DOB: John Thomas Financial Consent Order

* * * * * * * * * * * * * * * * * *


IN THE MATTER OF: 

JOHN THOMAS FINANCIAL


(CRD No. 40982) 
   

* * * * * * * * * * * * * * * * * *

*
*
*
*
*
*
*
*
*
*

CONSENT ORDER

No. CO-11-7904-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, John Thomas Financial (“JTF”) is a broker-dealer registered in Connecticut under the Act since March 26, 1997, and has its principal office located at 14 Wall Street, 23rd Floor, 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 JTF 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 JTF 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 ascertained that JTF failed to supervise the activities of some of its agents who engaged in inaccurate disclosure practices with respect to a “Handling Fee” charged to Connecticut customers by incorrectly representing to some of the firm’s Connecticut customers that the “Handling Fee” was a ticket charge assessed by JTF’s clearing firm and not revenue to the firm;
 
WHEREAS, as more fully described in the Findings below, the Division believes that grounds exist under Section 36b-15 of the Act to suspend or revoke JTF’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 JTF;
 
WHEREAS, an administrative proceeding initiated under Sections 36b-27 or 36b-15 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 . . . consent order”;
 
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-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 JTF reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
 
WHEREAS, JTF, 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;

WHEREAS, JTF, 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, JTF, 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 with respect to the matters described herein;
2. To present evidence and argument and to otherwise avail itself of Section 4-177c(a) of the Connecticut General Statutes with respect to the matters described herein;
3. To present its position in a hearing in which it is represented by counsel with respect to the matters described herein;
4. To have a written record of the hearing made and a written decision issued by a hearing officer with respect to the matters described herein; 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, JTF, through its execution of this Consent Order, accepts and consents to the entry of the following Findings by the Commissioner without admitting or denying them:

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. JTF violated Section 36b-31-6f(b) of the Regulations by failing to establish, enforce and maintain a supervisory system reasonably designed to achieve regulatory compliance.  Specifically, JTF failed to supervise it agents who engaged in inaccurate disclosure practices with respect to the “Handling Fee” charged to its Connecticut customers;
3. The foregoing conduct would support administrative proceedings against JTF under Sections 36b-15(a)(2)(B) and 36b-15(a)(2)(K) of the Act as well as subsections (a) and (d) of Section 36b-27 of the Act;

CONSENT TO ENTRY OF SANCTIONS

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

1. JTF, its representatives, agents, employees, affiliates, assigns, and successors in interest 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 person, organization or other device;
2. Within thirty (30) days of the entry of the Consent Order, JTF will provide the Division with proof that 1) it has reimbursed its Connecticut customers the difference between the amount of the “Handling Fee” paid by its Connecticut customers from July 2007 to July 2009 for each transaction and the actual amount of JTF’s ticket and clearing charge and the postage fee assessed by its clearing firm; and 2) it has sent correspondence to its Connecticut customers who received the reimbursement explaining that the “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, JTF shall remit to the Department of Banking, via certified bank check payable to "Treasurer, State of Connecticut", the sum of twenty thousand dollars ($20,000) 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 JTF 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 JTF 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 18th day of October 2011.      Howard F. Pitkin 
    Banking Commissioner 


CONSENT TO ENTRY OF ORDER

I, George Belesis, state on behalf of John Thomas Financial 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 John Thomas Financial; that John Thomas Financial agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that John Thomas Financial voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.     

 
    John Thomas Financial
   
              
By ______/s/____________
George Belesis
  President



On this 13th day of October 2011, personally appeared George Belesis, 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 John Thomas Financial, a corporation, and acknowledged the same to be his free act and deed, before me.


_____/s/______________________________
Notary Public
Date Commission Expires: November 10, 2012


  

Administrative Orders and Settlements