| * * * * * * * * * * * * * * IN THE MATTER OF: ADVISORS CAPITAL |
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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 (the “Regulations”) promulgated under the Act;
WHEREAS, Advisors Capital Investments, Inc. (“ACI”) and Advisor’s Capital Research, Inc. (“ACR”) are affiliated investment advisers located at 17 Tripp Road, Woodstock, Connecticut;
WHEREAS, Robert Keith Mann (“Mann”) is the president of ACI and ACR as well as a control person of each entity;
WHEREAS, on March 25, 2010, ACI filed an application for registration as an investment adviser under the Act since it was no longer eligible to remain registered with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940;
WHEREAS, until October 18, 2005, ACI maintained its principal office at 2220 South Ocean Boulevard, # 1002, Delray, Beach Florida 33483;
WHEREAS, on May 28, 2010, ACR filed an application for registration as an investment adviser under the Act since it was no longer eligible to remain registered with the SEC as an investment adviser;
WHEREAS, ACR was previously known as Pac Capital Strategies Inc. and as Mann Research and, until October 18, 2005, maintained its principal office at 2220 South Ocean Boulevard, #1002, Delray, Beach Florida 33483;
WHEREAS, Mann has been registered as an investment adviser agent of ACI under the Act since August 26, 1987, and applied for registration as an investment adviser agent of ACR under the Act on June 11, 2010;
WHEREAS, the Commissioner, through the Securities and Business Investments Division (the “Division”) of the Department of Banking, conducted an investigation pursuant to Sections 36b-8 and 36b-26(a) of the Act into the activities of ACI, ACR and Mann to determine if they, or any of them, had violated, were violating or were about to violate provisions of the Act, the Regulations or any order under the Act;
WHEREAS, on its March 25, 2010 Form ADV registration filing, ACI failed to disclose Mann’s arbitration history, and answered all the questions in the negative on Form ADV, Part 1B, Items 2 C, D, E and F. Such questions ask whether any advisory affiliate or any management person has been the subject of an arbitration claim alleging damages in excess of $2500;
WHEREAS, Mann signed ACI’s March 25, 2010 Form ADV filing, certifying that “the information and statements made in this ADV, including exhibits and any other information submitted, are true and correct”;
WHEREAS, Mann maintains that he incorrectly answered the questions found on Form ADV, Part 1B Item 2 because the disclosures were made on Mann’s Form U-4 as they occurred;
WHEREAS, ACI updated its Form ADV on April 16, 2010 to make the requisite disclosures in Form ADV Part 1B;
WHEREAS, as a result of such investigation, the Commissioner alleges that ACI failed to adequately disclose Mann’s disciplinary history on Form ADV, Part 1B, and that Mann, in certifying the accuracy of the information provided on behalf of ACI, violated Section 36b-23 of the Act by making a materially false or misleading statement in a document filed with the Commissioner;
WHEREAS, the foregoing allegations, if proven, would support proceedings under Sections 36b-15 and 36b-27 of the Act seeking the issuance of an order to cease and desist, the imposition of an administrative fine and/or denial of the registrations of ACI, ACR and Mann under the Act
WHEREAS, Section 36b-15(a) of the Act provides, in part, that: “The commissioner may, by order, deny . . . any registration or, by order, restrict or impose conditions on the securities or investment advisory activities that an applicant . . . may perform in this state if the commissioner finds that (1) the order is in the public interest, and (2) the applicant . . . or, in the case of a[n] . . . investment adviser, any partner, officer, or director, any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling the . . . investment adviser: (A) Has filed an application for registration which . . . as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained any statement which was, in light of the circumstances under which it was made, false or misleading with respect to any material fact; (B) has wilfully violated or wilfully failed to comply with any provision of sections 36b-2 to 36b-34, inclusive, or a predecessor statute or any regulation or order under said sections or a predecessor statute”;
WHEREAS, an administrative proceeding under Sections 36b-15 and 36b-27 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 stipulation, agreed settlement, or consent order or by the default of a party”;
WHEREAS, Section 36b-31(a) of the Act, provides, in relevant 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 [of the Act]”;
WHEREAS, the Commissioner finds that the entry of this Consent 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, 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, ACI, ACR and Mann reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, Mann, ACR and ACI agree to the terms of this Consent Order, and agree to the language in this Consent Order;
CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Mann, ACI and ACR, through their execution of this Consent Order, voluntarily waive the following rights:
| 1. | To receive prior written notice within the meaning of Sections 36b-27(a), 36b-27(d), 36b-15(f) and 4-177(b) of the Connecticut General Statutes; |
