agents, one of whom was the president of the firm; and 2) the firm’s application for broker-dealer registration was materially incomplete with respect to disclosures concerning the firm’s prior securities activities in Connecticut;

WHEREAS, as a result of such investigation, the Division alleges that Pennaluna violated Section 36b-6(a) of the Act by transacting business as a broker-dealer absent registration and Section 36b-6(b) of the Act by employing unregistered agents;

WHEREAS, Pennaluna maintains that prior to submitting its application, it ran a “state search” through electronic trade monitoring systems provided by its clearing firm; and that such search showed no Connecticut accounts,

WHEREAS, the Division further ascertained, as a result of such investigation, that on October 10, 2003, the National Association of Securities Dealers (the “NASD”) censured and fined Pennaluna and its president, jointly and severally, and directed that they pay restitution of approximately $7,877 plus interest following allegations that Pennaluna and its president violated NASD Conduct Rules 2110 and 2440 by effecting 29 sales of securities to customers as principal and charging customers mark-ups ranging from  8.1% to 150% (Acceptance, Waiver & Consent No. C38030018);

WHEREAS, Section 36b-15(a) of the Act provides, in part, that:

The commissioner may, by order, deny . . . 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 . . . 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 . . . (A) Has filed an application for registration which . . . as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained any statement which was, in light of the circumstances under which it was made, false or misleading with respect to any material fact; (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 . . . [or] (F) is the subject of any of the following sanctions that are currently effective or were imposed within the past ten years . . .  (iii) a suspension, expulsion or other sanction issued by a national securities exchange or other self-regulatory organization registered under federal laws administered by the Securities and Exchange Commission or the Commodity Futures Trading Commission if the effect of the sanction has not been stayed or overturned by appeal or otherwise . . . .
WHEREAS, on July 12, 2007, Pennaluna electronically filed an application to withdraw its broker-dealer registration application through the Central Registration Depository;

WHEREAS, Section 36b-15(e)(1) of the Act provides, in part, that:

[W]ithdrawal of an application for registration as a broker-dealer . . . becomes effective ninety days after receipt of . . . a notice of intent to withdraw such application for registration or within such shorter period of time as the commissioner may determine, unless a denial . . . proceeding is pending when the . . . notice is filed or a proceeding to deny . . . or impose conditions upon the withdrawal is instituted within ninety days after the . . notice is filed.  If a proceeding is pending or instituted, withdrawal becomes effective at such time and upon such conditions as the commissioner by order determines.  If no proceeding is pending or instituted and withdrawal automatically becomes effective, the commissioner may nevertheless institute a denial . . . proceeding under subsection (a) of this section within one year after withdrawal became effective.
WHEREAS, Section 36b-31(a) of the Act, provides, in relevant part, that “[t]he commissioner may from time to time make … such … orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive”;
 
WHEREAS, Section 36b-31(b) of the Act provides, in relevant part, that "[n]o . . . order may be made . . . unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-33, inclusive";
 
WHEREAS, the Commissioner finds that the entry of this Consent Order Conditioning Effectiveness of Withdrawal of Application for Registration as a Broker-dealer (hereinafter, “Consent Order”) is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act;

ACKNOWLEDGEMENT OF THE COMMISSIONER’S ALLEGATIONS

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

1. From at least October, 2001 through August 2004, Pennaluna violated Section 36b-6(a) of the Act by transacting business as a broker-dealer absent registration;
2. From at least October, 2001 through August, 2004 Pennaluna employed unregistered agents in contravention of Section 36b-6(b) of the Act; and
 3.
The sanctions levied against Pennaluna and its president by the NASD on October 10, 2003 (Acceptance, Waiver & Consent No. C38030018) and more fully described above would support the initiation of administrative proceedings under Section 36b-15(a)(2)(F)(iii) of the Act;

WHEREAS, the Commissioner would have the authority to enter findings and to impose sanctions, including a denial of registration under Section 36b-15 of the Act, an order to cease and desist under Section 36b-27 of the Act and/or an order imposing a fine of up to $100,000 per violation under Section 36b-27 of the Act, after granting Pennaluna an opportunity for a hearing;

WHEREAS, an administrative proceeding initiated under Sections 36b-27 or 36b-15 of the Act would constitute a "contested case" within the meaning of Section 4-166(2) of the Connecticut General Statutes;

WHEREAS, Section 4-177(c) of Chapter 54 of the Connecticut General Statutes provides that "[u]nless precluded by law, a contested case may be resolved by stipulation, agreed settlement, or consent order or by the default of a party";

CONSENT TO WAIVER OF PROCEDURAL RIGHTS

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

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

CONSENT TO ENTRY OF ORDER CONDITIONING EFFECTIVENESS OF WITHDRAWAL OF APPLICATION FOR REGISTRATION AS A BROKER-DEALER

WHEREAS, Pennaluna, through its execution of this Consent Order, consents to the Commissioner issuing an order rendering Pennaluna’s application to withdraw its broker-dealer registration application effective upon the entry of this Consent Order, subject to the following conditions:

1. Pennaluna and its successors in interest shall not reapply for registration as a broker-dealer under the Act for a period of three (3) years following the entry of this Consent Order by the Commissioner; and
2. No later than the date this Consent Order is entered by the Commissioner, Pennaluna shall remit to the department by certified bank check payable to “Treasurer, State of Connecticut” the sum of seven thousand, five hundred dollars ($7,500), five thousand dollars ($5,000) of which shall constitute an administrative fine; and two thousand five hundred dollars ($2,500) of which shall defray the costs associated with the Division’s investigation of Pennaluna;

ORDER

THE COMMISSIONER THEREFORE ORDERS THAT:

1. Pennaluna’s application to withdraw its broker-dealer registration application shall be EFFECTIVE upon the entry of this Consent Order, subject to the conditions described above;
2. Pennaluna, its officers, directors, control persons, agents, employees, representatives and successors in interest shall refrain from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act.
3. Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against Pennaluna based upon a violation of this Consent Order Conditioning Effectiveness of Withdrawal of Application for Registration as a Broker-dealer or the matters underlying its entry if the Commissioner determines that compliance is not being observed with the terms hereof; and
4. This Consent Order Conditioning Effectiveness of Withdrawal of Application for Registration as a Broker-dealer shall become final when issued.


            ________/s/_________
            Howard F. Pitkin
            Banking Commissioner


So ordered at Hartford, Connecticut
this 27th day of August 2007.

CONSENT TO ENTRY OF ORDER

I, Ronald B. Nicklas, Jr., state on behalf of Pennaluna & Company, Inc., that I have read the foregoing Consent Order Conditioning Effectiveness of Withdrawal of Application for Registration as a Broker-dealer; that I know and fully understand its contents; that I am authorized to execute the same on behalf of Pennaluna & Company, Inc.; and that Pennaluna & Company, Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein, expressly waiving any right to a hearing on the matters described herein.

      Pennaluna & Company, Inc.


By    _________/s/_________________
      Ronald B. Nicklas, Jr.
      President


On this 20th day of August, 2007, personally appeared Ronald B. Nicklas, Jr., signer of the foregoing Consent Order Conditioning Effectiveness of Withdrawal of Application for Registration as a Broker-dealer, who, being duly sworn, did acknowledge to me that he was authorized to execute the same on behalf of Pennaluna & Company, Inc., a corporation, and acknowledged the same to be his free act and deed, before me.

____________/s/_________________________
Notary Public/Commissioner of the Superior Court
My Commission Expires:  6/23/09


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