DOB: Southridge Investment Group - Fine - Rev

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IN THE MATTER OF:

SOUTHRIDGE INVESTMENT
GROUP LLC f/k/a
GREENFIELD CAPITAL
PARTNERS, LLC
CRD NO. 45531

    ("Respondent")

 
 
 


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ORDER TO CEASE
AND DESIST

ORDER TO
REVOKE REGISTRATION
AS BROKER-DEALER

      AND

ORDER IMPOSING FINE

DOCKET NO. RCF-2009-7741-S

I. PRELIMINARY STATEMENT

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

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

WHEREAS, on October 20, 2009, the Commissioner, acting pursuant to Sections 36b-27(a) of the Act, 36b-15(a) of the Act, as amended by Public Act 09-160, Section 4-182(c) of the Connecticut General Statutes and 36b-27(d) of the Act, as amended by Public Act 09-160, issued an Order to Cease and Desist ("Order to Cease and Desist"), 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 , in the Order to Cease and Desist, the Commissioner found that Respondent violated
Sections 36b-14, 36b-16 and 36b-23 of the Act and Sections 36b-31-6f, 36b-31-15a, 36b-31-14a, 36b-31-14f and 36a-31-15e [sic] of the Regulations;
 
WHEREAS, in the Notice, the Commissioner ordered that Respondent cease and desist from directly or indirectly violating the provisions of the Act and Regulations;
 
WHEREAS, in the Notice, the Commissioner alleged that Respondent had engaged in acts or conduct that, pursuant to Section 36b-15 of the Act, as amended, constitute grounds for revoking Respondent's registration as a broker-dealer in Connecticut;
 
WHEREAS, in the Notice, the Commissioner found that Respondent had committed one violation of Section 36b-16 of the Act, two violations of Section 36b-14 of the Act, one violation of Section 36b-23 of the Act, four violations of Section 36b-31-6f of the Regulations, four violations of Section 36b-31-15a of the Regulations and one violation of Section 36b-31-15e of the Regulations, and stated that the Commissioner may impose a fine on Respondent not to exceed One Hundred Thousand Dollars ($100,000) per violation, or a maximum fine of One Million Three Hundred Thousand Dollars ($1,300,000);
 
WHEREAS, in the Notice, the Commissioner notified Respondent that it could request a hearing with respect to the allegations set forth in the Notice;
 
WHEREAS, on October 20, 2009, the Notice was sent by registered mail, return receipt requested (Registered Mail No. RB027869444US), to Respondent, which Notice was received by Respondent on October 22, 2009;

WHEREAS, on November 2,2009, Respondent requested a hearing on the Notice;
 
WHEREAS, on August 4, 2011, the Commissioner issued a Redesignation of Hearing Officer appointing Attorney Nirja Savill as Hearing Officer;
 
WHEREAS , by letter dated October 17, 2011, Hearing Officer Savill scheduled the hearing for November 22, 2011, at 9 a.m.;

WHEREAS, on November 22, 2011, Attorney Jesse Silverman represented the Department at the hearing and Respondent failed to appear at the hearing;
 
WHEREAS, Section 36a-1-31(b) of the Regulations provides, in pertinent part, that "[w]hen a party fails to appear at a scheduled hearing, the allegations against the party may be deemed admitted. Without further proceedings or notice to the party, the presiding officer shall submit to the commissioner a proposed final decision containing the relief sought in the notice, provided the presiding officer 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-27(d)(2) of the Act, as amended, provides, in pertinent part, that "[i]f such person fails to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person";
 
WHEREAS, Section 36b-31(a) of the Act provides, in pertinent 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 provides, in pertinent 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

1. The facts as set forth in paragraphs 8 through 33, inclusive, of the Notice shall constitute findings of fact within the meaning of Section 4-180(c) of the Connecticut General Statutes and Section 36a-1-52 of the Regulations of Connecticut State Agencies.
2. Respondent's Written Supervisory Procedures ("Supervisory Manual") require all corporate officers, partners, owners, directors and managers who are actively engaged in the management of Respondent's investment banking or securities business to be registered principals. (Dept. Ex. 2 at 5 [1-2]; Tr. at 62-63.)
3. During the hearing, Attorney Silverman conceded that engaging in dishonest and unethical practices, within the meaning of Section 36b-31-15a of the Regulations, is not a basis for imposition of a fine and indicated that, notwithstanding paragraphs 42 through 45, inclusive, of the Notice, the Department had decided not to seek imposition of a fine based on Respondent engaging in such practices, thereby reducing the maximum fine sought from One Million Three Hundred Thousand Dollars ($1,300,000) to Nine Hundred Thousand Dollars ($900,000). (Dept. Ex. 1 at 10-12; Tr. at 45-49, 64 and 68.)
4. During the hearing, Attorney Silverman acknowledged that the reference in paragraph 42 of the Notice to Financial Industry Regulatory Authority, Inc.'s Conduct Rule 2110 was incorrect. He stated that he believed the reference to Rule 2110 was a "typo" and that the reference should have been to Rule 3010. (Tr. 50-54.)
  

