Winter 2023 Securities Bulletin

State of Connecticut Department of Banking

Securities and Business Investments Division Securities Bulletin

Vol. XXXVII No. 4 - Winter 2023

Features

Quarterly Statistical Summaries

Enforcement and Other Highlights

Stipulation and Agreements

Other Orders

Conditional Registrations

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Stipulation and Agreements

Validea Capital Management LLC (CRD No. 130887)

On October 19, 2023, the Banking Commissioner entered into a Stipulation and Agreement (No. ST-23-202324-S) with Validea Capital Management LLC , a Connecticut-registered investment adviser located at 363 Ridgewood Road, West Hartford, Connecticut 06107.  The Stipulation and Agreement alleged that the firm engaged an unregistered investment adviser agent in violation of Section 36b-6(c)(3) of the Connecticut Uniform Securities Act.  The investment adviser agent has since become registered.

In resolution of the matter, the firm agreed to refrain from violative conduct and to pay $5,250 to the department.  Of that amount, $5,000 constituted an administrative fine and $250 represented payment of past due investment adviser agent registration fees.

Other Orders

Safeguard Metals LLC and Jeffrey Ikahn

On November 3, 2023, the Banking Commissioner entered an Order Pursuant to Judicial Consent Order (No. 23-2021-34-S) against Safeguard Metals LLC and Jeffrey Ikahn .   Safeguard Metals LLC, located at 30 N Gould Street, Suite R, Sheridan, Wyoming and 21550 Oxnard Street, 3rd Floor, Woodland Hills, California, is a precious metals promoter focusing on gold and silver coin sales.   Jeffrey Ikahn, also known as Jeffrey S. Santulan and Jeff Hill, is the sole owner and control person of Safeguard Metals LLC.   The Commissioner’s Order, entered pursuant to the Connecticut Uniform Securities Act, permanently barred both Safeguard Metals LLC and Ikahn from 1) transacting business in or from Connecticut as an agent, broker-dealer, broker-dealer agent, investment adviser or investment adviser agent; 2) maintaining a direct or indirect ownership interest in a broker-dealer or an investment adviser registered or required to be registered in Connecticut; and 3) acting in any other capacity that requires a license or registration under laws administered by the Commissioner.   The Commissioner’s Order was consistent with a court-ordered Consent Order of Permanent Injunction and Other Statutory and Equitable Relief entered in the related civil action described below.

The Commissioner’s action followed a federal lawsuit initiated on February 1, 2022 and brought by the federal Commodity Futures Trading Commission, in conjunction with numerous states, including the State of Connecticut Department of Banking.  The suit was filed in the United States District Court for the Central District of California ( Commodity Futures Trading Commission et al. v. Safeguard Metals LLC and Jeffrey Ikahn , C.D. Cal. Civil No.: 2:22-cv-00691-JFW-SKx).  On October 20, 2023, the District Court ordered that defendants Safeguard Metals LLC and Ikahn comply with certain undertakings and requirements in a Consent Order of Permanent Injunction and Other Statutory and Equitable Relief entered by the District Court against the defendants.   The judicial Consent Order obviated the need for a trial on the merits.   Customer restitution and civil monetary penalties were slated to be considered in the next phase of the federal action.

The judicial Consent Order found that, between October 2017 and July 2021, the defendants deceived more than 450 customers nationwide into purchasing precious metals through false and misleading statements.  Most of the defendants’ customers were elderly.  More specifically, the defendants defrauded customers into establishing self-directed retirement accounts, with Safeguard Metals LLC as depository, to buy precious metals; charged exorbitant price markups on silver coins purchased by customers; misrepresented to customers how defendants earned profits; and lulled customers into a false sense of security by making misrepresentations about the value of the customers' precious metals or their safety as an investment.  The Consent Order also found that the defendants violated the antifraud provisions in Section 6(c)(1) of the Commodity Exchange Act, 7 U.S.C. § 9(1), and CFTC Regulation 180.1(a)(1)-(3), 17 C.F.R. § 180.1(a)(1)-(3) (2022).

Significantly, the judicial Consent Order also found that the defendants violated the antifraud provisions in the participating state jurisdictions’ securities laws and transacted business as an investment adviser and investment adviser agent while unregistered with the states.

The judicial Consent Order permanently enjoined the defendants from engaging in violative conduct.  By agreeing to the Consent Order, the defendants also consented to the entry of an administrative order by the states banning or barring the defendants from participating in the commodities or securities industries, including, without limitation, any position of employment, management, or control of any broker dealer, investment advisor, or commodity advisor.

