DOB: Marvin, Ronald - Hearing Decision

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IN THE MATTER OF:

RONALD MARVIN
CRD No. 722277

RMV HOLDING
COMPANY, LLC

RMV INVESTMENTS, LLC 

(Collectively
"Respondents")

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FINDINGS OF FACT,
CONCLUSIONS OF LAW
AND ORDER

DOCKET NO. CF-12-7791-S
 

[Editorial Note:  Footnotes appear at end of document.]

INTRODUCTION

The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a, Sections 36b-1 to 36b-34, inclusive, of the Connecticut General Statutes, 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”).

The above-referenced matter was initiated upon charges brought by the Commissioner to issue a permanent order to cease and desist against each Respondent and to impose a fine upon each Respondent.  On May 9, 2012, the Commissioner issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing against Respondents (“Notice”).

After due notice, a hearing was held at the Department of Banking (“Department”) on February 14, February 15 and March 8, 2013.  The hearing was conducted in accordance with Chapter 54 of the Connecticut General Statutes, the “Uniform Administrative Procedure Act”, and the Department’s contested case regulations, Sections 36a-1-19 to 36a-1-57, inclusive, of the Regulations of Connecticut State Agencies.  Having read the entire record, including testimony of the witnesses and documentary evidence, I make the following findings of fact and conclusions of law based on the preponderance of evidence in the record.

FINDINGS OF FACT

 
Procedural Findings
  
1. On May 9, 2012, the Commissioner issued an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing against Respondents.  (HO Ex. 1.)
2. On May 14, 2012, the Department received an Appearance and Request for Hearing from Rick Slavin, Esq., and Ari J. Hoffman, Esq., on behalf of all Respondents.  (HO Ex. 2.)
3. On May 15, 2012, the Commissioner appointed Attorney Stacey Serrano as Hearing Officer.  (HO Ex. 1.)
4. The hearing was held on the following dates:  February 14 and 15 and March 8, 2013.  (Tr. 2/14/13, 2/15/13 and 3/8/13.)
5. Attorneys Elena Zweifler and Paul Bobruff appeared at the hearing on behalf of the Department.  (Tr. 2/14 at 11.)
6. Attorney Rick Slavin appeared at the hearing on behalf of all Respondents.  (Tr. 2/14 at 11.)
  