| 2. | To present evidence and argument and to otherwise avail themselves of Section 4-177c(a) of the Connecticut General Statutes; |
| 3. | To present their respective positions in a hearing in which each is represented by counsel; |
| 4. | To have a written record of the hearing made and a written decision issued by a hearing officer; and |
| 5. | To seek judicial review of, or otherwise challenge or contest, the matters described herein, including the validity of this Consent Order. |
FINDINGS OF THE COMMISSIONER AS TO EVIDENTIARY SUFFICIENCY
TO INITIATE ADMINISTRATIVE PROCEEDINGS
WHEREAS, the Commissioner finds that sufficient grounds would exist to initiate administrative proceedings against ACI, ACR and Mann under Section 36b-15 of the Act and proceedings against Mann and ACI under Section 36b-27 of the Act based on the following which ACI, ACR and Mann neither admit nor deny:
| 1. | ACI’s initial failure to adequately disclose Mann’s disciplinary history on Form ADV, Part 1B would support proceedings under Section 36b-15(a)(2)(A) of the Act to deny or condition ACI’s registration in Connecticut; |
| 2. | Mann, in certifying the accuracy of the information provided on behalf of ACI, violated Section 36b-23 of the Act by making a materially false or misleading statement in a document filed with the Commissioner. Such conduct would support the initiation of administrative proceedings against Mann under Section 36b-27(a) and 36b-27(d) of the Act; |
| 3. | The above described conduct of Mann, a control person of ACI and ACR, would support proceedings to deny the registrations of ACI and ACR pursuant to Section 36b-15(a)(2)(B) of the Act; and |
| 4. | The above described conduct of Mann would support proceedings to deny Mann’s registration as an investment adviser agent of ACR under Section 36b-15(a)(2)(B) of the Act. |
CONSENT TO ENTRY OF SANCTIONS AND REMEDIAL MEASURES
WHEREAS, Mann, ACI and ACR, through their execution of this Consent Order, consent to the Commissioner’s entry of a Consent Order imposing on them the following sanctions and remedial measures:
| 1. | Mann 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 organizational or other device; |
| 2. | Within sixty (60) days following the Commissioner’s entry of this Consent Order ACI and ACR shall submit to the Division Director in writing the names and credentials of at least two experienced securities compliance consultant candidates, who may be Connecticut-licensed attorneys, to assist ACI and ACR in fulfilling its obligations under this paragraph. In meeting its obligations hereunder, ACI and ACR shall only retain a compliance consultant concerning whose credentials the Division Director has voiced no objection. After six months have expired from the Commissioner’s entry of this Consent Order, ACI and ACR shall meet and confer with such selected consultant to ensure that ACI and ACR are in compliance with this Consent Order, the Act and the Regulations thereunder. After the initial consultation, ACI and ACR shall meet and confer with such consultant annually until two years have elapsed from the entry of this Consent Order by the Commissioner; |
| 3. | No later than the date this Consent Order is entered by the Commissioner, ACI and ACR, through Mann, shall remit to the department by certified bank check payable to “Treasurer, State of Connecticut” the sum of three thousand five hundred dollars ($3,500), three thousand dollars ($3,000) of which shall constitute an administrative fine and five hundred dollars ($500) of which shall be applied to defray the Division’s investigative costs; |
CONSENT ORDER
NOW THEREFORE, the Commissioner enters the following:
| 1. | The Sanctions and Remedial Measures 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 Mann, ACI and ACR, as the case may be, 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 with the terms hereof [sic]; and |
| 3. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut | _______/s/_________ | |
| this 27th day of September, 2010. | Howard F. Pitkin | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Robert K. Mann, state individually and on behalf of Advisors Capital Investments, Inc. and Advisor’s Capital Research, Inc., 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 Advisors Capital Investments, Inc. and Advisor’s Capital Research, Inc.; that I, Advisors Capital Investments, Inc. and Advisor’s Capital Research, Inc. agree freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that I, Advisors Capital Investments, Inc. and Advisor’s Capital Research, Inc. voluntarily consent to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.
| Advisors Capital Investments, Inc. | |
| By | ______/s/____________________ |
| Robert K. Mann | |
| President |
| Advisors Capital Research, Inc. | |
| By | ______/s/__________________ |
| Robert K. Mann | |
| President |
| ______/s/__________________ | |
| Robert K. Mann (Individually) | |
On this the 22nd day of September 2010, before me, the undersigned officer, personally appeared Robert K. Mann, known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and acknowledged that he executed the same for the purposes therein contained.
In witness whereof I hereunto set my hand.
_____________/s/___________________________________
Notary Public/Commissioner of the Superior Court
Date Commission Expires: Nov. 30, 2011