Conditional Registrations

Calm River Capital LLC (IARD No. 326721)

On November 14, 2023, the Banking Commissioner issued an Order (No. COND-202343-S) conditioning the investment adviser registration of Calm River Capital LLC under the Connecticut Uniform Securities Act.  The firm has its principal office at 42 Greenlea Lane, Weston, Connecticut 06883.

The Order stated that, since the firm's principals did not fulfill the experience requirements for becoming registered as an investment adviser, a basis would exist for denying the registration absent the imposition of conditions.  In response, the firm represented that a qualified individual with prior securities industry experience would be joining the firm post-registration and would be solely responsible for advising clients and exercising trades in client accounts.

The Order imposed the following additional conditions on the firm:  1) for three years, the firm and its principals would not have custody or control of client funds or securities; 2) for three years, the firm would limit its new advisory activity to clients who are “accredited investors” within the meaning of Rule 501(a) of federal Regulation D; 3) within twelve months, the investment adviser agents of the firm would complete twelve credit hours of continuing education focusing on the investment advisory industry; and 4) for two years, the firm would retain an independent third party consultant to evaluate the firm’s compliance with regulatory requirements.

The firm became registered as an investment adviser in Connecticut on November 14, 2023.

Statistical Summary

Licensing At A Glance

at the end of the quarter

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Broker-dealers Registered

2,020

2,013

2,009

1,957

Broker-dealer Agents Registered

203,752

206,403

208,630

202,576

Broker-dealer Branch Offices Registered

2,314

2,357

2,334

2,295

Investment Advisers Registered

429

430

425

412

SEC Registered Advisers Filing Notice

2,476

2,484

2,522

2,473

Investment Adviser Agents Registered

15,400

15,260

15,344

15,175

Exempt Reporting Advisers

180

186

193

197

Agents of Issuer Registered

1

1

1

1

Conditional Registrations

0

0

0

1

Securities and Business Opportunity Filings

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Year to Date

Offerings Reviewed

27

19

26

18

90

Investment Company Notice Filings

430

405

403

7,116

8,354

Exemptions and Exemptive Notices

1,376

1,425

1,333

1,265

5,399

Examinations

Broker-dealers

17

15

13

16

61

Investment Advisers

13

11

15

9

48

Securities Investigations

Opened

9

8

14

10

41

Closed

2

9

13

5

29

Ongoing as of End of Quarter

94

95

94

96

Subpoenas issued

13

7

8

7

35

Matters referred from Attorney General

0

0

1

0

1

Matters referred from Other Agencies

0

0

0

0

0

Business Opportunity Investigations

Investigations Opened

0

0

0

0

0

Investigations Closed

0

0

0

0

0

Ongoing as of End of Quarter

1

1

1

1

Enforcement: Remedies and Sanctions

Notices of Intent to Deny (Licensing)

0

0

0

0

0

Notices of Intent to Suspend (Licensing)

0

0

0

0

0

Notices of Intent to Revoke (Licensing)

0

0

0

0

0

Denial Orders (Licensing)

0

0

1

0

1

Suspension Orders (Licensing)

0

0

0

0

0

Revocation Orders (Licensing)

0

0

0

0

0

Notices of Intent to Fine

0

2

2

0

4

Orders Imposing Fine

0

0

3

1

4

Cease and Desist Orders

0

2

2

0

4

Notices of Intent to Issue Stop Order

0

0

1

0

1

Activity Restrictions/Bars

3

2

0

0

5

Stop Orders

0

0

0

0

0

Vacating/Withdrawal/ Modification Orders

0

0

0

1

1

Restitutionary Orders and Disgorgement Orders

1

2

1

0

4

Injunctive Relief Obtained

0

0

0

1

1

Proceedings and Settlements

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Year to Date

Administrative Actions

0

2

4

0

6

Consent Orders

4

5

1

0

10

Stipulation and Agreements

1

2

0

1

4

Monetary Relief*

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Year to Date

Monetary Sanctions Imposed

$629,868

$47,750

$500,000

$5,250

$1,182,868

Portion attributable to settlements

$629,868

$47,750

$200,000

$5,250

$882,868

Attributable to Court-Ordered Penalties

0

0

0

Financial Literacy Contribution

0

0

0

0

0

Restitution or Other Monetary Relief ( includes rescission offer amounts )

$551,959

$224,541

$138,146

$57,158.33

$971,804

Cents eliminated

Securities Referrals

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Year to Date

Criminal Matters

0

0

0

0

0

Civil (Attorney General)

1

0

1

1

3

Other Agency Referrals

0

0

0

0

0