 
Matters Asserted
    
7. Ronald Marvin (“Marvin”) was registered as a broker-dealer agent on behalf of Greenwich Global, LLC from December 2003 to August 2004, and on behalf of Sloan Securities Corp. (“Sloan”) from August 2004 to December 2009.  (Jt. Ex. 2.)
8. RMV Partners, LP (“RMV Partners”) is a hedge fund started by Marvin.  (Tr. 2/14 at 71, 84.)  There were approximately seven investors or limited partners who invested approximately $2 million in RMV Partners.  (Tr. 2/14 at 80, 81.)
9. As a broker-dealer agent at Sloan, Marvin received commissions for securities trades executed on behalf of RMV Partners.  (Tr. 2/15 at 21, 24-26.)
10. RMV Holding Company, LLC (“RMV Holding”) is the general partner of RMV Partners.  (Tr. 1 at 71-72; Jt. Ex. 6 at 1.)  The three members of RMV Holding were Marvin, Mr. Carlo Vona and Mr. John Romano.  (Tr. 2/14 at 72-73.)
11. RMV Holding had the sole discretion of making investment decisions on behalf of RMV Partners, including purchasing, holding and selling securities for RMV Partners.  (Jt. Ex. 6 at 3; Tr. 2/15 at 13-14.)
12. RMV Holding received compensation for giving investment advice to RMV Partners.  (Tr. 2/15 at 14-16.)
13. RMV Holding has never been registered as an investment adviser in Connecticut.  (Jt. Ex. 3; Tr. 2/15 at 18.)
14. Marvin was the only individual who provided investment advice to RMV Partners on behalf of RMV Holding.  (Tr. 2/14 at 76; Tr. 2/15 at 19; Jt. Ex. 7 at 1, 7.)
15. Marvin has never been registered as an investment adviser in Connecticut, and had been registered as an investment adviser agent only on behalf of EGS Partners, L.P. from November 23, 1994 to December 31, 1995.  (Tr. 2/14 at 68; Tr. 2/15 at 28-29; Jt. Ex. 3.)
16. RMV Investments, LLC (“RMV Investments”) was formed by Marvin as the bill paying arm for RMV Partners.  (Tr. 2/14 at 76-77.)  RMV Investments had no business purpose aside from managing RMV Partners.  (Tr. 2/14 at 78.)
17. From January 2005 through November 2009, wire transfers were made almost monthly from RMV Partners to RMV Holding, then in the exact same amount from RMV Holding to RMV Investments for management fees.  (Jt. Ex. 22 at 57; Jt. Ex. 52; Tr. 2/15 at 83.)
18. Pursuant to an Employment Agreement between Marvin and RMV Investments, Marvin was entitled to compensation of $180,000 per year, payable at the rate of $15,000 per month for the period of January 1, 2004 through December 31, 2005, for such managerial and executive functions of RMV Investments as it should reasonably designate.  (Jt. Ex. 8 at 1; Tr. 2/15 at 32-33.)
19. Marvin was not entitled to a salary from RMV Investments after December 2005.  (Tr. 2/15 at 43; Jt. Ex. 8 at 1.)
20. From January 2005 to January 2010, Marvin received approximately $867,985 from RMV Investments.  (Jt. Ex. 17; Tr. 2/15 at 68, 79.)  The salary received by Marvin from RMV Investments was for making investment decisions for and running RMV Partners.  (Jt. Ex. 22 at 121.)
21. Mr. Vona and Mr. Romano were not involved in the management decisions of RMV Partners.  (Tr. 2/14 at 79.)
22. RMV Holding was entitled to a management fee in the amount of 1% of each limited partner’s capital account annually.  (Jt. Ex. 6 at 5; Tr. 2/14 at 86; Jt. Ex. 7 at 11; Tr. 2/15 at 32.)  The 1% management fee was to compensate RMV Holding for advising RMV Partners and any administrative duties.  (Tr. 2/15 at 156-157.)  RMV Holding was also entitled to a 20% performance fee if RMV Partners had net profits.  (Jt. Ex. 6 at 9-10; Tr. 2/14 at 87.)  RMV Partners had profits of $68,516 in 2005, and $193,390 in 2006.  (Jt. Ex. 11.)  RMV Partners was not profitable during years 2008 and 2009.  (Tr. 2/14 at 87-88.)
23. From January 2005 through December 2009, the total amount of management fees that RMV Holding was entitled to from RMV Partners, at 1% of the partner’s capital accounts, was approximately $18,567 in 2005, $16,694 in 2006, $18,328 in 2007, $23,172 in 2008, and $8,862 in 2009, for a total of approximately $85,622.  (Jt. Ex. 12; Tr. 2/15 at 78-79.)
24. Marvin borrowed $145,000 from RMV Partners, via RMV Holding, which was only disclosed to the limited partners of RMV Partners after he took the loan.  (Tr. 2/15 at 159; Jt. Ex. 18.)  Such borrowings were included with other management fee withdrawals made by RMV Holding from RMV Partners.  (Jt. Ex. 22 at 22.)  Marvin disclosed the existence of borrowing, or as he termed “advances”, to the limited partners in December 2009.  (Tr. 2/15 at 121; Jt. Ex. 18.)  In December 2009, Marvin executed a note promising to pay RMV Partners $115,000 for a loan that he had received.  (Jt. Ex. 19.)  Marvin, through RMV Investments, repaid RMV Partners approximately $115,287 in March 2010.  (Jt. Ex. 20; Tr. 2/15 at 163-164.)
25. Sloan reported on CRD that Marvin was discharged in December 2009 due to “failure to follow firm policies and procedures and violation of FINRA Rule 2730.  Mr. Marvin borrowed money from a client without written approval as required by our written supervisory procedures and FINRA rules.”  (Jt. Ex. 2 at 1.)
26. In 2004, Marvin solicited Mr. Levitt to invest in RMV Partners.  (Tr. 2/14 at 93.)  In connection with such solicitation, Marvin told Mr. Levitt that it was “a very safe investment”, would be invested in “very good stocks”, and would make Mr. Levitt “a lot of money.”  (Tr. 2/14 at 94.)
27. In 2004, Mr. Levitt invested $300,000 in RMV Partners.  (Tr. 2/14 at 94.)  Marvin also solicited Mr. Levitt, albeit unsuccessfully, to invest additional funds in RMV Partners.  (Tr. 2/14 at 95-96.)
28. In July 2005, an investment of $150,000 in RMV Partners was made by Ms. Housman and Mr. Levitt, jointly, but neither Ms. Housman nor Mr. Levitt authorized the investment.  (Tr. 2/14 at 101-103; Jt. Ex. 5.)
29. As of December 31, 2012, Mr. Levitt’s account statement reflected that he had an investment balance of over $401,000, when in reality his account balance was approximately $14,000.  (Jt. Ex. 53; Tr. 2/14 at 124-127.)
30. The limited partners of RMV Partners were not aware of Marvin’s salary, however, Mr. Levitt did expect that Marvin would receive something for his work – “[h]e wasn’t doing it for love”.  (Tr. 2/14 at 135-136; 2/15 at 44.)
31. Another limited partner had stated that she was unaware of the monthly withdrawals from RMV Partners that had been initiated by Marvin.  (Tr. 2/15 at 97.)
           

