Spring 2025 Securities Bulletin

State of Connecticut
Department of Banking

Securities and Business Investments Division
Securities Bulletin

Vol. XXXIX No. 1 - Spring 2025

Features

Financial Reporting Requirements for Registered Investment Advisers With Custody of Client Funds and Securities: Division Advisory Interpretation

Honors

Quarterly Statistical Summaries

Enforcement and Other Highlights

Administrative Actions

Consent Orders

Stipulation and Agreements

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Financial Reporting Requirements for Registered Investment Advisers With Custody of Client Funds and Securities

Advisory Interpretation - March 19, 2025

NASAA Honors Division Staff for Efforts in Reaching $106 Million Settlement Benefiting Investors

The North American Securities Administrators Association, Inc. Enforcement Section recently honored Staff Attorney Elena Zweifler and Principal Examiner Klem Klementon for their work on a multistate team investigation into the activities of Vanguard Marketing Corporation and The Vanguard Group, Inc. Connecticut was one of the lead states which conducted a three year comprehensive investigation culminating in a $106 million settlement with Vanguard which would be used to make remediation payments to affected investors.

Administrative Actions

Valuex Research LLC, Valuex Fintech LLC, Ulrika Johansson and Peter Johansson

On March 28, 2025, the Banking Commissioner issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (No. CRF-25-202417-S) against Valuex Research, LLC (“Research”), a currently dissolved Connecticut limited liability company, Valuex Fintech LLC (“Fintech”), Ulrika Johansson a/k/a Ulrika Drax Johansson a/k/a Ulrika E. Johansson (“Ulrika”) and Peter Johansson (“Peter”). Research and Fintech shared the same business address at 309 Greenwich Avenue, Greenwich, Connecticut 06830. Peter was the co-founder of Research and the managing member of Fintech.

The action alleged that, from approximately 2017 through 2021, Respondents Ulrika and Peter sold unregistered Research convertible promissory notes to at least 37 investors located in the United States and Sweden. The action also alleged that Ulrika and Peter sold unregistered pooled investments in Fintech to multiple investors in both of those countries. The offer and sale of unregistered securities by the Respondents allegedly violated Section 36b-16 of the Connecticut Uniform Securities Act.

The action also alleged that the Respondents violated the antifraud provisions in Section 36b-4(a) of the Act by, among other things, misrepresenting how the investment proceeds would be applied, commingling investor funds with their own and using investor monies to cover their personal expenses; erroneously leading investors to believe that Oppenheimer and Co. was Research’s investment banker; and failing to disclose multiple financial judgements against the Respondents.

The Respondents were afforded an opportunity to request a hearing on the allegations in the action.

Anchored Tiny Homes Franchising LLC

On January 17, 2025, the Banking Commissioner issued a Notice of Intent to Issue Stop Order Denying Effectiveness to Business Opportunity Registration, an Order to Cease and Desist and a Notice of Right to Hearing (No. CS-24-202453-B) against Anchored Tiny Homes Franchising LLC of 4401 Hazel Avenue, Suite 225, Fair Oaks, California 95628. The firm is in the business of offering franchises featuring the design, sale and installation of customized tiny home accessory dwelling units, affordable homes, and related services and products.

Anchored Tiny Homes Franchising LLC had previously registered its business opportunity under the Connecticut Business Opportunity Investment Act. However, that registration expired on April 30, 2024 and was slated for renewal. In reviewing the renewal application, Division staff noted that the firm's financial statement reflected a negative balance which was not corrected despite several Division inquiries.

The action alleged that the firm violated Section 36b-62(c)(2) of the Act by failing to make adequate financial arrangements to fulfill its contractual obligations. The action also alleged that the firm violated Sections 36b-62(a) and 36b-67(1) of the Act by failing to observe the requirements for renewing its business opportunity registration.

Anchored Tiny Homes Franchising LLC was provided with an opportunity to request a hearing on the allegations in the action.

Consent Orders

Vanguard Marketing Corporation (CRD No. 7452) and The Vanguard Group, Inc. (CRD No. 105958)

On March 25, 2025, the Banking Commissioner entered a Consent Order (No 25-202513-S) with respect to The Vanguard Group, Inc., a Securities and Exchange Commission registered investment adviser, and its wholly owned subsidiary, Vanguard Marketing Corporation. Vanguard Marketing Corporation, a Connecticut-registered broker-dealer, is located at 100 Vanguard Boulevard, Malvern, Pennsylvania.

