Sec. 36b-27. (Formerly Sec. 36-496). Enforcement powers of commissioner. - Connecticut Statutes

      Sec. 36b-27. (Formerly Sec. 36-496). Enforcement powers of commissioner. (a) Whenever it appears to the commissioner after an investigation that any person has violated, is violating or is about to violate any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, or that the further sale or offer to sell securities would constitute a violation of said sections or any such regulation, rule or order, or that any person has engaged in a dishonest or unethical practice in the securities or commodities business within the meaning of sections 36b-31-15a to 36b-31-15d, inclusive, of the regulations of Connecticut state agencies, the commissioner may, in the commissioner's discretion, order (1) the person, (2) any other person that directly or indirectly controls such person and that is, was or would be a cause of the violation of such sections or any such regulation, rule or order, due to an act or omission such other person knew or should have known would contribute to such violation, or (3) any other person that has materially aided, is materially aiding or is about to materially aid in such violation, to cease and desist from the violations or the causing of or aiding in the violations of the provisions of said sections or of the regulations, rules or orders thereunder, or from the further sale or offer to sell securities constituting or which would constitute a violation of the provisions of said sections or of the regulations, rules or orders thereunder, or from further engaging in such dishonest or unethical practice and to take or refrain from taking such action that in the opinion of the commissioner will effectuate the purposes of sections 36b-2 to 36b-33, inclusive. After such an order is issued, the person named in the order may, within fourteen days after receipt of the order, file a written request for a hearing. Any such hearing shall be held in accordance with the provisions of chapter 54.

      (b) Whenever it appears to the commissioner, after an investigation, that any person has violated any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, or that the further sale or offer to sell securities would constitute a violation of said sections or any such regulation, rule or order, or that such person has engaged in a dishonest or unethical practice in the securities or commodities business within the meaning of sections 36b-31-15a to 36b-31-15d, inclusive, of the regulations of Connecticut state agencies, the commissioner may, in addition to any other remedy under this section, order the person to (1) make restitution of any sums shown to have been obtained in violation of any of the provisions of said sections or any such regulation, rule or order or as a result of such dishonest or unethical practice plus interest at the legal rate set forth in section 37-1, (2) provide disgorgement of any sums shown to have been obtained in violation of any of the provisions of said sections or any such regulation, rule or order or as a result of such dishonest or unethical practice, or (3) both make restitution and provide disgorgement. After such an order is issued, the person named in the order may, not later than fourteen days after receipt of the order, file a written request for a hearing. Any such hearing shall be held in accordance with the provisions of chapter 54.

      (c) The commissioner, in the commissioner's discretion, may order any person who directly or indirectly controls a person liable under subsection (b) of this section or who has materially aided a person liable under subsection (b) of this section in violation of any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections 36b-2 to 36b-33, inclusive, to make restitution, provide disgorgement, or both, of any sums shown to have been obtained as a result of a dishonest or unethical practice or in violation of any of the provisions of said sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections. Such controlling person or aider shall be liable jointly and severally with and to the same extent as the person liable under subsection (b) of this section, unless such controlling person or aider allegedly liable under this subsection sustains the burden of proof that such person did not know, and in the exercise of reasonable care could not have known, of the existence of facts by reason of which the liability is alleged to exist. After such an order is issued, the person named in the order may, within fourteen days after receipt of the order, file a written request for a hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. There shall be contribution as in cases of contract among the several persons so liable.

      (d) (1) Whenever the commissioner finds as the result of an investigation that any person has violated any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, the commissioner may send a notice to (A) such person, (B) any other person that directly or indirectly controls such person and that was a cause of the violation of said sections or any such regulation, rule or order, due to an act or omission such other person knew or should have known would contribute to such violation, or (C) any other person that has materially aided in such violation, by registered mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt. Any such notice shall include: (i) A reference to the title, chapter, regulation, rule or order alleged to have been violated; (ii) a short and plain statement of the matter asserted or charged; (iii) the maximum fine that may be imposed for such violation; and (iv) the time and place for the hearing. Any such hearing shall be fixed for a date not earlier than fourteen days after the notice is mailed.

      (2) The commissioner shall hold a hearing upon the charges made unless such person fails to appear at the hearing. Any such hearing shall be held in accordance with the provisions of chapter 54. After the hearing if the commissioner finds that the person has violated, caused a violation or materially aided in the violation of any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, the commissioner may, in the commissioner's discretion and in addition to any other remedy authorized by said sections, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. If such person fails to appear at the hearing, the commissioner may, as the facts require, order that a fine not exceeding one hundred thousand dollars per violation be imposed upon such person. The commissioner shall send a copy of any order issued pursuant to this subsection by registered mail, return receipt requested, or by any express delivery carrier that provides a dated delivery receipt, to any person named in such order.