CONCLUSIONS OF LAW
  

The Commissioner is charged with the administration of Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act and the regulations promulgated thereunder (Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies).  The Commissioner’s authority includes the power to issue orders to cease and desist against Marvin, RMV Holding and RMV Investments, individually, pursuant to Section 36b-27(a) of the Act, and to impose a fine upon Marvin, RMV Holding and RMV Investments, individually, pursuant to Section 36b-27(d) of the Act.
  
Standard of Evidence
    
The applicable standard of proof in Connecticut administrative cases, including those involving fraud and severe sanctions, is the preponderance of the evidence standard.  Goldstar Medical Services v. Department of Social Services, 288 Conn. 790, 819 (2008).  “[I]t is the exclusive province of the trier of fact to make determinations of credibility, crediting some, all, or none of a given witness’ testimony . . . .  [A]n agency [is not] required to use in any particular fashion any of the materials presented to it as long as the conduct of the hearing is fundamentally fair.  Id. at 830 (internal citations omitted).
 
“Review of an administrative agency decision requires a court to determine whether there is substantial evidence in the administrative record to support the agency’s findings of basic fact and whether the conclusions drawn from those facts are reasonable.”  Id. at 833.  “An administrative finding is supported by substantial evidence if the record affords a substantial basis of fact from which the fact in issue can be reasonably inferred.”  Id.  “There is no distinction between direct and circumstantial evidence so far as probative force is concerned . . . .  In fact, circumstantial evidence may be more certain, satisfying and persuasive than direct evidence.”  Id. at 834 (internal citations omitted).
            
  
Violations of the Connecticut Uniform Securities Act and Regulations
  
1. The Department alleges that both Marvin and RMV Holding transacted business as an investment adviser absent registration, in violation of Section 36b-6(c)(1) of the Act.  In addition, the Department alleges that Marvin acted as an investment adviser agent absent registration, in violation of Section 36b-6(c)(2) of the Act.

Section 36b-6(c) of the Act states, in pertinent part, that:

   (1)  No person shall transact business in this state as an investment adviser unless registered as such by the commissioner as provided in sections 36b-2 to 36b-34, inclusive, or exempted pursuant to subsection (e) of this section. . . .
        
