DOB: Source Capital Group 2008 Consent

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IN THE MATTER OF:

SOURCE CAPITAL GROUP, INC.

(CRD No. 36719)
   

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CONSENT ORDER

CO-2008-7499-S

PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies promulgated under the Act (the “Regulations”);
 
WHEREAS, Source Capital Group, Inc. (“Source”) is a broker-dealer registered in Connecticut under the Act since November 27, 2001, and has its principal office located at 276 Post Road West in Westport, Connecticut,
 
WHEREAS, on August 29, 2006, as a precondition to registering Donatas Belys Vildzius (CRD number 2202883) ("Vildzius") as a broker-dealer agent of Source under the Act, the Commissioner entered a Consent Order Conditioning Registration as an Agent (No. CO-06-7298-S) (the "Vildzius Consent Order") which was signed by Vildzius and Source, respectively,
 
WHEREAS, the Vildzius Consent Order obligated Source, among other things, to notify the department each quarter, for two years, of any complaints, actions or proceedings (including arbitrations and updates thereto) involving Vildzius;
 
WHEREAS, the Commissioner, through the Securities and Business Investments Division (the “Division”) of the Department of Banking, conducted an examination of Source’s records pursuant to Section 36b-14(d) of the Act and 36b-31-14f of the Regulations, and a related investigation under Section 36b-26 of the Act to determine whether Source had violated, was violating or was about to violate any provision of the Act or any regulation or order under the Act (the “Investigation and Examination”);
 
WHEREAS, as a result of the Investigation and Examination, the Division obtained evidence that Source had violated the Vildzius Consent Order by failing to notify the department each quarter, for two years, of any complaints, actions or proceedings (including arbitrations and updates thereto) involving Vildzius;
 
WHEREAS, if proven, Source’s alleged failure to comply with the Vildzius Consent Order could result in 1) proceedings under Section 36b-15(a)(2)(B) of the Act to suspend or revoke Source’s broker-dealer registration under the Act or to restrict or impose conditions on the securities activities that Source may perform in this state; and/or 2) proceedings under Section 36b-27 of the Act seeking the entry of an order to cease and desist and/or an order imposing an administrative fine;
 
WHEREAS, an administrative proceeding under Sections 36b-15 and 36b-27 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";
 
WHEREAS, Section 36b-31(a) of the Act provides, in part, that: "The Commissioner may from time to time make, amend and rescind such ... orders as are necessary to carry out the provisions of Sections 36b-2 to 36b-33, inclusive [of the Connecticut Uniform Securities Act]";
 
WHEREAS, without holding a hearing and without trial or adjudication of any issue of fact or law, and prior to the initiation of any formal proceeding, the Commissioner and Source reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
 
WHEREAS, Source, without admitting or denying any of the Commissioner’s allegations or findings, expressly consents to the Commissioner’s jurisdiction under the Act and to the terms of this Consent Order; and
 
WHEREAS, Source, through its execution of this Consent Order, represents and agrees that none of the violations alleged in this Consent Order shall occur in the future;


CONSENT TO WAIVER OF PROCEDURAL RIGHTS

WHEREAS, Source, 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(a), 36b-27(d) 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 FINDINGS

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

1. The entry of this Consent Order is appropriate, in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act; and
2. Source’s alleged failure to comply with the Vildzius Consent Order would support the initiation of administrative proceedings under Sections 36b-15(a)(2)(B), 36b-27(a) and 36b-27(d) of the Act;


CONSENT TO ENTRY OF SANCTIONS

WHEREAS, Source, through its execution of this Consent Order, consents to the Commissioner issuing an order imposing on it the following sanctions:

1. Source, its representatives, agents, employees, affiliates, assigns, successors in interest, and those persons in active concert or participation with them shall cease and desist from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act, either directly or through any organizational or other device, such conduct including, without limitation, violating the terms of any order entered by the Commissioner;
2. No later than the date this Consent Order is entered by the Commissioner, Source shall remit to the department, via certified bank check, payable to "Treasurer, State of Connecticut", the sum of four thousand dollars ($4,000), two thousand five hundred dollars ($2,500) of which shall constitute an administrative fine, and one thousand, five hundred dollars ($1,500) of which shall be applied to defray the Division’s investigative costs;
3. For so long as Vildzius remains associated with Source but no later than two years from the date hereof, Source shall notify the Division Director in writing each calendar quarter of any securities-related complaints, actions or proceedings (including arbitrations and updates thereto) involving Vildzius which occur during the quarter, including the disposition thereof.  Such report shall be provided no later than ten (10) business days following the close of the quarter and shall include any written reprimands, censures or warnings issued by Source to Vildzius.  If no complaints, actions, proceedings, firm actions or updates exist for the quarter, the report shall so indicate.  The first report shall be due within ten business days following the close of the quarter ending June 30, 2008, and the final report shall be due within ten business days following the close of the quarter ending June 30, 2010; and
4. Within sixty (60) days from the date this Consent Order is entered by the Commissioner, Source shall hire a consultant, not unacceptable to the Division Director, to review Source’s supervisory and compliance procedures and make written recommendations concerning the implementation of additional procedures to ensure compliance with all applicable securities laws, regulations and administrative orders.  No later than ninety (90) days following the Commissioner’s entry of this Consent Order, Source will provide the Division Director with (a) the completed consultant's report; (b) a summary of the recommendations therein contained; (c) the date(s) each recommendation will be implemented and (d) if any recommendations are not to be implemented, the reasons therefor.  The Division will return the report to Source within forty-five (45) days after the Division receives it.  Through its execution of this Consent Order, Source undertakes, represents and understands that 1) it will resubmit the returned consultant's report to the Division within 24 hours after the Division requests such resubmission; 2) Source shall provide the report and any resubmission unconditionally and without question; and 3) in the event Source fails to resubmit the consultant’s report without limitation or question within the 24 hour time frame referenced in this paragraph, Source consents to a summary suspension of its broker-dealer registration in Connecticut, knowingly, wilfully and voluntarily waiving its right to notice and an administrative hearing in conjunction therewith; provided that, prior to invoking this provision, the Commissioner shall provide Source with an informal opportunity to demonstrate its compliance with such resubmission requirement;

CONSENT ORDER

NOW THEREFORE, the Commissioner enters the following:

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

               ________/s/_________ 
    Howard F. Pitkin
            Banking Commissioner

So ordered at Hartford, Connecticut                 
this 28th day of April 2008.                         
 

CONSENT TO ENTRY OF ORDER

I, David W. Harris, state on behalf of Source Capital Group, Inc. that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Source Capital Group, Inc.; that Source Capital Group, Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Source Capital Group, Inc. voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.


      Source Capital Group, Inc.


By
       ________/s/_______________ 
      David W. Harris 
      President


On this [blank in original] day of April 2008, personally appeared David W. Harris, signer of the foregoing Consent Order, who, being duly sworn, did acknowledge to me that he was authorized to execute the same on behalf of Source Capital Group, 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:  June 30, 2008



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