DOB: Winter 2017 Securities Bulletin

Securities and Business Investments Division

Securities Bulletin

Vol. XXXI  No. 4 
Winter 2017

Features

Enforcement and Other Highlights 


ADMINISTRATIVE ACTIONS

CE Capital Limited, Arthur Connolly, Trevor M. Allen, Sr. and Troy Rejda - Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine Issued

On December 1, 2017, the Banking Commissioner issued an Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine (Docket No. CRF-17-8212-S) against CE Capital Limited, a purported foreign business entity located in Hong Kong.  Also named in the action were Arthur Connolly of Kent, Connecticut, Risk Management Officer of CE Capital; Trevor M. Allen, Sr., Capital Account Signatory for CE Capital; and Troy Rejda of Ozark, Missouri.

The action alleged that the respondents offered and sold unregistered securities in the form of participation agreements in or from Connecticut.  Under the terms of one such participation agreement, an investor's $50,000 outlay would result in a "Profit Participation" of $450,000 within 31 days as well as the guaranteed return of the investor's initial $50,000.  The investor's monies were not returned nor did he receive the $450,000 "Profit Participation." The action alleged that the respondents violated the antifraud provisions in Section 36b-4 of the Connecticut Uniform Securities Act by failing to disclose, among other things, how a $50,000 investment could yield an additional return of $450,000 in 31 days or less; financial and background information on CE Capital Limited and its principals; risk factors relating to the investment; and information on how the investment proceeds would be applied. In addition, the action alleged that Connolly, Allen and Rejda transacted business as unregistered agents of issuer in violation of Section 36b-6 of the Act and that CE Capital Limited employed them in that unregistered capacity.

The respondents were afforded an opportunity to request a hearing on the allegations in the Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine.  Respondents Arthur Connolly and CE Capital Limited failed to request a hearing on the Order to Cease and Desist and Order to Make Restitution, and the Order to Cease and Desist and Order to Make Restitution became permanent as to each of them on January 3, 2018.

Lee Tyrol, Tyrol Group, LLC and Native American Tyrol Energy, LLC Fined $100,000, Order to Cease and Desist and Order to Make Restitution Made Permanent

On November 3, 2017, following a hearing, the Banking Commissioner entered Findings of Fact, Conclusions of Law and an Order against Tyrol Group, LLC of 130 Captains Drive, Westbrook, Connecticut 06498, Native American Tyrol Energy, LLC of 45 Foxboro Road, Essex, Connecticut 06426 and Lee Tyrol, control person of each entity.  None of the respondents appeared at the hearing.
 

The action had been preceded by an August 29, 2016 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRF-16-8171-S) alleging that from approximately January 2009 to September 2013, Tyrol, individually and/or on behalf of the Tyrol entities sold approximately $587,000 of securities consisting of ownership interests in the Tyrol entities, and that the securities were not registered under the Connecticut Uniform Securities Act.  The August 29, 2016 action had also alleged that, to induce investors to invest, Tyrol represented that investor monies would be used to finance projects earning upwards of $100 to $300 million dollars per year.  Tyrol allegedly did not provide investors with information relating to the operating history and finances of the Tyrol entities; the risks associated with the investment; the fact that Tyrol ultimately used investor funds for his personal expenses; or the unregistered status of the securities.  Such conduct allegedly violated the antifraud provisions in Section 36b-4(a) of the Connecticut Uniform Securities Act.  In addition, the action had alleged that Tyrol transacted business as an unregistered agent of issuer in violation of Section 36b-6(a) of the Act and that the Tyrol entities employed him in an unregistered capacity in contravention of Section 36b-6(b) of the Act.


Under Section 36a-1-31(b) of the Regulations, in light of Respondents’ default, the allegations against them made in the August 29, 2016 action were deemed admitted.  Accordingly, the Commissioner found that 1) all respondents violated Sections 36b-16 and 36b-4(a) of the Act; 2) respondents Tyrol Group, LLC and Native American Tyrol Energy, LLC violated Section 36b-6(b) of the Act; and 3) respondent Lee Tyrol violated Section 36b-6(a) of the Act.


The Commissioner rendered permanent the Order to Cease and Desist and the Order to Make Restitution issued against each respondent.  In addition, the Commissioner fined the respondents $100,000, jointly and severally.