  (2)  No individual shall transact business in this state as an investment adviser agent unless such individual is registered as an investment adviser agent of the investment adviser for which such individual acts in transacting such business . . . . 

Section 36b-3 of the Act defines “investment adviser” and “investment adviser agent” as follows:

   (11)  “Investment adviser” means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities.  “Investment adviser” does not include (A) an investment adviser agent . . . .
      
  (12) (A)  “Investment adviser agent” includes (i) any individual, including an officer, partner or director of an investment adviser, or an individual occupying a similar status or performing similar functions, employed, appointed or authorized by or associated with an investment adviser to solicit business from any person for such investment adviser in this state and who receives compensation or other remuneration, directly or indirectly, for such solicitation; or (ii) any partner, officer, or director of an investment adviser, or an individual occupying a similar status or performing similar functions, or other individual employed, appointed, or authorized by or associated with an investment adviser, who makes any recommendation or otherwise renders advice regarding securities to clients and who receives compensation or other remuneration, directly or indirectly, for such advisory services. 

In particular, the Department alleges that RMV Holding and Marvin acted as unregistered co-investment advisers to RMV Partners, and that Marvin acted as an unregistered investment adviser agent on behalf of RMV Holding.  The record is clear that RMV Holding was the General Partner of RMV Partners, a hedge fund, and that as General Partner, RMV Holding was responsible for providing investment advice to RMV Partners.  The record also reflects that all investment advice provided to RMV Partners was made by Marvin on behalf of RMV Holding.
 
RMV Holding was entitled to a 1% management fee and a 20% performance fee for advising RMV Partners, and had debited RMV Partners’ account monthly for such services.  From January 2005 to November 2009, such debits totaled over $800,000 (Jt. Ex. 52), well in excess of the authorized fees, and ultimately such amounts were passed on to Marvin.  As a result of RMV Holding receiving monies from RMV Partners for engaging in “the business of advising others . . . as to the value of securities or as to the advisability of investing in, purchasing or selling securities”, RMV Holding acted as investment adviser.  This is consistent with numerous cases holding that general partners of limited partnerships performing similar functions as RMV Holding for compensation constitute investment advisers.  See, e.g., Papic v. Burke, 2007 Conn. Super. LEXIS 820 (Conn. Super. Ct. March 22, 2007) 1  aff’d 113 Conn. App. 198 (Conn. App. Ct. 2009); Abrahamson v. Fleschner et al., 568 F.2d. 862 (2nd Cir. 1977), cert. denied, 436 U.S. 913 (1978).

Likewise, Marvin, as the individual who provided investment advice for compensation to RMV Partners, conducted investment advisory activities.  The Department alleges that Marvin acted both as an investment adviser and investment adviser agent.  Clearly, Marvin’s conduct constitutes acting as an “investment adviser agent”, since he was a “partner, officer, or director of an investment adviser, or an individual occupying a similar status or performing similar functions” for an investment adviser, who rendered advice regarding securities.
 
Looking to the definition of “investment adviser”, it must be noted that there are several exclusions, including one for an “investment adviser agent”.  In its brief, the Department argues that this statutory exclusion was not meant to encompass Marvin because “[a]ll this means . . . is that Marvin, as an investment adviser, could not also be an investment adviser agent of himself.”  DOB Brief at 12 (emphasis omitted).  While perhaps that was the intention of the statute, such interpretation does not comport with the plain meaning of the statute.  Section 1-2z requires that “[t]he meaning of a statute shall, in the first instance, be ascertained from the text of the statute itself and its relationship to other statutes.”  The definition of “investment adviser” provides for a complete categorical exclusion for “an investment adviser agent” without qualification.  The plain meaning of the statute provides that if Marvin is an investment adviser agent, he cannot come within the definition of “investment adviser”. 2

The Department argues that it is not unheard of “for one to be registered as an investment adviser agent of one entity and also to be independently registered as an investment adviser.”  DOB Brief at 12.  Once again, this indeed may be the practice if one provides investment advice on behalf of several different entities or for many different clients, but nothing in the Matters Asserted indicates that Marvin provided investment advice to anyone except RMV Partners.  In addition, monies received by Marvin were paid from RMV Partners via RMV Holding and RMV Investments.
 