The Consent Order was an outgrowth of a multistate investigation into the activities of the firm and a parallel investigation by the Securities and Exchange Commission (the “SEC”).

Respondents marketed and distributed two types of Target Retirement Funds (“TRFs”) on behalf of Vanguard Chester Funds, a federally registered investment company: Institutional TRFs and Investor TRFs. Each type offered 12 vintages of TRFs with different target retirement years.

The Consent Order alleged that in 2020, Respondents lowered the investment minimums for the Institutional Target Retirement Funds, and that, as a result, a large number of retirement plan investors redeemed their Investor TRF shares to purchase Institutional TRF shares. The large number of redemptions caused Vanguard to sell assets in the Investor TRF, which triggered significant capital gains taxes for many retail investors who remained invested in the Investor TRF. In addition, Vanguard allegedly did not disclose the potential capital gains and tax implications to Investor TRF shareholders which were attributable to the migration of shareholders from the Investor TRF to the Institutional TRF.

The Commissioner alleged that such conduct by Respondents constituted a supervisory lapse within the meaning of Section 36b-31-6(f) of the Regulations under the Connecticut Uniform Securities Act. The Consent Order also alleged that respondents' disclosure deficiencies violated Section 36b-5(a)(2) of the Act.

The Consent Order directed Respondents to cease and desist from regulatory violations. The Consent Order acknowledged that Respondents had agreed to pay $135 million in remediation to the SEC Fair Fund, administered by the SEC, to benefit harmed investors. Counting offsets, the total amount of remediation was $92.91 million, which Vanguard paid into the Fair Fund on or about January 24, 2025. In addition, on or about January 24, 2025, Respondents paid an administrative penalty of $13,500,000 into the SEC Fair Fund.

Plutus Financial Holdings Inc., Plutus Financial Inc., Plutus Lending LLC, Abra Boost LLC and William Barhydt

On February 13, 2025, the Banking Commissioner entered a Consent Order (No. CO-24-2024-1-S-S) with respect to Plutus Financial Holdings Inc., Plutus Financial Inc., Plutus Lending LLC, Abra Boost LLC and William Barhydt. The four entities are affiliated and under the common control of William Barhydt.

The Commissioner's action was preceded by a multistate investigation into the securities activities of the Respondents. Connecticut participated in that investigation. More specifically, the multistate investigation focused on Respondents’ offer and sale of interest-bearing depository account products, referred to as “Abra Earn” and “Abra Boost.” Members of the public purchased the investments through a smartphone application.

Respondents began winding down their U.S. retail operations on or about June 14, 2023, and converted all Abra Earn and Abra Boost accounts to Abra Trade accounts. Immediately upon conversion to Abra Trade, customers obtained title to their assets and a yield was no longer generated. Since June 14, 2023, Respondents have repeatedly notified affected customers requesting them to withdraw their assets from their Abra Trade accounts.

The Consent Order required that the Respondents return all outstanding assets in Connecticut customer accounts having a value of $10 or more no later than the date the Consent Order was entered by the Commissioner.

Approximately 93 Connecticut investors, whose accounts totaled approximately $98,609, were eligible for a monetary return. Approximately $92,838 has been paid out to those Connecticut investors whom Respondents were successful in contacting.

The Consent Order alleged that the Respondents violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered securities to the public.

The Consent Order directed the Respondents to cease and desist from regulatory violations and to pay a $100,000 fine to the state. Payment of the fine, however, would be suspended as long as Respondents returned customer assets in accordance with the Consent Order.

Russell D. Davis and IRWT, LLC d/b/a In Russ We Trust

On January 13, 2025, the Banking Commissioner issued a Consent Order (No. CO-24-202412-S) with respect to IRWT, LLC d/b/a In Russ We Trust, a Connecticut limited liability company located at 24 Anderson Avenue, Milford, Connecticut 06460, and Russell D. Davis, control person of the firm. IRWT, LLC held itself out as a crypto-consultancy company focused on profit projections. More specifically, Respondents sold subscriptions to a monthly online newsletter advising subscribers when to buy and sell certain cryptocurrencies. The Consent Order had been preceded by a July 22, 2024 Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (No. CF-24-202412-S) alleging that , in connection with a Securities and Business Investments Division investigation of the Respondents, Respondent Davis wilfully violated Section 36b-23 of the Connecticut Uniform Securities Act by making a materially misleading statement to the Commissioner regarding the Respondents’ financial holdings.

