DOB: Kondracki and Liu Consent Order

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IN THE MATTER OF:

ACAE, L.L.C.
("ACAE")

MICHAEL GEORGE
SEAN KONDRACKI
CRD No. 2179786
("Kondracki")

JUDY BAO-SHAN LIU
CRD No. 1702583
("Liu")

(Collectively "Respondents")



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CONSENT ORDER
 
DOCKET NO. CF-10-7334-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 Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies promulgated under the Act (“Regulations”);

WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, conducted an investigation pursuant to Section 36b-26(a) of the Act into the activities of Respondents to determine if they had violated, were violating or were about to violate provisions of the Act or Regulations (“Investigation”);

WHEREAS, Kondracki is an individual whose address last known to the Commissioner is 535 Hunting Ridge Road, Stamford, Connecticut.  Since December 17, 2003 to the present, Kondracki has been registered in Connecticut as an investment adviser agent of Fairport Advisors, Inc. (CRD No. 117177);

WHEREAS, Liu is an individual whose address last known to the Commissioner is 535 Hunting Ridge Road, Stamford, Connecticut;

WHEREAS, ACAE is a New York limited liability company whose principal place of business and address last known to the Commissioner is 535 Hunting Ridge Road, Stamford, Connecticut.  From at least September 2000 to October 2007, Kondracki and Liu owned, managed and were the only members of ACAE;

WHEREAS, on November 10, 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, issued an Order to Cease and Desist, Notice of Intent to Revoke Registration as Investment Adviser Agent, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Notice”) against Respondents, which Notice is incorporated by reference herein;

WHEREAS, the Notice alleged that, in violation of Section 36b-5(a) of the Act, Respondents, in connection with directly or indirectly receiving compensation or other remuneration for soliciting advisory business on behalf of a person subject to the prohibition contained Section 36b-5(a) of the Act, employed a device, scheme or artifice to defraud, made an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaged in an act, practice or course of business which operates as a fraud or deceit upon such other person;

WHEREAS, the Notice alleged that, in violation of Section 36b-5(e) of the Act, Kondracki and Liu, in connection with directly or indirectly receiving compensation or other remuneration for soliciting advisory business on behalf of a person subject to the prohibition contained Section 36b-5(a) of the Act, employed a device, scheme or artifice to defraud, made an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaged in an act, practice or course of business which operates as a fraud or deceit upon such other person;

WHEREAS, the Notice alleged that, in violation of Section 36b-5(f) of the Act, Respondents, in connection with directly or indirectly receiving compensation or other remuneration for advising another person as to the value of securities or their purchase or sale or soliciting advisory business on behalf of a person subject to the prohibition contained in Section 36b-5(a) of the Act constituted engaging in a dishonest or unethical practice in connection with the rendering of such advice or in connection with such solicitation;

WHEREAS, the Notice alleged that, in violation of Section 36b-6(c)(1) of the Act, ACAE transacted business as an investment adviser in Connecticut absent registration as such;

WHEREAS, the Notice alleged that, in violation of Section 36b-6(c)(3) of the Act, ACAE engaged Kondracki and Liu as investment adviser agents in Connecticut, absent registration;

WHEREAS, the Notice alleged that, in violation of Section 36b-6(c)(2) of the Act, Kondracki and Liu transacted business as investments adviser agents of ACAE in Connecticut absent registration as an investment adviser agent;

WHEREAS, the Notice stated that the Commissioner found that the issuance of an Order to Cease and Desist and the imposition of a fine as well as a an order revoking Kondracki’s registration as an investment adviser agent of Fairport Advisors, Inc., in Connecticut was necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act;

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

WHEREAS, Respondents requested a hearing on the matters alleged in the Notice (“Hearing”);

WHEREAS, Respondent and the Division requested continuances of the Hearing;

WHEREAS, the Hearing has been continued so that the parties may engage in settlement discussions;

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-34, 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-34, inclusive”;

WHEREAS, an administrative proceeding initiated 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 General Statutes of Connecticut;

WHEREAS, Section 36b-27(f) of the Act provides, in relevant part, that “[a]ny time after the issuance of an order or notice provided for in subsection (a) . . . or subdivision (1) of subsection (d) of this section, the commissioner may accept an agreement by any respondent named in such order or notice to enter into a written consent order in lieu of an adjudicative hearing”;

WHEREAS, Section 4-177(c) of the General Statutes of Connecticut and Section 36a-1-55(a) of the Regulations of Connecticut State Agencies provide that a contested case may be resolved by consent order, unless precluded by law;

WHEREAS, Respondents and the Commissioner now desire to resolve the matters alleged in the Notice without the need for further administrative proceedings;

WHEREAS, the Commissioner finds that the entry of this 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;

WHEREAS, Respondents agree that the Notice may be used in construing the terms of this Consent Order and agree to the language in this Consent Order;

AND WHEREAS, Respondents have provided documentation to the Division evidencing their financial inability to pay the fine that otherwise would have been assessed against them pursuant to the Notice and this Consent Order.


