DOB: Westrock Advisors - REV-FINE

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IN THE MATTER OF:

WESTROCK ADVISORS, INC.

CRD No. 114338

("Respondent")


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ORDER REVOKING REGISTRATION
AS BROKER-DEALER

              AND

ORDER IMPOSING FINE

DOCKET NO. RCF-10-7887-S

I. PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and the regulations promulgated thereunder (Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies) (“Regulations”);

WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking (“Department”), conducted an investigation into the activities of Respondent, pursuant to Section 36b-26(a) of the Act, as amended by Public Act 10-141, to determine if it had violated, was violating or was about to violate provisions of the Act or Regulations (“Investigation”);

WHEREAS, as a result of the Investigation, on December 8, 2010, the Commissioner, acting pursuant to Sections 36b-15 and 36b-27 of the 2010 Supplement to the General Statutes (“2010 Supplement”), as amended by Public Act 10-141, and Section 4-182(c) of the General Statutes of Connecticut, issued an Order to Cease and Desist (“Order”), Notice of Intent to Revoke Registration as Broker-dealer, Notice of Intent to Fine and Notice of Right to Hearing against Respondent (collectively “Notice”), which Notice is incorporated by reference herein;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s offer and sale of securities listed for quotation on the Toronto Stock Exchange/Pink Sheets (“Pink Sheet Securities”) in Connecticut to at least one client constitutes a wilful violation of the September 4, 2008, consent order (No. CO-2008-7530-S) the Commissioner entered with respect to Respondent (“2008 Consent Order”), which forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s offer and sale of the Pink Sheet Securities in Connecticut to at least one client in violation of the 2008 Consent Order also forms a basis for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s opening a new account approved for options trading for at least one Connecticut customer who was not an accredited investor constitutes a wilful violation of the 2008 Consent Order, which forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s violation of the 2008 Consent Order also forms a basis for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to reimburse the Department the costs for the Division’s examination of Respondent’s books and records at Respondent’s branch office located at 201 Old Country Road, Suite 206, Melville, New York 11747, constitutes a wilful violation of the 2008 Consent Order, which forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s violation of the 2008 Consent Order also forms a basis for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to ensure that its representatives, agents, employees, affiliates, assigns, successors in interest, and those persons in active concert or participation with them ceased and desisted from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act constitutes a wilful violation of the 2008 Consent Order, which forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s violation of the 2008 Consent Order also forms a basis for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent offered and sold Pink Sheet Securities in Connecticut to at least one client, which securities were not registered in Connecticut under the Act.  The offer and sale of such securities absent registration constitutes a wilful violation of Section 36b-16 of the Act, as amended by Public Act 10-141, which forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s offer and sale of Pink Sheet Securities in violation of Section 36b-16 of the Act, as amended, also forms a basis for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to provide the material records requested by the Division constitutes a wilful violation of Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations, which forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s violation of Section 36b-14(d) of the Act and Section 36b-31-14f of the Regulations also forms a basis for the imposition of a fine against Respondent under Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to provide the material records requested by the Division also forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(L) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to have and maintain the minimum net capital prescribed by law constitutes a wilful violation of Section 36b-31-9b(a) of the Regulations, which forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s violation of Section 36b-31-9b(a) of the Regulations also forms a basis for the imposition of a fine against Respondent under Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to provide the Commissioner with written notice of its failure to maintain the minimum net capital and Respondent’s failure to file with the Commissioner an up-to-date statement of its financial condition constitutes a wilful violation of Sections 36b-31-9b(b) and 36b-31-9b(c) of the Regulations, which forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s violation of Sections 36b-31-9b(b) and 36b-31-9b(c) of the Regulations also forms a basis for the imposition of a fine against Respondent under Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to monitor the use of scripts by individuals directly under its supervision to ensure that such scripts were in compliance with all regulatory requirements constitutes a wilful violation of Section 36b-31-6f of the Regulations, which forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s violation of Section 36b-31-6f of the Regulations also forms a basis for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended.  Respondent’s failure to monitor the use of scripts by individuals directly under its supervision to ensure that such scripts were in compliance with all regulatory requirements also forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(K) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to ensure that its agents did not offer or sell Pink Sheet Securities in or from Connecticut and that the Pink Sheet Securities the agents did offer and sell were appropriately registered constitutes a violation of Section 36b-31-6f of the Regulations.  A wilful violation of Section 36b-31-6f of the Regulations forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s violation of Section 36b-31-6f of the Regulations also forms a basis for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended.  Respondent’s failure to ensure that its agents did not offer or sell Pink Sheet Securities in or from Connecticut and that the Pink Sheet Securities the agents did offer and sell were appropriately registered also forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(K) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to ensure that its agents did not open any new account approved for options trading for any Connecticut customer unless that Connecticut customer was an “accredited investor” constitutes a violation of Section 36b-31-6f of the Regulations.  A wilful violation of Section 36b-31-6f of the Regulations forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s violation of Section 36b-31-6f of the Regulations also forms a basis for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended.  Respondent’s failure to ensure that its agents did not open any new account approved for options trading for any Connecticut customer unless that Connecticut customer was an “accredited investor” also forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(K) of the 2010 Supplement, as amended;

