Summer 2019 Securities Bulletin

State of Connecticut Department of Banking

Securities and Business Investments Division Securities Bulletin

Vol. XXXIII No. 2 - Summer 2019

Features

Quarterly Statistical Summaries

Enforcement and Other Highlights

Administrative Actions

Stipulation and Agreements

ADMINISTRATIVE ACTIONS

James Welsh and GHC Fund One LLC a/k/a Gilbert Hill Fund I, LLC

On June 25, 2019, 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 (Docket No. CRF-19-8311-S) against GHC Fund One LLC a/k/a Gilbert Hill Fund I, LLC , a currently inactive limited liability company, and its managing member James Welsh .  GHC Fund One LLC was located at 49 Richmondville Avenue, Westport, Connecticut 06880.  The action alleged that in 2008, respondents sold $300,000 of GHC Fund One LLC membership interests to a Massachusetts investor with the representation that the investor's monies would be used by GHC Fund One LLC to implement its day trading strategy.  According to the action, the investor's monies were actually used to purchase shares of an unrelated entity based in Waterbury, Connecticut.  The investor made a second investment of $50,000 in 2009, and the action alleged that at least a portion of the total investment was used to pay respondent Welsh's personal expenses.  The action claimed that the respondents violated Section 36b-16 of the Connecticut Uniform Securities Act by offering and selling unregistered securities and that the conduct described violated the antifraud provisions in Section 36b-4(a) of the Act.  The respondents were afforded an opportunity to request a hearing on the Order to Cease and Desist, Order to Make Restitution and Notice of Intent to Fine.

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

On May 10, 2019, the Banking Commissioner issued an 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, Amended and Restated Notice of Intent to Fine and Notice of Right to Hearing (Docket No. CRNDF-19-8408-S) against 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 original March 11, 2019 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Deny Registrations as an Investment Adviser and as an Investment Adviser Agent and Notice of Intent to Fine 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 original action had also alleged that, 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, and that Mosaic falsely represented on its reapplication that it had not rendered investment advisory services.

In addition, the original action alleged that Westphalen sold unregistered securities in violation of Section 36b-16 of the Act and violated the antifraud provisions in Section 36b-4(a) of the Act.  More specifically, Westphalen purportedly solicited a Connecticut couple to invest $67,500 in Omni Oil and Gas Inc., a Texas based oil and gas concern whose securities were not registered under the Act.  Westphalen also allegedly solicited multiple investors to invest in Triton Investment Partners LLC and failed to provide them with key disclosures.  In neither offering was Westphalen registered as an agent of issuer as required by Section 36b-6(a) of the Act.

The amended action incorporated the previous allegations, and added a claim that Westphalen solicited additional investors to invest in Omni Oil and Gas Inc.   Those investors received back only $7,600 of their original $67,500 investment.

The Respondents were afforded an opportunity to request a hearing on the Amended and Restated Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Deny Registrations as an Investment Adviser and as an Investment Adviser Agent and Notice of Intent to Fine.

STIPULATION AND AGREEMENTS

Ralph Steven Giorgio (CRD No. 1048638)

On May 3, 2019, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-19-8364-S) with Ralph Steven Giorgio of Greenwich, Connecticut.  The Stipulation and Agreement alleged that Giorgio violated Section 36b-6(c)(2) of the Connecticut Uniform Securities Act by transacting business as an unregistered investment adviser agent of Sentinel Growth Fund Management, LLC.  Pursuant to the Stipulation and Agreement, Ralph Steven Giorgio agreed to refrain from violative conduct and to pay a $2,500 fine to the agency.

Titan Advisors, LLC (CRD No. 135805)

On April 25, 2019, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-19-8456-S) with Titan Advisors, LLC , an investment adviser registered with the Securities and Exchange Commission.  The firm maintains its principal office at 750 Washington Boulevard, Floor 10, Stamford, Connecticut 06901.  The Stipulation and Agreement alleged that from 2015 to 2018, the firm did not make the regulatory notice filing required of SEC-registered advisers by Section 36b-6(c)(2) of the Connecticut Uniform Securities.  The firm has since made a curative filing.