Finally, it is undisputed that at no time was RMV Holding or Marvin registered pursuant to Section 36b-6(c) of the Act.  Accordingly, Marvin transacted business as an investment adviser agent absent registration in violation of Section 36b-6(c)(2) of the Act, and RMV Holding transacted business as an investment adviser absent registration in violation of Section 36b-6(c)(1) of the Act.  Such conduct forms a basis for an order to cease and desist to be issued against Marvin and RMV Holding pursuant to Section 36b-27(a) of the Act, and for the imposition of a fine against Marvin and RMV Holding, individually, pursuant to Section 36b-27(d) of the Act.
2. The Department alleges that both Marvin and RMV Holding, 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, whether through the issuance of analyses or reports or otherwise, engaged in a dishonest or unethical practice in violation of Section 36b-5(f) of the Act.  In addition, the Department alleges that RMV Investments materially aided Marvin’s and/or RMV Holding’s violation of Section 36b-5(f) of the Act.
 
Section 36b-5(f) of the Act states that:

   No person who directly or indirectly receives compensation or other remuneration for:  (1) Advising another person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise; or (2) soliciting advisory business on behalf of a person subject to the prohibition contained in subsection (a) of this section shall engage in any dishonest or unethical practice in connection with the rendering of such advice or in connection with such solicitation.

The Department alleges that both Marvin and RMV Holding engaged in a dishonest or unethical practice by misappropriating money from RMV Partners for Marvin’s personal benefit.  Once again, it is undisputed that, via RMV Holding, Marvin received money in vast excess of the amounts that were authorized to be withdrawn from RMV Partners.

There is an absence of Connecticut case law construing the phrase “dishonest or unethical practice” within the securities context.  Thus, the phrase should be construed according to the commonly approved usage of the language.  See, Section 1-1(a) of the Connecticut General Statutes.  The Connecticut Supreme Court has stated that when the legislature has not provided a specific definition of a word in a statute, the Court looks to the common understanding of that word as expressed in a dictionary.  State v. Russo, 259 Conn. 436, 449, cert. denied 537 US 879 (2002).  Merriam-Webster’s Collegiate Dictionary 332 (10th ed. 2001) defines “dishonest” as “characterized by lack of truth, honesty, or trustworthiness”.  While there is no definition of “unethical” in Merriam-Webster’s dictionary, Black’s Law Dictionary 1667 (9th ed. 2009) defines “unethical” as “not in conformity with moral norms or standards of professional conduct”.

Disclosing a 1% management fee, while in actuality withdrawing substantially more than 1%, represents either unethical or dishonest conduct by Marvin and RMV Holding.  Disclosure is paramount in the securities industry, and fees received by investment advisers and investment adviser agents must be fully disclosed. 3  Connecticut courts have continually held half-truths or partial disclosure to be inadequate in the securities industry.  “A party who assumes to speak must make full and fair disclosure as to the matters about which he assumes to speak.”  Teal Assocs. v. Alfin, 2012 Conn. Super. LEXIS 3143, *2 (Conn. Super. Ct. Dec. 21, 2012).  In addition, the use of RMV Investments as a conduit for such payments, serving no other purpose but to conceal the source and ultimate beneficiary of such funds, is dishonest.  Such conduct by Marvin and RMV Holding constitutes violations of Section 36b-5(f) of the Act and forms a basis for an order to cease and desist to be issued against Marvin and RMV Holding pursuant to Section 36b-27(a) of the Act, and for the imposition of a fine against Marvin and RMV Holding, individually, pursuant to Section 36b-27(d) of the Act.