In resolution of the matter, the Respondents were directed to pay a $10,000 fine to the department and to cease and desist from regulatory violations.

Stipulation and Agreements

ACK Asset Management LLC (CRD No. 155136)

On March 28, 2025, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-25-20242-S) with ACK Asset Management LLC, a Securities and Exchange Commission registered investment adviser located at 777 West Putnam Avenue, Suite 300, Greenwich, Connecticut 06830.

The Stipulation and Agreement alleged that, between October 13, 2021 and January 23, 2024, the firm failed to make the investment advisory notice filing required of SEC-registered investment advisers by Section 36b-(e) of the Connecticut Uniform Securities Act.

The firm has since made a corrective filing with the department. In resolution of the matter, the firm agreed to refrain from regulatory violations and to pay $2,950 to the agency. Of that amount, $2,500 constituted an administrative fine and $450 constituted reimbursement for past due investment advisory notice filing fees.

CFP Fund 1, LLC

On March 28, 2025, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-24-2022-8-S) with CFP Fund 1, LLC of 290 Los Gatos-Saratoga Road, Los Gatos, California 95030.

The Stipulation and Agreement alleged that, in 2020, the issuer violated Section 36b-16 of the Connecticut Uniform Securities Act by failing to make a notice filing when it offered and sold securities to two Connecticut investors in a private placement exempt from federal registration pursuant to Rule 506 of Regulation D. The firm repaid the affected investors in twelve monthly installments.

Pursuant to the Stipulation and Agreement, the firm agreed to refrain from regulatory violations and to pay a $2,500 fine.

Statistical Summary

Licensing At A Glance

at the end of the quarter

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Broker-dealers Registered

1,923

Broker-dealer Agents Registered

212,726

Broker-dealer Branch Offices Registered

2,364

Investment Advisers Registered

418

SEC Registered Advisers Filing Notice

2,599

Investment Adviser Agents Registered

15,468

Exempt Reporting Advisers

230

Agents of Issuer Registered

0

Conditional Registrations

0

Securities and Business
Opportunity Filings

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year to Date

Offerings Reviewed

9

9

Investment Company Notice Filings

396

396

Exemptions and Exemptive Notices

1,274

1,274

Examinations

Broker-dealers

16

16

Investment Advisers

14

14

Securities Investigations

Opened

17

17

Closed

9

9

Ongoing as of End of Quarter

109

109

Subpoenas issued

2

2

Matters referred from Attorney General

0

0

Matters referred from Other Agencies

2

2

Business Opportunity Investigations

Investigations Opened

2

2

Investigations Closed

1

1

Ongoing as of End of Quarter

1

1

Enforcement: Remedies and Sanctions

Notices of Intent to Deny (Licensing)

0

0

Notices of Intent to Suspend (Licensing)

0

0

Notices of Intent to Revoke (Licensing)

0

0

Denial Orders (Licensing)

0

0

Suspension Orders (Licensing)

0

0

Revocation Orders (Licensing)

0

0

Notices of Intent to Fine

1

1

Orders Imposing Fine

0

0

Cease and Desist Orders

2

2

Notices of Intent to Issue Stop Order

1

1

Activity Restrictions/Bars

0

0

Stop Orders

0

0

Vacating/Withdrawal/ Modification Orders

0

0

Restitutionary Orders and Disgorgement Orders

1

1

Injunctive Relief Obtained

0

0

Proceedings and Settlements

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year to Date

Administrative Actions

2

2

Consent Orders

3

3

Stipulation and Agreements

2

2

Monetary Relief*

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year to Date

Monetary Sanctions Imposed

$115,450

$115,450

Portion attributable to settlements

$115,450

$115,450

Attributable to Court-Ordered Penalties

0

0

Financial Literacy Contribution

0

0

Restitution or Other Monetary Relief
( includes rescission offer amounts
)

$262,838

$262,838

Independent SEC Fair Fund Remediation Remittance

$92,910,000

$
92,910,000

Independent SEC Fair Fund Penalty Remittance

$13,500,000

$
13,500,000

Cents eliminated

Securities Referrals

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year to Date

Criminal Matters

0

0

Civil (Attorney General)

0

0

Other Agency Referrals

0

0