DOB: Westrock Advisors Consent

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IN THE MATTER OF:

WESTROCK ADVISORS, INC.

    (CRD No. 114338)


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CONSENT ORDER

CO-2008-7530-S

PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner (the “Commissioner”) is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act (the “Act”), and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies promulgated under the Act (the “Regulations”);
 
WHEREAS, Westrock Advisors, Inc. (“Westrock”) is a broker-dealer registered in Connecticut under the Act since April 24, 2002, and has its principal office located at 230 Park Avenue, New York, New York;
 
WHEREAS, the Commissioner, through the Securities and Business Investments Division (the “Division”) of the Department of Banking, conducted an examination of Westrock’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 Westrock 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, as more fully described in the Consent to Entry of Findings herein, that would support the initiation of administrative proceedings under Section 36b-15 of the Act to suspend or revoke Westrock’s broker-dealer registration under the Act or to restrict or impose conditions on the securities activities that the firm may perform in this state; and/or 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 against Westrock;
 
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 Westrock reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
 
WHEREAS, Westrock has represented to the Division that it has ceased making commission payments to an unregistered entity and has ceased compensating its unregistered sales assistants with a percentage of its registered representatives’ commissions;
 
WHEREAS, Westrock, 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, Westrock, 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, Westrock, 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, Westrock, 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;
2. From January 11, 2006 to February 16, 2007, Westrock violated Section 36b-6(b) of the Act by employing at least two individuals as agents at a time when such individuals were not registered as agents of Westrock under the Act;
3. Between September 22, 2005 and February 16, 2007, Westrock violated Section 36b-16 of the Act by offering and selling securities to seven Connecticut residents at a time when such securities were not registered under Sections 36b-17, 36b-18 or 36b-19 of the Act nor the subject of an exemptive claim or claim of covered security status under Section 36b-21 of the Act;
4. In contravention of Section 36b-31-6f(b) of the Regulations, Westrock failed to reasonably supervise the activities of at least four of its agents who were in possession of unapproved research materials, sales presentations and/or sales scripts;
5. From October 14, 2005 to October 23, 2006, Westrock engaged in dishonest or unethical business practices in the securities business within the meaning of Section 36b-15(a)(2)(H) of the Act and Section 36b-31-15a(b) of the Regulations by engaging in conduct proscribed by FINRA Conduct Rule 2110, to wit, paying commissions to an entity that was not a FINRA member;
6. From October 14, 2005 to July 2006, Westrock engaged in dishonest or unethical business practices in the securities business within the meaning of Section 36b-15(a)(2)(H) of the Act by permitting unregistered sales assistants to be compensated with a percentage of commissions earned by registered representatives of the firm; and
7. In contravention of Section 36b-31-6f(b) of the Regulations, Westrock failed to establish, enforce, and maintain a system for supervising the activities of its agents that was reasonably designed to achieve compliance with applicable securities laws and regulations;


CONSENT TO ENTRY OF SANCTIONS

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

1. Westrock, 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;
2. No later than the date this Consent Order is entered by the Commissioner, Westrock shall remit to the Department of Banking, via certified bank check payable to "Treasurer, State of Connecticut", the sum of twenty-five thousand dollars ($25,000) as an administrative fine;
3. Commencing on the date this Consent Order is entered by the Commissioner and continuing for a period of three years thereafter, the securities business of Westrock in Connecticut shall be exclusively limited to the purchase, sale, and redemption of securities issued by investment companies regulated under the Investment Company Act of 1940; securities issued or guaranteed by the United States government, any state, any political subdivision of a state, or any agency or corporate or other instrumentality of the foregoing; exchange-listed options; and securities listed on the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, and the NASDAQ Capital Market. During such period, Westrock shall not offer or sell in or from Connecticut securities trading on the NASDAQ Bulletin Board or listed for quotation on the Pink Sheets.  Westrock is not precluded from effecting liquidating sale transactions for its existing accounts in securities trading on the NASDAQ Bulletin Board or listed for quotation on the Pink Sheets for its Connecticut clients;
4. Commencing on the date this Consent Order is entered by the Commissioner and continuing for a period of three years thereafter, Westrock shall not open any new account approved for options trading for any Connecticut customer unless that Connecticut customer is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933; and
5. Commencing on the date this Consent Order is entered by the Commissioner and continuing for a period of three years thereafter, Westrock shall not open or maintain any discretionary accounts for Connecticut clients;
6. Commencing on the date this Consent Order is entered by the Commissioner and continuing for a period of three years thereafter, Westrock shall not offer or sell to any Connecticut client any private placement or initial public offering of the securities of Westrock, its successors in interest, or any entity related to or affiliated with Westrock unless such Connecticut client is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933;
7. Commencing on the date this Consent Order is entered by the Commissioner and continuing for a period of three years thereafter, Westrock shall not open any new margin accounts for any Connecticut customer unless that Connecticut customer is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933.  During such three year period, Westrock shall limit its new accounts for non-accredited investors in this state to cash accounts;
8. Westrock shall reimburse the Department of Banking for the costs associated with one or more future examinations of any of Westrock’s offices to be conducted by the Division within twenty-four (24) months following the Commissioner’s entry of this Consent Order, such amount not to exceed three thousand five hundred dollars ($3,500) in total.  Amounts due under this paragraph shall be remitted to the Commissioner via check, payable to “Treasurer, State of Connecticut,” within thirty (30) days following the completion of the examination(s);

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 Westrock 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 Westrock 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 4th day of September 2008.                         
 

CONSENT TO ENTRY OF ORDER

I, Gregory M. Martino, state on behalf of Westrock Advisors, 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 Westrock Advisors, Inc., that Westrock Advisors, Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Westrock Advisors, Inc. voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.


      Westrock Advisors, Inc.

By
       ________/s/_______________ 
      Gregory M. Martino 
      President


On this 20th day of August 2008, personally appeared Gregory M. Martino, 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 Westrock Advisors, Inc., a corporation, and acknowledged the same to be his free act and deed, before me.


_______________/s/______________
Notary Public
Date Commission Expires:  6-15-10

 


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