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WACHOVIA SECURITIES, LLC * * * * * * * * * * * * * * * * * * |
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CONSENT ORDER No. CO-10-7710-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, Wachovia Securities, LLC ("Wachovia") n/k/a Wells Fargo Advisors, LLC has been registered as a broker-dealer under the Act since May 16, 1989, and has its principal office located at One North Jefferson Avenue, St. Louis, Missouri;
WHEREAS, the Commissioner, though the Securities and Business Investments Division (the "Division") of the Department of Banking, conducted an investigation under Section 36b-26 of the Act to determine whether Wachovia violated, was violating or was about to violate any provision of the Act or any regulation or order under the Act (the "Investigation");
WHEREAS, as a result of the Investigation, the Division ascertained that from October 1, 2000 to February 11, 2004, Daniel Charles Allegrini (CRD No. 2962754) ("Allegrini") was registered as a broker-dealer agent of Wachovia under the Act, and was also employed by Wachovia Bank (formerly known as First Union National Bank) as a financial specialist working from a Waterbury, Connecticut office of Wachovia and Wachovia Bank;
WHEREAS, the Division also ascertained as a result of the Investigation that, while employed as a broker-dealer agent of Wachovia, Allegrini recommended to a certain Wachovia client that the client purchase securities in the form of promissory notes issued by Allegrini (the "Allegrini Notes"), and that the Allegrini Notes were not suitable investments for the client based on the client's financial situation and needs;
WHEREAS, the Division, through the Investigation, obtained evidence that the Allegrini Notes were not registered under Section 36b-16 of the Act, nor were they the subject of an exemptive claim or claim of covered security status under Section 36b-21 of the Act;
WHEREAS, the Division, through the Investigation, obtained evidence that the Allegrini Notes were not registered under Section 36b-16 of the Act, nor were they the subject of an exemptive claim or claim of covered security status under Section 36b-21 of the Act;
WHEREAS, the Division further ascertained that Allegrini referred Wachovia broker-dealer clients and Wachovia bank clients to an associate to invest in other interest-paying promissory notes and that, in exchange for such referrals, Allegrini received cash and check payments. Such conduct, in addition to Allegrini's sales of the Allegrini Notes, was outside the regular course or scope of Allegrini's employment with Wachovia, inasmuch as the transactions did not go through the books and records of Wachovia, and Allegrini did not provide Wachovia with prior written notice describing in detail the proposed transactions and his proposed role therein and stating whether he had received or might receive selling compensation in connection with the transactions;
WHEREAS, the Division alleges that, in connection with the Investigation, Wachovia failed to furnish material information to the Commissioner in a timely manner;
WHEREAS, Wachovia alleges that its failure to provide information to the Commissioner in a timely manner was inadvertent;
WHEREAS, as a result of the Investigation, 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 the broker-dealer registration of Wachovia Securities, LLC 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 the firm;
WHEREAS, an administrative proceeding initiated under Sections 36b-27 or 36b-15 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. . .consent order";
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 Wachovia Securities, LLC reached an agreement, the terms of which are reflected in this Consent Order, in full and final resolution of the matters described herein;
WHEREAS, Wachovia Securities, LLC 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;
WHEREAS, in cooperation and consultation with the Division, Wachovia Securities, LLC paid compensation to the individuals harmed by Allegrini's wrongdoing, such restitution of approximately eight hundred thousand dollars ($800,000);
WHEREAS, Wachovia Securities, LLC 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, Wachovia Securities, LLC 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, Wachovia Securities, LLC 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; and |
| 2. | In connection with the conduct of Allegrini and in contravention of Section 36b-31-6f(b) of the Regulations, Wachovia Securities, LLC 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, Wachovia Securities, LLC through its execution of this Consent Order, consents to the Commissioner issuing an order imposing on it the following sanctions:
| 1. | Wachovia Securities LLC, its representatives, agents, employees, affiliates, assigns, and successors in interest 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; and |
| 2. | No later than the date this Consent Order is entered by the Commissioner, Wachovia Securities LLC shall remit to the Department of Banking, via certified bank check or bank wire, payable to "Treasurer, State of Connecticut", the sum of seventy five thousand dollars ($75,000) which shall constitute an administrative fine; |
CONSENT ORDER
NOW THEREFORE,
the Commissioner enters the following:| 1. | The Findings and 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 Wachovia Securities, LLC 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 29th day of December, 2010. | Howard F. Pitkin | |
| Banking Commissioner |
CONSENT TO ENTRY OF ORDER
I, Paul Costello, state on behalf of Wells Fargo Advisors, LLC f/k/a Wachovia Securities, LLC 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 Wells Fargo Advisors, LLC f/k/a Wachovia Securities, LLC, that Wells Fargo Advisors, LLC f/k/a Wachovia Securities, LLC agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Wells Fargo Advisors, LLC f/k/a Wachovia Securities, LLC voluntarily consents to the entry of this Consent Order, expressly waiving any right to a hearing on the matters described herein.
| Wells Fargo Advisors, LLC | |
| f/k/a Wachovia Securities, LLC | |
| By | ______/s/_________________ |
| Paul Costello | |
| Senior Director of Brokerage |
On this 15th day of November 2010, personally appeared Paul Costello, 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 Wells Fargo Advisors, LLC f/k/a Wachovia Securities, LLC, a limited liability company, and acknowledged the same to be his free act and deed, before me.
_____/s/__________________________
Notary Public
Date Commission Expires: May 22, 2012