Further, the Department alleges that RMV Investments materially aided Marvin and RMV Holding in their violation of Section 36b-5(f) of the Act.  The Connecticut Supreme Court has construed materially aided in the context of another provision of the Act in Connecticut National Bank v. Giacomi, 242 Conn. 17 (Conn. 1997).  In Giacomi, the Court relied on Kungys v. United States, 485 U.S. 759, 770 (1988), for the proposition that “aid is material if it has a natural tendency to influence, or was capable of influencing the decision . . . .”  Id. at *52-53 (internal quotations omitted).  By serving as a conduit for the excessive payments to RMV Holding and Marvin, RMV Investments facilitated and materially assisted Marvin’s and RMV Holding’s violation of Section 36b-5(f) of the Act.  Such material assistance forms a basis for an order to cease and desist to be issued against RMV Investments pursuant to Section 36b-27(a) of the Act, and for the imposition of a fine against RMV Investments pursuant to Section 36b-27(d) of the Act.
3. The Department alleges that while registered as a broker-dealer agent under the Act, Marvin borrowed money or securities from an account carried for a customer without the customer’s prior consent and without notice to the broker-dealer whom he represented, constituting a dishonest or unethical practice by an agent within the meaning of Section 36b-31-15b(a)(1) of the Regulations.

Section 36b-31-15b(a)(1) of the Regulations states, in pertinent part, that:

    [T]he following shall be deemed “dishonest or unethical practices in the securities . . . business” by agents without limiting those terms to the following practices:
        
   (1)  Borrowing money or securities from an account carried for a customer without the customer’s prior consent and without notice to the broker-dealer whom the agent represents[.] 

The record reflects that Marvin was registered as a broker-dealer agent on behalf of Sloan from August 2004 to December 2009, at which time, he was discharged due to “failure to follow firm policies and procedures and violation of FINRA Rule 2730 [and] borrow[ing] money from a client without written approval as required by our written supervisory procedures and FINRA rules.”  It is undisputed that via RMV Holding, Marvin borrowed from the account of RMV Partners and only disclosed such borrowing well after the fact in December 2009.  It was also established that RMV Partners had an account at Sloan while Marvin was employed as broker-dealer agent with Sloan, and that Marvin serviced such account and received commissions on executed trades.  As a result, Marvin’s conduct violated Section 36b-31-15b(a)(1) of the Regulations, which forms a basis for an order to cease and desist to be issued against Marvin pursuant to Section 36b-27(a) of the Act.
4. The Department alleges that Marvin failed to disclose to a client in writing before any advice was rendered any conflict of interest relating to him which could reasonably be expected to impair the rendering of unbiased advice, constituting a dishonest or unethical practice by an investment adviser agent within the meaning of Section 36b-31-15d(a)(2) of the Regulations.

Section 36b-31-15d(a)(2) of the Regulations states, in pertinent part, that:

   [T]he following shall be deemed “dishonest or unethical practices in the securities . . . business” by investment adviser agents without limiting those terms to the following practices: . . .
        
  (2)  Failing to disclose to a client in writing before any advice is rendered any conflict of interest relating to the investment adviser agent which could reasonably be expected to impair the rendering of unbiased advice[.]

In particular, the Department alleges in the Statement of Facts in the Notice that Marvin “failed to disclose to the limited partners of RMV Partners (the recipient of investment advice) the potential conflict of interest involving Marvin acting simultaneously as: (1) the broker-dealer agent for RMV Partners’ brokerage account at Sloan; (2) the managing member of the General Partner of RMV Partners; and (3) the managing member of RMV Investments” and “the potential conflict of interest involved in Marvin directing loans from RMV Partners to RMV Holding while Marvin was the managing member of RMV Holding.”

Connecticut courts have not construed the term “conflict of interest” within the securities context, however, generally, the term refers to a situation in which a fiduciary’s personal interests are at odds with the interests of his or her client.  See, e.g., Grazoli et al. v. Nichols, 2007 Conn. Super. LEXIS 1635 (Conn. Super. Ct. June 19, 2007).  This is consistent with the commonly approved usage of the language.  See, Section 1-1(a) of the Connecticut General Statutes.  Black’s Law Dictionary 341 (9th ed. 2009) defines “conflict of interest” as “[a] real or seeming incompatibility between one’s private interests and one’s public or fiduciary duties”.