Omni View Capital LLC and Abraxas J. Discala (CRD No. 3188107) Fined $300,000 Following Hearing, Ordered to Pay Restitution

On October 13, 2017, following an administrative hearing, the Banking Commissioner issued Findings of Fact, Conclusions of Law and an Order (Docket No. CRF-16-8169-S) in the matter of Omniview Capital Advisors, LLC, Omni View Capital LLC and Abraxas J. Discala, Chief Executive Officer of both entities.  Respondents Omniview Capital Advisors, LLC and Omni View Capital LLC were both located at 140 Rowayton Avenue, Norwalk, Connecticut.


The decision had been preceded by a February 17, 2017 Amended and Restated Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing which had been previously issued on August 17, 2016.

The hearing decision concluded that respondent Omni View Capital LLC, through its involvement in the sale of Crackpot, Inc. stock and participation interests in Scanbuy, Inc., had transacted business as an unregistered broker-dealer in violation of Section 36b-6(a) of the Connecticut Uniform Securities Act, and that respondent Discala had transacted business as an unregistered broker-dealer agent in violation of Section 36b-6(a) of the Act.  The decision also determined that respondents Omni View Capital LLC and Discala violated Section 36b-16 of the Act by selling unregistered securities issued by Crackpot, Inc. and Scanbuy, Inc. to investors.  In addition, the decision found that respondents Omni View Capital LLC and Discala violated Section 36b-4(a)(3) of the Act by engaging in an act, practice or course of business which operates as a fraud or deceit.  More specifically, Discala and Omni View Capital LLC failed to ensure full disclosure of potentially adverse information to potential investors, including, without limitation, the fact that Discala and Omni View Capital LLC were unregistered and that no filings had been made with the department for the securities involved.  The decision found that there was insufficient evidence to establish that Omniview Capital Advisors, LLC transacted business as an unregistered broker-dealer, that it offered or sold unregistered securities in violation of Section 36b-16 of the Act or that it violated the antifraud provisions in Section 36b-4(a) of the Act.

  
The action rendered permanent the Amended and Restated Order to Cease and Desist and Order to Make Restitution issued against Omni View Capital LLC and Discala.  The Order also directed Omni View Capital LLC and Discala to reimburse the affected Connecticut investors $47,500 plus interest no later than 30 days following the mailing of the Order.  The original reimbursement amount of $55,000 was reduced by a partial refund of $7,500 previously remitted to the Connecticut investors.  In addition, the action levied a $150,000 fine against Omni View Capital LLC and a $150,000 fine against Discala, payable no later than 30 days following the mailing of the Order.
 



Senior Financial Advisors, Inc. (CRD No. 139518) and William Thomas Leavitt (CRD No. 2408292) Fined $10,000 Jointly and Severally

On December 15, 2017, the Banking Commissioner entered a Consent Order (No. CO-17-8373-S) with respect to Senior Financial Advisors, Inc. of 1 Corporate Drive, Suite 105, Shelton, Connecticut 06484 and William Thomas Leavitt, president of the firm.  The firm is registered as an investment adviser under the Connecticut Uniform Securities Act.  The Consent Order was an outgrowth of an examination of the firm and a related investigation conducted by the Securities and Business Investments Division.


The Consent Order alleged that Senior Financial Advisors, Inc. violated Section 36b-31-14e(a) of the Regulations under the Act by failing to amend its Form ADV to reflect that it had custody of an advisory client's cash, bank accounts and/or securities.  The custody issue arose when an advisory client, since deceased, designated Leavitt to act as sole trustee of the account upon the account owner's death.  On December 10, 2017, Leavitt transferred trusteeship of the account to a third party.  The Consent Order also alleged that the firm and Leavitt violated Section 36b-31-14e(a) of the Regulations by failing to amend their regulatory filings to reflect that they were doing business as “Senior Financial College Planning” and to explain the nature of that business.  Senior Financial College Planning’s business purpose was to assist students with the college admissions process and to provide parents of college bound students with advice on managing finances.  In addition, the Consent Order alleged that from January 1, 2016 to January 4, 2017, William Thomas Leavitt transacted business as an unregistered investment adviser agent in contravention of Section 36b-6(c)(2) of the Act, and that the firm unlawfully engaged Leavitt in an unregistered capacity in violation of Section 36b-6(c)(3) of the Act.  The Consent Order acknowledged that the firm and Leavitt ultimately updated their regulatory filings and that Leavitt became registered as an investment adviser agent of the firm in Connecticut.


