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IN THE MATTER OF: CRD No. 104065 ("Respondent") * * * * * * * * * * * * * * * * * * |
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ORDER TO MAKE RESTITUTION AND NOTICE OF RIGHT TO HEARING DOCKET NO. RCF-11-7794-S |
I. PRELIMINARY STATEMENT
| 1. | The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and the regulations promulgated thereunder (Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies) (“Regulations”). |
| 2. | Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, has conducted an investigation into the activities of Respondent to determine if Respondent has violated, is violating or is about to violate provisions of the Act or Regulations (“Investigation”). |
| 3. |
As a result of the Investigation, the Commissioner has reason to believe that Respondent has violated certain provisions of the Act. |
| 4. | As a result of the Investigation, the Commissioner has the authority to issue a cease and desist order against Respondent pursuant to Section 36b-27(a) of the Act. |
| 5. |
As a result of the Investigation, the Commissioner has the authority to order that Respondent make restitution pursuant to Section 36b-27(b) of the Act. |
| 6. | As a result of the Investigation, the Commissioner brings this administrative action to revoke the broker-dealer registration of Respondent in Connecticut pursuant to Section 36b-15 of the Act and Section 4-182(c) of the General Statutes of Connecticut. |
| 7. | As a result of the Investigation, the Commissioner has the authority to impose a fine against Respondent pursuant to Section 36b-27(d) of the Act. |
II. RESPONDENT
| 8. |
Respondent is a Virginia corporation with its principal place of business at 1451 Cypress Creek Road, Suite 204, Fort Lauderdale, Florida 33309. |
III. STATEMENT OF FACTS
| 9. | From September 18, 2000 to the present, Respondent has been registered in Connecticut under the Act as a broker-dealer. |
| 10. | As part of the Investigation, the Division conducted an examination of Respondent’s books and records at Respondent’s branch office located at 7600 Jericho Turnpike, Suite 202, Woodbury, New York 11797. |
| 11. | During the Investigation, the Division discovered that Respondent charged a transactional “Handling Fee” ranging from $5 to $49.95 to each Connecticut customer, as well as a commission for each trade. This practice resulted in substantial profits for both the Respondent and the Respondent’s registered broker-dealer agents. However, Respondent failed to disclose to its Connecticut customers that the “Handling Fee” included this profit to Respondent, that certain customers paid lower fees and that the fee was not related to or based on the actual cost of handling a particular transaction. Respondent’s omissions were material to investors, and Respondent’s failure to adequately disclose the nature of these charges made Respondent’s limited explanation misleading. |
| 12. | On January 12, 2010, the Commissioner gave Respondent written notice pursuant to Section 4-182(c) of the General Statutes of Connecticut that Respondent may have engaged in conduct which, if proven, would constitute a basis for the suspension or revocation of Respondent’s broker-dealer registration in Connecticut, and gave Respondent the opportunity to show compliance with all lawful requirements for the retention of its registration as a broker-dealer in Connecticut. Respondent provided the Department with a response to the written notice. The response, however, was not persuasive. |
IV. STATUTORY AND REGULATORY BASIS FOR
ORDER TO CEASE AND DESIST, ORDER TO MAKE RESTITUTION,
REVOCATION OF REGISTRATION AS A BROKER-DEALER
AND ORDER IMPOSING FINE
a. Violation of Section 36b-4(a) of the Act -
Fraud in Connection with the Offer and Sale of any Security
| 13. | Paragraphs 1 through 12, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 14. |
The conduct of Respondent, as more fully described in paragraph 11, constitutes, in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates as a fraud or deceit upon any person. Such conduct constitutes a violation of Section 36b-4(a) of the Act, which forms a basis for an order to cease and desist to be issued against Respondent under Section 36b-27(a) of the Act, an order that Respondent make restitution under Section 36b-27(b) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(B) of the Act, and for the imposition of a fine against Respondent under Section 36b 27(d) of the Act. |
b. Violation of Section 36b-4(b) of the Act –
Dishonest and Unethical Practices in Connection with
the Offer and Sale of any Security
| 15. | Paragraphs 1 through 14, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 16. |
The conduct of Respondent, as more fully described in paragraph 11, constitutes, in connection with the offer, sale or purchase of any security, directly or indirectly engaging in a dishonest or unethical practice. Such conduct constitutes a violation of Section 36b-4(b) of the Act, which forms a basis for an order to cease and desist to be issued against Respondent under Section 36b-27(a) of the Act, an order that Respondent make restitution under Section 36b-27(b) of the Act, the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Sections 36b-15(a)(2)(B) and 36b-15(a)(2)(H) of the Act, and for the imposition of a fine against Respondent under Section 36b-27(d) of the Act. |
c. Dishonest and Unethical Practices –
Violation of FINRA Conduct Rules
| 17. | Paragraphs 1 through 16, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 18. |
The conduct of Respondent, as more fully described in paragraph 11, is conduct proscribed by the Financial Industry Regulatory Authority (formerly NASD) Conduct Rules 2210, 2430, and 2440. Such conduct constitutes a dishonest or unethical practice in the securities business within the meaning of Section 36b-31-15a(b) of the Regulations, which forms a basis for an order to cease and desist to be issued against Respondent under Section 36b-27(a) of the Act, an order that Respondent make restitution under Section 36b-27(b) of the Act, and for the revocation of Respondent’s registration as a broker-dealer in Connecticut pursuant to Section 36b-15(a)(2)(H) of the Act. |
V. ORDER TO CEASE AND DESIST, ORDER TO MAKE RESTITUTION,
NOTICE OF INTENT TO REVOKE REGISTRATION AS A BROKER-DEALER,
NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Respondent has committed at least one violation of Section 36b-4(a) of the Act, at least one violation of Section 36b-4(b) of the Act, and has engaged in fraudulent, dishonest or unethical practices in the securities business;
WHEREAS, the Commissioner has reason to believe that Respondent has engaged in acts or conduct that, pursuant to Section 36b-15 of the Act, constitute grounds for revoking Respondent’s registration as a broker-dealer in Connecticut;
WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist, Order to Make Restitution, order revoking Respondent’s registration as a broker-dealer in Connecticut, and the imposition of a fine against Respondent is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act;
WHEREAS, notice is hereby given to Respondent that its registration as a broker-dealer in Connecticut shall be revoked, subject to Respondent’s right to request a hearing on the allegations set forth above;
WHEREAS, notice is hereby given to Respondent that the Commissioner intends to impose a maximum fine not to exceed One Hundred Thousand Dollars ($100,000) per violation;
WHEREAS, the Commissioner ORDERS that Respondent CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) in connection with the offer, sale or purchase of any security, directly or indirectly, employing a device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates as a fraud or deceit upon any person, (2) in connection with the offer, sale or purchase of any security engaging in dishonest or unethical practices, and (3) engaging in dishonest or unethical practices in the securities business within the meaning of section 36b-31-15a(b) of the Regulations;
WHEREAS, the Commissioner ORDERS that Respondent MAKE RESTITUTION of any sums obtained as result of Respondent’s violations of Sections 36b-4(a) and 36b-4(b) of the Act, and Respondent’s having engaged in a dishonest or unethical practice in the securities business within the meaning of section 36b-31-15a(b) of the Regulations, plus interest at the legal rate set forth in Section 37-1 of the General Statutes of Connecticut. Specifically, the Commissioner ORDERS that:
| 1. | Within thirty (30) days from the date this Order to Make Restitution becomes permanent, Respondent shall provide the Division with an updated written disclosure which covers the period from January 1, 2008 to the date this Order to Make Restitution becomes permanent and which contains (a) the name and address of each Connecticut customer, (b) the amount of the “Handling Fee” paid by each Connecticut customer, (c) the amount of commissions paid by each Connecticut customer, and (d) the actual amount of Respondent’s ticket and clearing charge and the postage fee assessed by its clearing firm for each Connecticut transaction; |
| 2. | Within forty-five (45) days from the date this Order to Make Restitution becomes permanent, Respondent shall reimburse each Connecticut customer the difference between the amount of the “Handling Fee” paid by such Connecticut customer for each transaction and the actual amount of Respondent’s ticket and clearing charge and the postage fee assessed by its clearing firm, with respect to all transactions effected from January 1, 2008 to the date this Order to Make Restitution becomes permanent. Such restitution shall be made by certified check, and shall be sent by certified mail, return receipt requested, to each affected Connecticut customer; and |
| 3. | Within ninety days (90) days from the date this Order to Make Restitution becomes permanent, Respondent shall provide the Division with proof in the form of copies of the certified checks and the return receipts required by paragraph 2 of Section V of this Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Revoke Registration as a Broker-dealer, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Order”), that Respondent has reimbursed each Connecticut customer the difference between the amount of the “Handling Fee” paid by such Connecticut customer for each transaction and the actual amount of Respondent’s ticket and clearing charge and the postage fee assessed by its clearing firm. |
THE COMMISSIONER FURTHER ORDERS THAT, pursuant to Sections 36b-15(f) and subsections (a), (b) and (d) of Section 36b-27 of the Act, Respondent will be afforded an opportunity for a hearing on the allegations set forth above if a written request for a hearing is received by the Department of Banking, Securities and Business Investments Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following Respondent’s receipt of this Order. The enclosed Appearance and Request for Hearing Form must be completed and mailed to the above address. If Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a presiding officer and sets the date of the hearing in accordance with Section 4-177 of the General Statutes of Connecticut and Section 36a-1-21 of the Regulations of Connecticut State Agencies. If a hearing is requested, the hearing will be held on May 12, 2011 at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the General Statutes of Connecticut. At such hearing, Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
This Order to Cease and Desist shall remain in effect and become permanent against Respondent if Respondent fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
This Order to Make Restitution shall remain in effect and become permanent against Respondent if Respondent fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
The Commissioner shall issue an order revoking Respondent’s registration as a broker-dealer in Connecticut if Respondent fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
The Commissioner may order that the maximum fine be imposed upon Respondent if Respondent fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
| Dated at Hartford, Connecticut, | ________/s/________ | |
| this 15th day of April 2011. | Howard F. Pitkin | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 15th day of April 2011, the foregoing Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Revoke Registration as a Broker-dealer, Notice of Intent to Fine and Notice of Right to Hearing was sent by certified mail, return receipt requested, to Newbridge Securities Corporation, 1451 Cypress Creek Road, Suite 204, Fort Lauderdale, Florida 33309, certified mail no. 7010 1870 0001 3618 8607.
____/s/___________
Jesse B. Silverman
Prosecuting Attorney