      (e) Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, or that the further sale or offer to sell securities would constitute a violation of said sections or any such regulation, rule or order, the commissioner may, in the commissioner's discretion and in addition to any other remedy authorized by this section, bring an action in the superior court for the judicial district of Hartford to: (1) Enjoin the acts or practices and to enforce compliance with sections 36b-2 to 36b-33, inclusive, or any such regulation, rule or order against (A) such person; (B) any other person who directly or indirectly controls such person and who is, was or would be a cause of the violation of said sections 36b-2 to 36b-33, inclusive, or any such regulation, rule or order due to an act or omission such other person knew or should have known would contribute to such violation; or (C) any other person who has materially aided, is materially aiding or is about to materially aid in such violation. Upon a proper showing, the court may issue a permanent or temporary injunction, restraining order or writ of mandamus and may order other appropriate or ancillary relief, which may include: (i) An asset freeze, accounting, writ of attachment, writ of general or specific execution, and appointment of a receiver or conservator, who may be the commissioner or a person recommended by the commissioner, for the defendant or the defendant's assets. If a person other than the commissioner is appointed receiver or conservator, the commissioner shall be a party to the receivership proceeding or conservatorship with standing to initiate or contest any motion, and the views of the commissioner shall be entitled to deference unless they are inconsistent with the plain meaning of sections 36b-2 to 36b-33, inclusive. The commissioner may appoint such employees and retain such consultants as the commissioner deems necessary for liquidating or administering the affairs of the defendant; (ii) an order directing the commissioner to take charge and control of a defendant's property, including investment accounts and accounts in a depository institution, rents, and profits; to collect debts; and to acquire and dispose of property; (iii) an order directing the payment of prejudgment and postjudgment interest; or (iv) an order covering such other relief as the court considers appropriate. The court shall not require the commissioner to post a bond; (2) seek a court order imposing a fine not to exceed one hundred thousand dollars per violation against the person found to have violated, caused a violation or materially aided in the violation of any provision of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections 36b-2 to 36b-33, inclusive; (3) apply for an order whereby the person that violated any of the provisions of said sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections shall be ordered to: (A) Make restitution of those sums shown by the commissioner to have been obtained by such person in violation of any of the provisions of said sections or any such regulation, rule or order, plus interest at the rate set forth in section 37-3a; (B) provide disgorgement of any sums shown to have been obtained in violation of any of the provisions of said sections or any such regulation, rule or order; (C) both make restitution and provide disgorgement; or (4) apply for an order whereby any person who directly or indirectly controls a person liable under subdivision (3) of this subsection, or who has materially aided a person liable under subdivision (3) of this subsection in a violation of any of the provisions of sections 36b-2 to 36b-33, inclusive, or any regulation, rule or order adopted or issued under said sections, to make restitution, provide disgorgement, or both, of any sums shown to have been obtained as a result of such violation. Such controlling person or aider shall be liable jointly and severally with and to the same extent as the person liable under subdivision (3) of this subsection, unless such controlling person or aider allegedly liable under this subdivision sustains the burden of proof that such person did not know, and in the exercise of reasonable care could not have known, of the existence of facts by reason of which the liability is alleged to exist. Such restitution or disgorgement shall, at the option of the court, be payable to the receiver or conservator appointed pursuant to this subsection, or directly to the persons whose assets were obtained in violation of any provision of sections 36b-2 to 36b-33, inclusive, or any such regulation, rule or order.

      (f) Any time after the issuance of an order or notice provided for in subsection (a), (b) or (c) or subdivision (1) of subsection (d) of this section, the commissioner may accept an agreement by any respondent named in such order or notice to enter into a written consent order in lieu of an adjudicative hearing. The acceptance of a consent order shall be within the complete discretion of the commissioner. The consent order provided for in this subsection shall contain (1) an express waiver of the right to seek judicial review or otherwise challenge or contest the validity of the order or notice; (2) a provision that the order or notice may be used in construing the terms of the consent order; (3) a statement that the consent order shall become final when issued; (4) a specific assurance that none of the violations alleged in the order or notice shall occur in the future; (5) such other terms and conditions as are necessary to further the purposes and policies of sections 36b-2 to 36b-33, inclusive; (6) the signature of each of the individual respondents evidencing such respondent's consent; and (7) the signature of the commissioner or of the commissioner's authorized representative.

      (P.A. 77-482, S. 28; P.A. 78-34, S. 8, 17; P.A. 79-396, S. 8, 11; P.A. 80-483, S. 166, 186; P.A. 87-375, S. 6; P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 91-145, S. 7; P.A. 93-142, S. 4, 7, 8; P.A. 94-178, S. 3; May 25 Sp. Sess. P.A. 94-1, S. 110; P.A. 95-66, S. 2; 95-220, S. 4-6; P.A. 97-220, S. 13, 15; P.A. 98-162, S. 8; P.A. 99-38, S. 6; P.A. 01-48, S. 4; P.A. 03-259, S. 21; P.A. 05-177, S. 10; P.A. 07-91, S. 26.)