The Consent Order directed Senior Financial Advisors, Inc. and William Thomas Leavitt to cease and desist from regulatory violations and to pay a $10,000 fine to the department, jointly and severally.  The Consent Order also required the firm to review and revise (as necessary) its written supervisory procedures within six months to ensure that the firm was in compliance with regulatory requirements governing custody and other matters.

 


Advanced Business Banking Solutions LLC

On November 27, 2017, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-17-8321-S) with Advanced Business Banking Solutions LLC, a since dissolved Connecticut limited liability company whose purpose was to provide credit card processing services to businesses. The entity was located at 1331 Silas Deane Highway, Suite 202, Wethersfield, Connecticut 06109. The sole managing member of Advanced Business Banking Solutions LLC was John Hamby.

The Stipulation and Agreement alleged that in 2011, Advanced Business Banking Solutions offered and sold unregistered securities to at least one Connecticut investor in contravention of Section 36b-16 of the Connecticut Uniform Securities Act.  John Hamby executed the Stipulation and Agreement on behalf of Advanced Business Banking Solutions LLC, agreeing to pay a $500 fine in resolution of the matter.  Pursuant to the Stipulation and Agreement, Advanced Business Banking Solutions LLC, its control persons, affiliates and successors in interest agreed to refrain from state securities law violations.
 

Columbia Funds Series Trust and Columbia Funds Series Trust I Assessed $8,500 for Notice Filing Delinquencies

  
On October 24, 2017, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-17-8276-S) with Columbia Funds Series Trust and Columbia Funds Series Trust I, both of 225 Franklin Street, Boston, Massachusetts 02110.  Each trust is an open-end management investment company under the Investment Company Act of 1940.

The Stipulation and Agreement alleged that the trusts were delinquent in making notice filings under Section 36b-21(c) of the Connecticut Uniform Securities Act for various securities portfolios.  After self-reporting the deficiencies through a third party service provider upon whom the trusts had relied to make the required filings, the deficiencies were cured.  The affected Columbia Funds Series Trust portfolios were:  1) Columbia AMT-Free North Carolina Intermediate Muni Bond Fund; 2) Columbia AMT-Free South Carolina Intermediate Muni Bond Fund; 3) Columbia AMT-Free California Intermediate Muni Bond Fund; 4) Columbia AMT-Free Virginia Intermediate Muni Bond Fund; and 5) Columbia AMT-Free Maryland Intermediate Muni Bond Fund.  The affected Columbia Funds Series Trust I portfolios were:  1) Columbia AMT-Free Oregon Intermediate Muni Bond Fund; and 2) Columbia California Tax-Exempt Fund.
  

Pursuant to the Stipulation and Agreement, Columbia Funds Series Trust and Columbia Funds Series Trust I agreed to jointly and severally remit $8,500 to the department.  Of that amount, $5,000 represented reimbursement for past due notice filing fees and $3,500 constituted an administrative fine.  In addition, the trusts agreed to refrain from offering or selling securities absent compliance with Connecticut securities filing requirements.
 


Dale Joseph Quesnel, Sr. (CRD No. 2231152) Permanently Enjoined from Violating State Securities Laws; Civil Judgment Entered Enforcing Administrative Sanctions Levied by Commissioner

On December 22, 2017, the Superior Court for the Judicial District of Hartford entered an Order permanently enjoining Dale Joseph Quesnel, Sr. from violating Sections 36b-16, 36b-6(a), 36b-23, 36b-4(a) and 36b-6(c)(1) of the Connecticut Uniform Securities Act (Perez v. Dale Joseph Quesnel, Sr.; Docket No. HHDCV16607129S).  The Order also directed defendant Quesnel to make restitution to investors and to pay a $600,000 fine imposed against Quesnel by the Commissioner on March 3, 2016.  Defendant Quesnel's failure to pay the administrative fine and to abide by the Commissioner's prior directive regarding restitution resulted in the court imposing an additional $900,000 penalty on Quesnel.  Both the $600,000 fine and the $900,000 penalty would be payable in $10,000 monthly installments.

