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CHARLES MORGAN * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER No. CO-10-7885-S |
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 promulgated under the Act (the "Regulations");
WHEREAS, Charles Morgan Securities, Inc. ("Charles Morgan") is a broker-dealer registered in Connecticut under the Act since June 12, 2007, and has its principal office located at 120 Wall Street, 16th Floor, New York, New York;
WHEREAS, on June 12, 2007, the Commissioner entered a Consent Order Conditioning Registration as a Broker-dealer (No. CO-07-7344-S) (the "2007 Consent Order") with respect to Charles Morgan. Such 2007 Consent Order is incorporated by reference herein and made a part hereof. Among other things, the 2007 Consent Order restricted the firm's activities by obligating it to refrain for three years from selling private offerings except to "accredited investors" and then only if such private offerings were registered under the Act or the subject of a filed exemptive claim or claim of covered security status under Section 36b-21 of the Act ("notice filing");
WHEREAS, the Commissioner, through the Securities and Business Investments Division (the "Division") of the Department of Banking, conducted an examination of Charles Morgan's records pursuant to Section 36b-14(d) of the Act and 36b-31-14f of the Regulations, and a related investigation under Section 36b-26 of the Act to determine whether Charles Morgan had violated, was violating or was about to violate any provision of the Act or any regulation or order under the Act (the "Investigation and Examination");
WHEREAS, as a result of the Investigation and Examination, the Division obtained evidence, as more fully described in the Findings herein, that would support the initiation of administrative proceedings under Section 36b-15 of the Act to suspend or revoke Charles Morgan's broker-dealer registration under the Act or to restrict or impose conditions on the securities activities that the firm may perform in this state and/or proceedings under Section 36b-27 of the Act seeking the entry of an order to cease and desist and/or an order imposing an administrative fine against Charles Morgan;
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 part, that: "The Commissioner may from time to time make, amend and rescind such . . . orders as are necessary to carry out the provisions of Sections 36b-2 to 36b-34, inclusive [of the Connecticut Uniform Securities 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 and Charles Morgan reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, Charles Morgan, without admitting or denying any of the Commissioner's allegations or findings, expressly consents to the Commissioner's jurisdiction under the Act and to the terms of this Consent Order; and
WHEREAS, Charles Morgan, without admitting or denying any of the Commissioner's allegations or findings, expressly consents to the Commissioner's jurisdiction under the Act and to the terms of this Consent Order; and
WHEREAS, Charles Morgan, through its execution of this Consent Order, represents and agrees that none of the violations alleged in this Consent Order shall occur in the future;
CONSENT TO WAIVER OF PROCEDURAL RIGHTS
WHEREAS, Charles Morgan, through its execution of this Consent Order, voluntarily waives the following rights:
| 1. | To receive prior written notice within the meaning of Sections 36b-15(f), 36b-27(a), 36b-27(d) and 4-177(b) of the Connecticut General Statutes; |
| 2. | To present evidence and argument and to otherwise avail itself of Section 4-177c(a) of the Connecticut General Statutes; |
| 3. | To present its position in a hearing in which it 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; |
CONSENT TO ENTRY OF FINDINGS
WHEREAS, Charles Morgan, through its execution of this Consent Order, accepts and consents to the entry of the following Findings by the Commissioner:
| 1. | The entry of this Consent Order is appropriate, in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act; |
| 2. | From October 2008 through March 2010, Charles Morgan violated Section 36b-16 of the Act by offering and selling a private offering pursuant to Rule 506 of Regulation D of the Securities Act of 1933, to a Connecticut resident without making the required notice filing and paying the required fee pursuant to Section 36b-21(e) of the Act; |
| 3. | Charles Morgan's failure to file the private offering notice and pay the required fee pursuant to Section 36b-21(e) of the Act is a violation of the Commissioner's 2007 Order; and |
| 4. | In contravention of Section 36b-31-6f(b) of the Regulations, Charles Morgan failed to establish, enforce, and maintain a system for supervising the activities of its agents that was reasonably designed to achieve compliance with applicable securities laws and regulations; |
CONSENT TO ENTRY OF SANCTIONS
WHEREAS, Charles Morgan, through its execution of this Consent Order, consents to the Commissioner issuing an order imposing on it the following sanctions:
| 1. | Charles Morgan, its representatives, agents, employees, affiliates, assigns, successors in interest, and those persons in active concert or participation with them 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. | No later than the date this Consent Order is entered by the Commissioner, Charles Morgan shall remit to the Department of Banking, via certified bank check or bank wire, payable to "Treasurer, State of Connecticut", the sum of fifteen thousand dollars ($15,000) which shall constitute an administrative fine; and |
| 3. | Charles Morgan shall reimburse the Department of Banking for the costs associated with one or more future examinations of any of Charles Morgan's offices to be conducted by the Division within twenty-four (24) months following the Commissioner's entry of this Consent Order, such amount not to exceed three thousand five hundred dollars ($3,500) in total. Amounts due under this paragraph shall be remitted to the Commissioner via check, payable to "Treasurer, State of Connecticut," within thirty (30) days upon receipt of the invoice submitted by the Department of Banking; |
CONSENT ORDER
NOW THEREFORE,
the Commissioner enters the following:| 1. | The Sanctions 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 Charles Morgan 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; and |
| 3. | This Consent Order shall become final when entered. |
| So ordered at Hartford, Connecticut | _______/s/_________ | |
| this 5th day of May 2011. | Howard F. Pitkin | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Paul E. Taboada, state on behalf of Charles Morgan Securities, 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 Charles Morgan Securities, Inc., that Charles Morgan Securities, Inc. agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Charles Morgan Securities, Inc. voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.
| Charles Morgan Securities, Inc. | |
| By | ______/s/_________________ |
| Paul E. Taboada | |
| President |
On this 1 day of April 2011, personally appeared Paul E. Taboada, signer of the foregoing Consent Order, who, being duly sworn, did acknowledge to me that he was authorized to execute the same on behalf of Charles Morgan Securities, Inc. and acknowledged the same to be his free act and deed, before me.
_____/s/__________________________
Notary Public
Date Commission Expires: Jan. 26, 2013