WHEREAS, the Commissioner alleged in the Notice that Respondent’s failure to ensure that its representatives, agents, employees, affiliates, assigns, successors in interest, and those persons in active concert or participation with them ceased and desisted from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act, including the 2008 Consent Order constitutes a violation of Section 36b-31-6f of the Regulations.  A wilful violation of Section 36b-31-6f of the Regulations forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the 2010 Supplement, as amended.  Respondent’s violation of Section 36b-31-6f of the Regulations also forms a basis for the imposition of a fine against Respondent pursuant to Section 36b-27(d) of the 2010 Supplement, as amended, and for an order to cease and desist against Respondent under Section 36b-27(a) of the 2010 Supplement, as amended.  Respondent’s failure to ensure that its representatives, agents, employees, affiliates, assigns, successors in interest, and those persons in active concert or participation with them ceased and desisted from engaging in conduct constituting or which would constitute a violation of the Act or any regulation or order under the Act also forms a basis for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(K) of the 2010 Supplement, as amended;

WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Respondent violated the 2008 Consent Order, has committed at least one violation of Section 36b-16 of the Act, as amended, at least one violation of Section 36b-14(d) of the Act, at least one violation of Section 36b-31-14f of the Regulations, one violation of Section 36b-31-9b(a) of the Regulations, one violation of Section 36b-31-9b(b) of the Regulations, one violation of Section 36b-31-9b(c) of the Regulations, and at least one violation of Section 36b-31-6f of the Regulations;

WHEREAS, the Commissioner has reason to believe that Respondent has engaged in acts or conduct that, pursuant to Section 36b-15 of the 2010 Supplement, as amended, constitute grounds for revoking Respondent’s registration as a broker-dealer in Connecticut;

WHEREAS, the Notice stated that Respondent’s registration as a broker-dealer in Connecticut shall be revoked, subject to Respondent’s right to request a hearing on the allegations;

WHEREAS, the Notice stated that the Commissioner intended to impose a maximum fine not to exceed One Hundred Thousand Dollars ($100,000) per violation on Respondent;

WHEREAS, the Notice stated that Respondent would be afforded an opportunity for a hearing on the allegations if a written request for a hearing was received by the Department within fourteen (14) days following Respondent’s receipt of the Notice;

WHEREAS, the Notice stated that the Commissioner shall issue an order revoking Respondent’s registration as a broker-dealer in Connecticut if Respondent failed to request a hearing within the prescribed time period or failed to appear at any such hearing;

WHEREAS, the Notice stated that the Commissioner may order that the maximum fine be imposed upon Respondent if Respondent failed to request a hearing within the prescribed time period or failed to appear at any such hearing;

WHEREAS, on December 9, 2010, the Notice was sent by certified mail, return receipt requested, to Respondent;

WHEREAS, on December 21, 2010, the Notice was returned to the Department of Banking marked “Returned To Sender – Moved, Left No Address”;

WHEREAS, on December 21, 2010, the Notice was served on the Commissioner, and on December 22, 2010, in accordance with 36b-33(g) of the Act, as amended by Public Act 10-141, Notice of Service on the Banking Commissioner In the Matter of:  Westrock Advisors, Inc., dated December 22, 2010 (“Notice of Service”), was sent by registered mail, return receipt requested, to Respondent;

WHEREAS, on January 5, 2011, the Notice of Service was returned to the Department of Banking marked “Returned To Sender – Not Deliverable as Addressed, Unable to Forward”;

WHEREAS, Respondent has failed to request a hearing on the matters set forth in the Notice within 14 days of the date of the Notice of Service;

WHEREAS, on January 10, 2011, a Certification was issued rendering the Order permanent as of January 6, 2011, which Certification is incorporated by reference herein;

WHEREAS, Section 36a-1-31(a) of the Regulations of Connecticut State Agencies provides, in pertinent part, that:

When a party fails to request a hearing within the time specified in the notice, the allegations against the party may be deemed admitted.  Without further proceedings or notice to the party, the commissioner shall issue a final decision in accordance with section 4-180 of the Connecticut General Statutes and section 36a-1-52 of the Regulations of Connecticut State Agencies, provided the commissioner may, if deemed necessary, receive evidence from the department, as part of the record, concerning the appropriateness of the amount of any . . . fine . . . sought in the notice[;]

WHEREAS, Section 36b-15 of the 2010 Supplement, as amended, provides, in pertinent part, that:

(a) The commissioner may, by order . . . revoke any registration . . . if the commissioner finds that (1) the order is in the public interest, and (2) the . . . 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 . . . (B) has wilfully violated or wilfully failed to comply with any provision of sections 36b-2 to 36b-34, inclusive, . . . or any regulation or order under said sections . . . (K) has failed reasonably to supervise:  (i) The agents . . . of such . . . registrant, if the . . . registrant is a broker-dealer . . . ; or (ii) the agents of a broker-dealer . . . if such . . . registrant . . . is or was an agent . . . or other person charged with exercising supervisory authority on behalf of a broker-dealer . . . ; (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[.]

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(f)  No order may be entered under this section except as provided in subsection (c) of this section without (1) appropriate prior notice to the applicant or registrant and to the employer or prospective employer if such applicant or registrant is an agent or investment adviser agent, (2) opportunity for hearing, and (3) written findings of fact and conclusions of law[;]

WHEREAS, Section 36b-31(a) of the Act, as amended by Public Act 10-141, 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-34, inclusive”;

AND WHEREAS, Section 36b-31(b) of the Act, as amended by Public Act 10-141, 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-34, inclusive.”

II.  FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. The Commissioner finds that the facts as set forth in paragraphs 7 through 23, inclusive, of the Notice shall constitute findings of fact within the meaning of Section 4-180(c) of the General Statutes of Connecticut and Section 36a-1-52 of the Regulations of Connecticut State Agencies; and that the Statutory and Regulatory Basis for Order to Cease and Desist, Revocation of Registration as Broker-dealer and Order Imposing Fine, set forth in paragraphs 24 through 42, inclusive, of the Notice, shall constitute conclusions of law within the meaning of Section 4-180(c) of the General Statutes of Connecticut and Section 36a-1-52 of the Regulations of Connecticut State Agencies.
2. The Commissioner finds that Respondent violated the 2008 Consent Order, has committed at least one violation of Section 36b-16 of the Act, as amended, at least one violation of Section 36b-14(d) of the Act, at least one violation of Section 36b-31-14f of the Regulations, one violation of Section 36b-31-9b(a) of the Regulations, one violation of Section 36b-31-9b(b) of the Regulations, one violation of Section 36b-31-9b(c) of the Regulations, and at least one violation of Section 36b-31-6f of the Regulations.
3. The Commissioner finds that the facts require the issuance of an order revoking Respondent’s registration as a broker-dealer in Connecticut.
4.
The Commissioner finds that the facts require the imposition of a fine against Respondent.
5. The Commissioner finds that the Notice was given in compliance with the requirements of Sections 36b-15(f) and 36b-27 of the 2010 Supplement, as amended, and Sections 4-177 and 4-182(c) of the General Statutes of Connecticut.
6. The Commissioner finds that the issuance of an order revoking Respondent’s registration as a broker-dealer in Connecticut and the imposition of a fine against Respondent is necessary and appropriate in the public interest and for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of Sections 36b-2 to 36b-34, inclusive, of the Act.

III.  ORDER

Having read the record, I hereby ORDER, pursuant to Sections 36b-15 and 36b-27(d) of the 2010 Supplement, as amended, that:

1. The registration of Westrock Advisors, Inc., as a broker dealer in Connecticut is hereby REVOKED;
2.
A fine of Two Hundred Fifty Thousand Dollars ($250,000) be imposed against Westrock Advisors, Inc., to be remitted to the Department of Banking by cashier’s check, certified check or money order, made payable to “Treasurer, State of Connecticut”, no later than Forty-five (45) days from the date this Order is mailed; and
3. This Order shall become effective when mailed.


Dated at Hartford, Connecticut,        ______/s/__________ 
this 20th day of January 2011.      Howard F. Pitkin 
      Banking Commissioner 



This Order was mailed by certified mail,
return receipt requested, to
Respondent on January 21, 2011.

Westrock Advisors, Inc. 
230 Park Avenue
New York, NY 10169
Certified Mail No. 7010 1870 0001 3619 4400                          


Administrative Orders and Settlements