Several items were disclosed to investors in RMV Partners via the limited partnership agreement and private placement memorandum, including that RMV Partners could conduct certain transactions with affiliates of the general partner and that the general partner would act principally through Marvin.  However it was never disclosed prior to the rendering of advice that loans would be taken from RMV Partners by RMV Holding for the purpose of providing monies to Marvin.  Such loans represented a situation in which Marvin’s personal interest of receiving a certain amount in salary from the fund was at odds with the best interest of the fund and, ultimately, its limited partners.  As an investment adviser agent, Marvin’s failure to disclose this practice prior to the rendering of advice to his clients constitutes a violation of Section 36b-31-15d(a)(2) of the Regulations, which forms a basis for an order to cease and desist to be issued against Marvin pursuant to Section 36b-27(a) of the Act.
       
    
Authority to Issue Order to Cease and Desist and Impose Fine
 
Section 36b-27(a) of the Act provides, in pertinent part, that:

Whenever it appears to the commissioner after an investigation that any person has violated, is violating or is about to violate any of the provisions of sections 36b-2 to 36b-34, inclusive, or any regulation, rule or order adopted or issued under said sections, . . . or that any person has engaged in a dishonest or unethical practice in the securities . . . business within the meaning of sections 36b-31-15a to 36b-31-15d, inclusive, of the regulations of Connecticut state agencies, the commissioner may, in the commissioner’s discretion, order (1) the person, . . . or (3) any other person that has materially aided, is materially aiding or is about to materially aid in such violation, to cease and desist from the violations . . . of the provisions of said sections or of the regulations, rules or orders thereunder, . . . or from further engaging in such dishonest or unethical practice . . . .  After such an order is issued, the person named in the order may, within fourteen days after receipt of the order, file a written request for a hearing.  Any such hearing shall be held in accordance with the provisions of chapter 54.

Section 36b-27(d) of the Act provides, in pertinent part, that:

(1)  Whenever the commissioner finds as the result of an investigation that any person has violated any of the provisions of sections 36b-2 to 36b-34, inclusive, or any regulation, rule or order adopted or issued under said sections, the commissioner may send a notice to (A) such person, . . . or (C) any other person that has materially aided in such violation, by registered or certified mail, return receipt requested . . . .  The notice shall be deemed received by the person on the earlier of the date of actual receipt or the date seven days after the date on which such notice was mailed or sent.  Any such notice shall include:  (i) A reference to the title, chapter, regulation, rule or order alleged to have been violated; (ii) a short and plain statement of the matter asserted or charged; (iii) the maximum fine that may be imposed for such violation; (iv) a statement indicating that such person may file a written request for a hearing on the matters asserted not later than fourteen days after receipt of the notice; and (v) the time and place for the hearing.

(2)  If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the charges made unless such person fails to appear at the hearing.  Any such hearing shall be held in accordance with the provisions of chapter 54.  After the hearing if the commissioner finds that the person has violated . . . any of the provisions of sections 36b-2 to 36b-34, inclusive, or any regulation, rule or order adopted or issued under said sections, the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person.  If 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.  The commissioner shall send a copy of any order issued pursuant to this subsection by registered or certified mail, return receipt requested, . . . to any person named in such order.

 
Notice
 
  Section 4-177 of the Connecticut General Statutes provides, in pertinent part, that:

(a)  In a contested case, all parties shall be afforded an opportunity for hearing after reasonable notice.

(b)  The notice shall be in writing and shall include:  (1) A statement of the time, place, and nature of the hearing; (2) a statement of the legal authority and jurisdiction under which the hearing is to be held; (3) a reference to the particular sections of the statutes and regulations involved; and (4) a short and plain statement of the matters asserted.