      History: P.A. 78-34 rephrased situations in which commissioner may take action and added provisions designated as Subdiv. (a); P.A. 79-396 added Subdivs. (c) to (e) and provisions specifying contents of consent order; P.A. 80-483 substituted "judicial district of Hartford-New Britain" for "Hartford county" in Subdiv. (b); P.A. 87-375 restructured the section by dividing it into Subsecs., made technical changes in Subsecs. (a), (c) and (d), added new provisions in Subsec. (b) re notice requirements for hearings, increased the fine the commissioner may impose to $10,000 and amended Subsec. (c) to include provisions that restitution shall be paid with interest at the rate set forth in Sec. 37-3a and to increase the fine a court may impose for violations of orders of the commissioner to $10,000; P.A. 88-230 replaced "judicial district of Hartford-New Britain" with "judicial district of Hartford", effective September 1, 1991; P.A. 90-98 changed the effective date of P.A. 88-230 from September 1, 1991, to September 1, 1993; P.A. 91-145 amended Subsec. (c) by subjecting persons who have violated the provisions of the Uniform Securities Act to the enforcement powers of the commissioner and requiring the commissioner to apply to the superior court for the judicial district of Hartford-New Britain for an order of restitution; P.A. 93-142 changed the effective date of P.A. 88-230 from September 1, 1993, to September 1, 1996, effective June 14, 1993; P.A. 94-178 added Subsec. (a)(2) to(4) re ordering restitution, disgorgement or both, inserted new Subsec. (b) re liability of controlling persons to make restitution or provide disgorgement, and renumbered former Subsecs. (b) through (d) as Subsecs. (c) through (e); May 25 Sp. Sess. P.A. 94-1 made technical changes to Subsec. (a); Sec. 36-496 transferred to Sec. 36b-27 in 1995; P.A. 95-66 amended Subsec. (a) to delete remedies other than cease and desist orders for existing or prospective violations, added a new Subsec. (b) re restitution or disgorgement for past violations, and renumbered remaining Subsecs. accordingly; P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995; P.A. 97-220 amended Subsec. (a) to add reference to persons who have violated the provisions of Secs. 36b-2 to 36b-33, inclusive, and amended Subsec. (d) to require notice by registered mail, effective July 1, 1997; P.A. 98-162 amended Subsec. (d)(2) by changing "civil penalty" to "fine"; P.A. 99-38 added provisions throughout re engaging in a dishonest or unethical practice in the securities or commodities business, changed the interest rate reference in Subsec. (b) from Sec. 37-3a to the legal rate set forth in Sec. 37-1, added provisions re joint and several liability of controlling persons and made a technical change in Subsec. (c), and changed "person charged with violating any provision of sections 36b-2 to 36b-33, inclusive" to "respondent named in such order" and made technical changes in Subsec. (f); P.A. 01-48 made technical changes throughout, amended Subsec. (c) by adding reference to violation of any regulation, rule or order, amended Subsec. (d) by adding references to express delivery and amended Subsec. (f) by adding references to notice and to Subsec. (d)(1); P.A. 03-259 amended Subsec. (a) to authorize commissioner to issue order to any other persons causing violation, added Subsec. (b)(3) authorizing commissioner to order both restitution and disgorgement, inserted "or both" in Subsec. (c), increased fines in Subsecs. (d)(2) and (e) from $10,000 to $100,000, inserted "or any such regulation, rule or order" in Subsec. (e) and made technical changes; P.A. 05-177 amended Subsec. (a) to insert Subdiv. designators (1) to (3), to authorize commissioner to issue a cease and desist order against person that directly or indirectly controls a person who commits violation and any other person that has materially aided, is materially aiding or is about to materially aid in violation, amended Subsec. (c) to authorize commissioner to order restitution and disgorgement for any person who has materially aided a person liable in violation under Subsec. (b) and to insert "or aider" re joint liability, amended Subsec. (d) to authorize commissioner to impose a fine on any person that directly or indirectly controls a person who commits violation and that was a cause of violation due to an act or omission such other person knew or should have known would contribute to violation and on any person that has materially aided in violation, amended Subsec. (e) to make extensive changes and expand the court-ordered remedies available to commissioner, amended Subsec. (f)(4) to delete reference to dishonest or unethical practices, and made technical changes throughout; P.A. 07-91 amended Subsec. (a)(3) to allow commissioner to order person that has materially aided, is materially aiding or is about to materially aid in violation to take or refrain from taking action that will effectuate purposes of Secs. 36b-2 to 36b-33, effective June 5, 2007.

      Cited. 233 C. 304.