III. CONCLUSIONS OF LAW

1. The Notice complied with Sections 36b-27(a) of the Act, 36b-15(a), of the Act, as amended, 36b-27(d) of the Act, as amended, and Section 4-177(b) of the Connecticut General Statutes.
2. The Commissioner complied with Section 4-182(c) of the Connecticut General Statutes.
3. The conclusions set forth in paragraphs 35, 37 through 40, inclusive, 47, 49, 51 and 53 of the Notice shall constitute conclusions of law within the meaning of Section 4-180(c) of the Connecticut General Statutes and Section 36a-1-52 of the Regulations.
4. Respondent's conduct in allowing Hicks to operate as an unregistered principal of Respondent, as described in paragraphs 12 through 14, inclusive, of the Notice, constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a of the Regulations, in that it is conduct proscribed by National Association of Securities Dealers' Registration Rule 1021.  Such practice forms the basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act and the revocation of Respondent's registration as broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended.
5. Respondent's failure to protect its material, non-public information, as more fully described in paragraphs 13 and 21 through 25 of the Notice, in contradiction of its Supervisory Manual, as more fully described in paragraph 32 of the Notice, constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a of the Regulations, in that it is conduct which demonstrates a failure to establish a system for applying written supervisory procedures which can reasonably be expected to prevent and detect violations of the Act. Such practice in the securities business by Respondent forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act and the revocation of Respondent's registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended.
6. Respondent's failure to maintain the business E-mails of Stefansky and Rosenblum, as more fully described in paragraphs 30 and 31 of the Notice, in contradiction of its Supervisory Manual, as more fully described in paragraph 29 of the Notice, constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a of the Regulations, in that it is conduct which demonstrates a failure to establish a system for applying written supervisory procedures which can reasonably be expected to prevent and detect violations of the Act. Such practice in the securities business by Respondent forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act and the revocation of Respondent's registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended.
7. Respondent's failure to submit fingerprints to the Attorney General of the United States or the Attorney General's designee for identification and appropriate processing, as more fully described in paragraphs 21 through 25, inclusive, of the Notice, in contradiction of its Supervisory Manual, as more fully described in paragraph 29 of the Notice, constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a of the Regulations, in that it is conduct which demonstrates a failure to establish a system for applying written supervisory procedures which can reasonably be expected to prevent and detect violations of the Act. Such practice in the securities business by Respondent forms a basis for an order to cease and desist to be issued against Respondent pursuant to Section 36b-27(a) of the Act and the revocation of Respondent's registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a) of the Act, as amended.
8. The Commissioner finds that Respondent committed one violation of Section 36b-16 of the Act, four violations of Section 36b-31-6f of the Regulations, two violations of Section 3b-14 of the Act, one violation of Section 36b-31-15e of the Regulations and one violation of Section 36b-23 of the Act.
9. The Commissioner finds that the facts require the issuance of a permanent order to cease and desist against Respondent.
10. The Commissioner finds that the facts require revocation of Respondent's registration as a broker-dealer in Connecticut.
11. The Commissioner finds that the facts require the imposition of a fine against Respondent; however, based upon the nature of Respondent's actions in violation of the Act and the Regulations, the facts do not require the imposition of the maximum fine against Respondent.
12. This Order to Cease and Desist, Order to Revoke Registration as Broker-dealer and Order Imposing Fine 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.

ORDER

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

1. The Order to Cease and Desist issued on October 20, 2009, against Southridge Investment Group LLC f/k/a Greenfield Capital Partners, LLC shall be and is hereby made PERMANENT;
2. The registration as a broker-dealer in Connecticut of Southridge Investment Group LLC f/k/a Greenfield Capital Partners, LLC shall be and is hereby REVOKED;
3. A FINE of Two Hundred Fifty Thousand Dollars ($250,000) be imposed against Southridge Investment Group LLC f/k/a Greenfield Capital Partners LLC, 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 45 days from the date this Order is mailed; and
4. This Order shall become effective when mailed.


 

Dated at Hartford, Connecticut,      _______/s/_________
this 9th day of February 2012.      Howard F. Pitkin 
    Banking Commissioner 


This Order was mailed by certified mail,
return receipt requested, to Respondent
on February 10, 2012.

Southridge Investment Group LLC
f/k/a Greenfield Capital Partners, LLC
90 Grove Street, 2nd Floor
Ridgefield, CT 06877
Certified Mail No. 701 1 0470 0002 2573 1703


 Administrative Orders and Settlements