By way of background, on March 3, 2016, the Banking Commissioner had entered Findings of Fact, Conclusions of Law and an Order by default against Quesnel, a former insurance licensee and a former broker-dealer agent of ING Financial Partners, Inc. n/k/a Voya Financial Advisors, Inc. (Docket No. CRF-15-8110-S).  Respondent Quesnel had been the subject of a June 22, 2015 Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine which also named Overtime Marketing, LLC, Overtime Sports Southeast, LLC, Overtime Sports Southwest, LLC, Kenny Hansmire and Floridel, LLC as respondents.  Since respondent Quesnel failed to appear at the hearing on the June 22, 2015 action, the allegations against him were deemed admitted.  Accordingly, on March 3, 2016, the Commissioner found that Quesnel violated 1) Section 36b-16 of the Connecticut Uniform Securities Act by offering and selling unregistered securities issued by the Overtime entities and by Floridel, LLC; 2) Section 36b-6(a) of the Act by transacting business as an unregistered agent of issuer for more than one entity; 3) Section 36b-23 of the Act by making material misrepresentations to the Division concerning his securities-related compensation; 4) the antifraud provisions in Section 36b-4(a) of the Act in connection with the offer and sale of securities; 5) Section 36b-31-6e of the Regulations under the Act by participating in private securities transactions without providing prior written notice to his employing broker-dealer; and 6) Section 36b-6(c)(1) of the Act by transacting business as an unregistered investment adviser.  The March 3, 2016 Order had rendered the June 22, 2015 Order to Cease and Desist and Order to Make Restitution permanent, and fined Quesnel $600,000.



  


STATISTICAL SUMMARY

Licensing At A Glance
at the end of the quarter

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Broker-dealers Registered   2,180 2,177
2,173
2,116
Broker-dealer Agents Registered 164,522 166,491
169,340
163,204
Broker-dealer Branch Offices Registered 2,597 2,589
2,593
2,568
Investment Advisers Registered 528 523 527
491
SEC Registered Advisers Filing Notice 2,141 2,180 2,214
2,119
Investment Adviser Agents Registered 13,542 13,711 13,868
13,579
Exempt Reporting Advisers
117
121
124
126
Agents of Issuer Registered 18 18 17
17
Conditional Registrations
0
0
0
0
 
 

Securities and Business
Opportunity Filings

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Offerings Reviewed 62 50
59
27 198
Investment Company Notice Filings 568 638
425
7,587 9,218
Exemptions and Exemptive Notices 945 994 879 988 3,806
 
 
Examinations
     
Broker-dealers 17 24
26
29 96
Investment Advisers 26 31
33
38 128
 
 
Securities Investigations
 
Opened 15 17 16
7
55
Closed 23 10 21
16
70
Ongoing as of End of Quarter 82 89 80
71
  
Subpoenas issued 5 19 6 24 54
Matters referred from Attorney General 1 1 1 0 3
Matters referred from Other Agencies 0 1 1 0 2
 
 
Business Opportunity Investigations
 
Investigations Opened 1 0  2 0 3
Investigations Closed 1 0
0
1 2
Ongoing as of End of Quarter 2 2 4 3     
 
 
Enforcement: Remedies and Sanctions
 
Notices of Intent to Deny (Licensing) 0
1
0
0
1
Notices of Intent to Suspend (Licensing)
0
0
0
0
0
Notices of Intent to Revoke (Licensing)
0
0
0
0
0
Denial Orders (Licensing) 0 0
0
0 0
Suspension Orders (Licensing) 0 0
0
0
0
Revocation Orders (Licensing) 1 0
0
0 1
Notices of Intent to Fine 0 2
0
1 3
Orders Imposing Fine 0 0
1
2 3
Cease and Desist Orders 0 2
0
1 3
Notices of Intent to Issue Stop Order 0 0
0
0
0
Activity Restrictions/Bars 1 0
2
0
3
Stop Orders 0 0 0 0 0
Vacating/Withdrawal/ Modification Orders 1 0 0 0 1
Restitutionary Orders 0 0
0
2 2
Injunctive Relief Obtained 0 0 0 1 1
 
 

Proceedings and Settlements

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Administrative Actions
1
2
1
3
7
Consent Orders
2
3
2
1
8
Stipulation and Agreements
1
0
2
2
5
 
 

Monetary Relief*

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Monetary Sanctions Imposed
$23,500
$45,400
$221,000
$1,319,000 $1,608,900
Portion attributable to settlements
$23,500
$45,400
$21,000
$19,000
$108,900
Attributable to Court-Ordered Penalties
0
0
0
$900,000 
$900,000
Restitution or Other Monetary Relief
(includes rescission offer amounts)
$17,000
$25,000
$196,597
$47,500  $286,097

*Cents eliminated

 

Securities Referrals

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Year
to Date
Criminal Matters
0
0
0
0
0
Civil (Attorney General)
0
0
0
0
0
Other Agency Referrals
0
0
0
0
0



Securities Division