II. CONSENT TO WAIVER OF PROCEDURAL RIGHTS

WHEREAS, Respondents, through their execution of this Consent Order, voluntarily waive the following rights:

1. To be afforded notice and an opportunity for a hearing within the meaning of Sections 36b-15 and 36b-27 of the Act and Section 4-177(a) of the General Statutes of Connecticut;
2. To present evidence and argument and to otherwise avail themselves of Sections 36b-15 and 36b-27 of the Act and Section 4-177c(a) of the General Statutes of Connecticut;
3. To present their position in a hearing in which each 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.

III. ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS

WHEREAS, Respondents, through their execution of this Consent Order, acknowledge the allegations of the Commissioner contained in the Notice, without admitting or denying such allegations;

WHEREAS, the Commissioner would have the authority to enter findings of fact and conclusions of law after granting Respondents an opportunity for a hearing;

WHEREAS, Respondents acknowledge the possible consequences of an administrative hearing and voluntarily consent to the entry of the sanctions described below;

AND WHEREAS, Respondents specifically assure the Commissioner that none of the violations alleged in the Notice or this Consent Order shall occur in the future.

IV. CONSENT TO ENTRY OF SANCTIONS

WHEREAS, Respondents, through their execution of this Consent Order, consent to the Commissioner’s entry of a Consent Order imposing the following sanctions:

1. For a period of three (3) years commencing on the date this Consent Order is entered by the Commissioner, Respondents are barred from transacting business in or from Connecticut as a broker-dealer, agent, investment adviser or investment adviser agent, as such terms are defined in the Act, and from directly or indirectly soliciting or accepting funds for investment purposes from public or private investors in or from Connecticut;
2. Respondents 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;
3. For a period of two (2) years following the expiration of the bar referenced in paragraph one of section IV of this Consent Order, Kondracki and Liu, and any entity under their control, shall retain legal counsel experienced in the area of state securities registration and regulation under the Act to: (a) advise them on compliance with the securities laws of Connecticut and other jurisdictions, including compliance with registration requirements; (b) review all required securities offering documents; (c) provide a signed opinion of counsel setting forth the basis for any claim of exemption or covered security status under Section 36b-21 of the Act at least thirty (30) days prior to the commencement of the offering; and (d) provide a signed opinion of counsel setting forth the basis for any claim of registration exemption pursuant to Section 36b-6(e) of the Act at least thirty (30) days prior to the commencement of the offering or directly or indirectly soliciting or accepting funds for investment purposes from public or private investors in or from Connecticut; and
4. For a period of two (2) years following the expiration of the bar referenced in paragraph one of section IV of this Consent Order,  Kondracki, Liu, and ACAE and ACAE’s affiliates and successors in interest, shall not offer or sell securities in Connecticut within the meaning of Section 36b-33 of the Act unless such offers or sales are effected through a registered broker-dealer whose name is submitted to the Division in writing for approval at least thirty (30) days before the commencement of the offering.

V. 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 Respondents 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; and
3. This Consent Order shall become final when issued.



Issued at Hartford, Connecticut,       _______/s/____________
this 14th day of June 2011.      Howard F. Pitkin 
         Banking Commissioner 
 

CONSENT TO ENTRY OF ORDER

I, Judy Bao-Shan Liu, state on behalf of ACAE, L.L.C, 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 ACAE, L.L.C; that ACAE, L.L.C agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that ACAE, L.L.C consents to the issuance of this Consent Order.


       ACAE, L.L.C.
  
  
By: ______/s/__________
    Judy Bao-Shan Liu
     Managing Member


State of:  Connecticut
 
County of:  Hartford

On this the 14th day of June 2011, before me, Richard N. Freeth, Esq., the undersigned officer, personally appeared Judy Bao-Shan Liu who acknowledged herself to be the Managing Member of ACAE, L.L.C., a limited liability company, and that she, as such Managing Member, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the limited liability company by herself as Managing Member.
 
In witness whereof I hereunto set my hand.



___________/s/________________
Commissioner of the Superior Court
Bar #: 418108


CONSENT TO ENTRY OF ORDER

I, Michael George Sean Kondracki, state that I have read the foregoing Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I consent to the issuance of this Consent Order, expressly waiving any right to challenge or contest the validity of this Consent Order.


__________/s/______________
Michael George Sean Kondracki


State of:  Connecticut

County of:  Hartford

On this the 14th day of June 2011, before me, Richard N. Freeth, Esq., the undersigned officer, personally appeared Michael George Sean Kondracki, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained.

In witness whereof I hereunto set my hand.


___________/s/_________________
Commissioner of the Superior Court
Bar #: 418108

CONSENT TO ENTRY OF ORDER

I, Judy Bao-Shan Liu, state that I have read the foregoing Consent Order; that I know and fully understand its contents; that I agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I consent to the issuance of this Consent Order, expressly waiving any right to challenge or contest the validity of this Consent Order.



_______/s/_______
Judy Bao-Shan Liu


State of:  Connecticut

 
County of:  Hartford

On this the 14th day of June 2011, before me, Richard N. Freeth, Esq., the undersigned officer, personally appeared Judy Bao-Shan Liu, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that she executed the same for the purposes therein contained.
 
In witness whereof I hereunto set my hand.



___________/s/________________
Commissioner of the Superior Court
Bar #: 418108


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