In resolution of the matter, Titan Advisors, LLC agreed to refrain from violative conduct and to remit $2,975 to the agency.  Of that amount, $2,500 constituted an administrative fine and $475 constituted reimbursement for past due notice filing fees.

Vintage Foods Ltd.

On April 24, 2019, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-19-8434-S) with Vintage Foods Ltd. , a medical/recreational marijuana manufacturer located at 20 Mayer Drive, Montebello, New York 10901.  The Stipulation and Agreement alleged that, in 2015, Vintage Foods Ltd. sold unregistered securities to at least one Connecticut investor in violation of Section 36b-16 of the Connecticut Uniform Securities Act.  Pursuant to the Stipulation and Agreement, Vintage Foods Ltd. agreed to 1) pay a $1,000 fine to the agency; 2) refrain from offering or selling securities in or from Connecticut absent compliance with Section 36b-16 of the Act; and 3) for a three year period, retain legal counsel experienced in securities law to advise it on state securities law compliance.

STATISTICAL SUMMARY

Licensing At A Glance

at the end of the quarter

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Broker-dealers Registered

2,085

2,103

Broker-dealer Agents Registered

171,305

172,601

Broker-dealer Branch Offices Registered

2,531

2,527

Investment Advisers Registered

496

506

SEC Registered Advisers Filing Notice

2,251

2,278

Investment Adviser Agents Registered

14,639

14,733

Exempt Reporting Advisers

138

137

Agents of Issuer Registered

5

5

Conditional Registrations

0

0

Securities and Business Opportunity Filings

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Year to Date

Offerings Reviewed

29

33

62

Investment Company Notice Filings

504

532

1,036

Exemptions and Exemptive Notices

972

1,155

2,127

Examinations

Broker-dealers

22

31

53

Investment Advisers

46

44

90

Securities Investigations

Opened

12

22

34

Closed

23

12

35

Ongoing as of End of Quarter

81

90

Subpoenas issued

7

16

23

Matters referred from Attorney General

0

2

2

Matters referred from Other Agencies

3

6

9

Business Opportunity Investigations

Investigations Opened

0

0

0

Investigations Closed

0

0

0

Ongoing as of End of Quarter

0

0

0

Enforcement: Remedies and Sanctions

Notices of Intent to Deny (Licensing)

1

1

2

Notices of Intent to Suspend (Licensing)

0

0

0

Notices of Intent to Revoke (Licensing)

0

0

0

Denial Orders (Licensing)

0

0

0

Suspension Orders (Licensing)

0

0

0

Revocation Orders (Licensing)

0

0

0

Notices of Intent to Fine

2

2

4

Orders Imposing Fine

0

0

0

Cease and Desist Orders

2

2

4

Notices of Intent to Issue Stop Order

0

0

0

Activity Restrictions/Bars

1

0

1

Stop Orders

0

0

0

Vacating/Withdrawal/ Modification Orders

0

0

0

Restitutionary Orders and Disgorgement Orders

2

2

4

Injunctive Relief Obtained

0

0

0

Proceedings and Settlements

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Year to Date

Administrative Actions

2

2

4

Consent Orders

5

0

5

Stipulation and Agreements

3

3

6

Monetary Relief*

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Year to Date

Monetary Sanctions Imposed

$143,590

$6,475

$150,065

Portion attributable to settlements

$143,590

$6,475

$150,065

Attributable to Court-Ordered Penalties

0

0

0

Restitution or Other Monetary Relief ( includes rescission offer amounts )

$1,299,312

$49,306

$1,348,618

Cents eliminated

Securities Referrals

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Year to Date

Criminal Matters

1

1

2

Civil (Attorney General)

2

1

3

Other Agency Referrals

0

0

0