Bulletin 2946 - August 7, 2020

State of Connecticut
Department of Banking

The Department of Banking News Bulletin

Bulletin # 2946 - Week Ending August 7, 2020

This bulletin constitutes the only official notification you will receive from this office concerning any of the following applications. Any observations you may have are solicited. Any comments should be in writing to Jorge L. Perez, Banking Commissioner, Department of Banking, 260 Constitution Plaza, Hartford, CT 06103-1800. Written comments will be considered only if they are received within ten business days from the date of this bulletin.

CONSUMER CREDIT DIVISION ACTIVITY

Consent Order

On July 29, 2020, the Commissioner entered into a Consent Order with Mortgage Default Services, LLC (“MDS”), Spokane, Washington. The Consent Order was based on an investigation by the Consumer Credit Division. As a result of such investigation, the Commissioner alleged that MDS acted as a consumer collection agency in Connecticut between February 2017 and February 2019 without a consumer collection agency license, in violation of Section 36a-801(a) of the Connecticut General Statutes in effect at such time. As part of the Consent Order, MDS paid $10,000 as a civil penalty and $800 for back licensing fees.

SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY

Adam Westphalen (CRD No. 2821723) and Mosaic Financial Strategies LLC (CRD Numbers 288997 and 149364)

On July 27, 2020, following an administrative hearing, the Banking Commissioner entered Findings of Fact, Conclusions of Law and an Order (Docket No. CRNDF-19-8408-S) in the matter of Mosaic Financial Strategies LLC ( f/k/a Mosaic Portfolio Strategists LLC and doing business as Mosaic Advisory Partners ) (“Mosaic”) of 40 Maple Road, Easton, Connecticut 06612 and Adam Westphalen , principal of the firm. Mosaic had previously been registered as an investment adviser in Connecticut until 2014, and reapplied for investment adviser registration under a different CRD number. Adam Westphalen also reapplied for registration as an investment adviser agent of Mosaic.

The action had been preceded by a May 10, 2019 Amended and Restated Order to Cease and Desist, Amended and Restated Order to Make Restitution, Amended and Restated Notice of Intent to Deny Registrations as an Investment Adviser and as an Investment Adviser Agent and Amended and Restated Notice of Intent to Fine (collectively, the "Notice"). Among other things, the Notice had alleged that 1) from approximately 2004 forward, Westphalen was involved with various businesses, to wit, Triton Investment Partners LLC, Vista Financial Strategies LLC, Vista Investment Advisors LLC and Mosaic College Planners; and 2) Westphalen and Mosaic failed to amend their Connecticut registration filings to disclose their affiliations with Triton Investment Partners LLC, Vista Financial Strategies LLC and Mosaic College Planners in violation of Section 36b-31-14e of the Regulations under the Connecticut Uniform Securities Act. The Notice also alleged that, 1) following the expirations of their prior registrations, Mosaic and Westphalen transacted business as an unregistered investment adviser and an unregistered investment adviser agent, respectively, in contravention of Sections 36b-6(c)(1) and 36b-6(c)(2) of the Act; 2) that Mosaic falsely represented on its reapplication that it had not rendered investment advisory services; 3) that Westphalen sold unregistered securities in violation of Section 36b-16 of the Act 4) that Westphalen violated the antifraud provisions in Section 36b-4(a) of the Act in conjunction with sales of Omni Oil and Gas Inc. and Triton Investment Partners LLC to investors; and 5) that Westphalen transacted business as an unregistered agent of issuer in violation of Section 36b-6(a) of the Act.

Based on the hearing record, the Commissioner found that Westphalen and Mosaic violated Section 36b-31-14e of the Regulations by failing to update their regulatory filings to reflect their association with Triton Investment Partners LLC, Vista Financial Strategies LLC, Vista Investment Advisors LLC and Mosaic College Planners as well as New Horizon Financial Strategies, an entity from whom Mosaic received investment advisory fees. The Commissioner also found that Mosaic and Westphalen violated Sections 36b-6(c)(1) and 36b-6(c)(2) of the Act by transacting business as an unregistered investment adviser and unregistered investment adviser agent, respectively. In addition, the Commissioner found that 1) respondents violated Section 36b-23 of the Act by making false or misleading statements to the department; 2) Westphalen sold unregistered securities of Omni Oil and Gas, Inc., and Triton Investment Partners LLC in violation of Section 36b-16 of the Act; 3) Westphalen violated the antifraud provisions in Section 36b-4(a) of the Act in conjunction with sales of Omni Oil and Gas Inc. and Triton Investment Partners LLC to investors; and 4) Mosaic failed to preserve its investment advisory records as required by Section 36b-14(a)(1) of the Act and Section 36b-31-14b(a) of the Regulations. However, there was insufficient evidence in the record to support the allegation that Westphalen transacted business as an unregistered agent of issuer in violation of Section 36b-6(a) of the Act.

Concluding that there was no evidence of mitigating circumstances provided during the hearing, the Commissioner fined the respondents $900,000, jointly and severally. The Commissioner also denied Westphalen's registration as an investment adviser agent and denied Mosaic Financial Strategies LLC's registration as an investment adviser. The May 10, 2019 Order to Cease and Desist and Order to Make Restitution were also rendered permanent as to each respondent, with investor restitution being due in 45 days. The Commissioner directed the respondents to pay $490,000, excluding interest, to the affected investors.

John J. Lynch - Consent Order Entered

On August 6, 2020, the Banking Commissioner entered a Consent Order (No. CO-20-202015-S) with respect to John J. Lynch of Reading, Pennsylvania and formerly of Sandy Hook, Connecticut. Lynch was the owner and control person of JM Financial Solutions LLC, a currently defunct entity that was in the business of preparing tax returns.

The Consent Order alleged that from approximately June 2016 to approximately November 2017, Lynch, through JM Financial Solutions, LLC, sold approximately $65,000 of interests in various investment funds offered by Woodbridge Group of Companies, LLC d/b/a Woodbridge Wealth ("Woodbridge") to three investors. Woodbridge Group of Companies, LLC, based in California, was a defendant in a civil action brought by the Securities and Exchange Commission alleging that it operated a purported Ponzi scheme. For his role in selling interests in the Woodbridge funds, Lynch received $2,583.33 in total remuneration from Woodbridge. The Consent Order alleged that Lynch violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered securities and that he transacted business as unregistered agent of issuer in contravention of Section 36b-6(a) of the Act. The Consent Order acknowledged Lynch's representation that, based on Woodbridge’s representations, he believed that the Woodbridge Funds were not securities and that securities registration was unnecessary.

The Consent Order fined Lynch $3,500 and directed him to cease and desist from regulatory violations. In addition, the Consent Order required that Lynch disgorge to affected investors the $2,583.33 in remuneration he earned from Woodbridge. The monies would be deposited with Lynch's legal counsel which would then oversee disbursement of the funds to investors.

Dated: Tuesday, August 11, 2020

Jorge L. Perez
Banking Commissioner