DOB: JHS Capital Advisors Consent Order

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IN THE MATTER OF:
 

JHS CAPITAL ADVISORS, INC.
f/k/a POINTE CAPITAL, INC.

(CRD No. 112097) 
   

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CONSENT ORDER

No. CO-10-7780-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 Agencies promulgated under the Act (the “Regulations”);
 
WHEREAS, JHS Capital Advisors, Inc. (“JHS”), formerly known as Pointe Capital, Inc., is a broker-dealer registered in Connecticut under the Act since February 15, 2005, and has its principal office located at 400 North Ashley Drive, Suite 2150, Tampa, Florida 33602;
 
WHEREAS, the Commissioner, through the Securities and Business Investments Division (the “Division”) of the Department of Banking, conducted an examination of the records of JHS 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 JHS 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, from at least January 1, 2008 through March 31, 2010 (the “Review Period”), JHS charged its Connecticut customers a per transaction fee in addition to a commission and/or markup or markdown, which fee was categorized as “Postage and Handling” on customer trade confirmations and which ranged from $7.50 to $100.00 and varied depending on which JHS agent effected the transaction;
 
WHEREAS, JHS has represented to the Division that during the Review Period it aggregated the full amount of the “Postage and Handling” charge with any commission and/or markup or markdown charged on each trade in order to assess whether the trade complied with the firm’s procedures and applicable regulatory rules and guidance concerning appropriate commissions and mark-ups;
 
WHEREAS, JHS has provided the Division with proof that it has changed its practices regarding the charging of “Postage and Handling” to customers in that it has eliminated the use of a separate charge for postage and handling, and has terminated its relationship with the independently-owned branch office that charged the overwhelming majority of “Postage and Handling” charges in excess of the actual amount of JHS’s ticket and clearing charge and the postage fee assessed by its clearing firm;
 
WHEREAS, the evidence obtained by the Division during the Investigation and Examination would support the initiation of administrative proceedings under Section 36b-15 of the Act to suspend or revoke JHS’ 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 JHS;
 
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 Section 36b-2 to 36b-34, 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 JHS reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
 
WHEREAS, JHS, 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, JHS, 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, JHS, 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, JHS, 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. JHS, by failing to itemize and disclose to its Connecticut clients the fee classified as “Postage and Handling” on the trade confirmations, which fee ranged from $7.50 to $100.00 per transaction, engaged in conduct which would support proceedings under Section 36b-15(a)(2)(H) of the Act;

CONSENT TO ENTRY OF SANCTIONS

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

1. JHS, 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. Within forty-five (45) days from the date this Consent Order is entered by the Commissioner, JHS shall provide the Division with proof that: 1) with respect to all transactions effected between January 1, 2008 and March 31, 2010, JHS has reimbursed its Connecticut customers the difference between the amount of the “Postage and Handling” fee paid by its Connecticut customers for each transaction and the actual amount of JHS’ ticket and clearing charge and the postage fee assessed by its clearing firm; and 2) JHS  has sent correspondence to its Connecticut customers receiving the reimbursement explaining that the “Postage and Handling” fee reimbursement was a result of an examination conducted by the Division;
3. No later than the date this Consent Order is entered by the Commissioner, JHS shall provide to the Division Director for review and approval the letter that will be sent to those Connecticut customers eligible for the “Postage and Handling” fee reimbursement described in paragraph 2 above; and
4. No later than the date this Consent Order is entered by the Commissioner, JHS shall remit to the Department of Banking, via certified bank check, payable to “Treasurer, State of Connecticut”, or by wire transfer, the sum of ten thousand dollars ($10,000) as an administrative fine.

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 JHS 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 JHS and reflected herein are subsequently discovered to be untrue; and
3. This Consent Order shall become final when entered.


 
So ordered at Hartford, Connecticut      _______/s/_________
this 26th day of October, 2010.      Howard F. Pitkin 
    Banking Commissioner 


CONSENT TO ENTRY OF ORDER

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

 
    JHS Capital Advisors, Inc.
   
              
By ______/s/_____________
Paul R. Richardson
  Chief Executive Officer


On this 21th [sic] day of October, 2010, personally appeared Paul R. Richardson, [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 JHS Capital Advisors, Inc., a corporation, and acknowledged the same to be his free act and deed, before me.


_____/s/________________________
Notary Public
Date Commission Expires: 8/26/11


  

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