DOB: Employers of Agents Seeking Multiple Registration Exempt from Joint and Several Undertaking

ORDER EXEMPTING EMPLOYERS OF AGENTS SEEKING MULTIPLE REGISTRATION FROM THE JOINT AND SEVERAL LIABILITY UNDERTAKING IN SECTION 36b-31-6g(c) OF THE REGULATIONS UNDER THE CONNECTICUT UNIFORM SECURITIES ACT


WHEREAS the Commissioner of Banking (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 (the "Regulations") promulgated under the Act;

WHEREAS Section 36b-31(a) of the Act provides, in part, that: "The commissioner may from time to time make ... such ... orders as are necessary to carry out the provisions of sections 36b-2 to 36b-33, inclusive, including ... orders governing ... applications ... For the purpose of ... orders, the commissioner may classify securities, persons and matters within his jurisdiction, and prescribe different requirements for different classes";

WHEREAS Section 36b-31(b) of the Act provides 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-33, inclusive";

WHEREAS the Commissioner finds that the issuance of this 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 Section 36b-31-6g of the Regulations provides, in part, that:

(a) No person shall be concurrently registered as an agent of more than one broker-dealer or issuer unless written consent is obtained from the commissioner.

(b) No person shall be concurrently registered as an investment adviser agent of more than one investment adviser unless written consent is obtained from the commissioner.

(c) The commissioner may consent to multiple registration under subsections (a) and (b) of this section if each employer files a written undertaking with the commissioner containing the following information: (1) A statement by each employer that it consents to the multiple employment of the agent or investment adviser agent and setting forth the effective date of the multiple employment and (2) a statement by each employer that it agrees to assume joint and several liability with all other employers for any act or omission of the agent or investment adviser agent during the employment period (emphasis added);

WHEREAS Section 36b-29(c) of the Act imposes joint and several liability as a matter of law on control persons and on broker-dealers who materially aid in an act or transaction constituting a violation of the Act. Section 36b-29(c) states, in part, that: "Every person who directly or indirectly controls a person liable under subsections (a) and (b) of this section and every broker-dealer who materially aids in the act or transaction constituting the violation are also liable jointly and severally with and to the same extent as such person, unless the person who is so liable sustains the burden of proof that he did not know, and in exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. There shall be contribution as in cases of contract among the several persons so liable";

WHEREAS Section 36b-29(j) of the Act adds that: "[t]he rights and remedies provided by sections 36b-2 to 36b-33, inclusive, [of the Act] are in addition to any other rights or remedies that may exist at law or in equity";

WHEREAS Section 36b-27(c) of the Act imposes joint and several liability upon control persons in administrative disgorgement and restitutionary proceedings. Section 36b-27(c) states, in part, that: "The commissioner, in the commissioner's discretion, may order any person who directly or indirectly controls a person liable under subsection (b) of this section to make restitution or to provide disgorgement of any sums shown to have been obtained as a result of a dishonest or unethical practice or in violation of any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections. Such controlling person shall be liable jointly and severally with and to the same extent as the person liable under subsection (b) of this section, unless such controlling person allegedly liable under this subsection sustains the burden of proof that such person did not know, and in the exercise of reasonable care could not have known, of the existence of facts by reason of which the liability is alleged to exist";

WHEREAS Section 36b-31-31c of the Regulations provides that: "The commissioner may exempt a person ... from a specified provision of ... the regulations upon a finding that such exemption is in the public interest";

WHEREAS the Commissioner finds that granting the related exemptive relief set forth in this Order is in the public interest since it reduces the regulatory burden on certain employers of applicants for multiple registration;

NOW THEREFORE THE COMMISSIONER ORDERS AS FOLLOWS:

(1) Pursuant to Section 36b-31-31c of the Regulations, and effective upon entry of this Order by the Commissioner, the joint and several liability undertaking required by Section 36b-31-6g(c) of the Regulations shall be waived for employers of a) agents seeking concurrent registration with multiple issuers; b) agents seeking concurrent registration with multiple broker-dealers; and c) investment adviser agents seeking concurrent registration with multiple investment advisers, where the employing issuers, broker-dealers or investment advisers involved are affiliated or under common management and control;
(2) Where the employing issuers, broker-dealers or investment advisers are not affiliated or under common management and control, an agent or investment adviser agent seeking to be registered concurrently with multiple issuers, broker-dealers or investment advisers, as the case may be, shall procure from each employing issuer, broker-dealer or investment adviser and shall file with the Commissioner the undertaking required by Section 36b-31-6g(c) of the Regulations as a condition to multiple registration;
(3) Nothing in this Order shall excuse broker-dealer agents and investment adviser agents from complying with their obligations, under Sections 36b-31-15b(a)(6) and 36b-31-15d(a) of the Regulations, respectively, to disclose in writing to customers and clients any potential conflicts of interest, including the multiple capacity in which the agent or investment adviser agent is acting;
(4) Nothing in this Order shall preclude the Commissioner from imposing on a multiple registrant any additional individual conditions as may be necessary in the public interest; and
(5) The terms and conditions of this Order shall become effective upon entry of this Order, and shall remain in effect until modified, superseded or vacated by the Commissioner or other legal authority.
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So ordered at Hartford, Connecticut this 5th day of February 2002. John P. Burke
Banking Commissioner