The Notice issued by the Commissioner complied with Sections 36b-27(a) and 36b-27(d) of the Act and Section 4-177 of the Connecticut General Statutes.

    
  
Public Interest
  
Section 36b-31(b) of the Act states, in pertinent part, that:

No . . . 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.

I conclude that it is in the public interest, 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 to enter the following order.

      

ORDER
  

Having read the record, I hereby ORDER:
  
1. Pursuant to Section 36b-27(a) of the Act, that the Order to Cease and Desist issued against Ronald Marvin on May 9, 2012, be and is hereby made PERMANENT with respect to violations of Sections 36b-5(f) and 36b-6(c)(2) of the Act and dishonest or unethical practices within the meaning of Sections 36b-31-15b(a)(1) and 36b-31-15d(a)(2) of the Regulations;
2. Pursuant to Section 36b-27(a) of the Act, that the Order to Cease and Desist issued against RMV Holding Company, LLC on May 9, 2012, be and is hereby made PERMANENT with respect to violations of Sections 36b-5(f) and 36b-6(c)(1) of the Act;
3. Pursuant to Section 36b-27(a) of the Act, that the Order to Cease and Desist issued against RMV Investments, LLC on May 9, 2012, be and is hereby made PERMANENT with respect to materially aiding persons in violation of Section 36b-5(f) of the Act;
4. Pursuant to Section 36b-27(d) of the Act, that a FINE of Two Hundred Thousand Dollars ($200,000) be imposed against Ronald Marvin 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 after this date the Order is mailed;
5. Pursuant to Section 36b-27(d) of the Act, that a FINE of Twenty Thousand Dollars ($20,000) be imposed against RMV Holding Company, 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 forty-five (45) days after this date the Order is mailed;
6. Pursuant to Section 36b-27(d) of the Act, that a FINE of Ten Thousand Dollars ($10,000) be imposed against RMV Investments, 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 forty-five (45) days after this date the Order is mailed;
7. The Order shall become effective when mailed.
 

Dated at Hartford, Connecticut,       ______/s/__________ 
this 29th day of July 2013.   Howard F. Pitkin 
    Banking Commissioner 


This Order was sent by certified mail,
return receipt requested, to Respondents'
attorneys and hand delivered to
Elena Zweifler, Esq., on July 29, 2013.

Rick Slavin, Esq.
Ari J. Hoffman, Esq.
Cohen and Wolf
115 Broad Street
Bridgeport, CT 06604
Certified Mail No. 7012 1010 0001 7317 4964

 

Footnotes

1  The court noted, “in interpreting CUSA, General Statutes § 36b-2 to 36b-33, it is appropriate to look to federal decisional law for interpretation of analogous language.  See Lehn v. Dailey, supra, 77 Conn.App. 628-29.”  Id. at *34.
      
2  The brief filed by Respondents discusses the broker-dealer exclusion to the definition of “investment adviser” at length, arguing that Marvin’s activities qualify for such exclusion.  Since Marvin is excluded from the definition of “investment adviser” as a result of being an investment adviser agent, such claim need not be addressed.
      
3  In construing similar federal securities laws, the United States Supreme Court stated:

   The Investment Advisers Act of 1940 was the last in a series of Acts designed to eliminate certain abuses in the securities industry, abuses which were found to have contributed to the stock market crash of 1929 and the depression of the 1930’s . . . .  A fundamental purpose, common to these statutes, was to substitute a philosophy of full disclosure for the philosophy of caveat emptor and thus to achieve a high standard of business ethics in the securities industry.  As we recently said in a related context, “It requires but little appreciation . . . of what happened in this country during the 1920’s and 1930’s to realize how essential it is that the highest ethical standards prevail” in every facet of the securities industry.

SEC v. Capital Gains Research Bureau, Inc. 375 U.S. 180, 186-187 (U.S. 1963) (internal notations and citations omitted).
      


Administrative Orders and Settlements