STATE OF MAINE
OFFICE OF SECURITIES
121 STATE HOUSE
STATION
AUGUSTA, ME 04333
NOTICE OF
INTENT
TO ISSUE AN
ORDER TO
DENY A LICENSE
01-074
|
ALLEGATIONS
1.
Hawthorne Investment Management, LLC (“HIM”) is a limited
liability company organized pursuant to the laws of Delaware.
2.
David Conary (“Conary”)
is and has been at all material times the manager of HIM since its organization
in 1999.
3.
Mustang Capital LLC (“Mustang”) was a limited liability
company licensed as an investment adviser in the State of Maine from February 26, 1998, through December 31, 1999.
Conary was an investment adviser
representative and executive vice president of Mustang.
4.
Conary resigned his
positions with Mustang in or about September or October 1999.
5.
On or about June 16, 2000, HIM
submitted an application to the Office of Securities for the
State of Maine (“Office of
Securities”) to be licensed as an investment adviser in the State of Maine.
6.
By letter dated September
7, 2000, the Office of Securities confirmed to Lawrence Kletter (“Kletter”), counsel for
HIM, that HIM was licensed as an investment adviser in Maine effective September 7, 2000.
7.
On or about November 20,
2000, the Office of Securities commenced an examination at HIM’s office in Bethel, Maine. Conary was not
present during the examination due to physical incapacitation, but he
participated by telephone.
8.
During the examination of HIM’s
office on November 20,
2000, Conary informed the Office of
Securities that HIM had been acting as an investment adviser in the State of Maine since the
latter part of 1999.
9.
More particularly, during the examination of HIM’s office on November
20, 2000, Conary informed the Office of
Securities that he contacted Maine customers of
Mustang in the latter part of 1999 and told them that they could choose to
leave Mustang and become his clients at HIM.
10.
As a result of Conary’s
solicitations, some Maine investment
advisory clients who had been with Mustang, left Mustang and became investment
advisory clients of HIM in the latter part of 1999 and HIM engaged in
investment advisory activities on behalf of these Maine clients in
the latter part of 1999.
11.
On or about July 20, 2001, the Office
of Securities recommenced its examination of HIM at the Office of Securities in
Gardiner, Maine. During
this examination, Conary confirmed again that he had
contacted Mustang clients, at least some of whom were Maine residents, in
the latter part of 1999 with a view toward having them become HIM clients. Conary further confirmed
that some of these Maine Mustang clients became clients of HIM in the
latter part of 1999.
12.
By letter dated March
20, 2002, Conary informed the Office of
Securities that HIM would be withdrawing from licensure as an investment
adviser in the State of Maine effective April 19, 2002, and submitted the completed
withdrawal form.
13.
Accordingly, the Office of Securities terminated HIM’s investment adviser license with the State of Maine effective April 19, 2002. By letter dated April
19, 2002, the Office of Securities notified Conary
that HIM’s license as an investment advisor in the State
of Maine was terminated. In this letter, the Office of Securities
requested that Conary notify the Office of Securities
that HIM no longer had any investment advisory clients. By letter dated April
25, 2002, Conary confirmed that HIM no
longer had any investment advisory clients.
14.
By letter dated May
7, 2002, Kletter, on behalf of HIM,
submitted a new investment adviser license application on behalf of HIM to the
Office of Securities.
15.
A person may not act
in Maine as an
investment adviser unless licensed or exempt from licensing pursuant to 32
M.R.S.A. § 10303(1).
16.
According to the records of the Office of Securities, HIM
was not licensed to act as an investment adviser in the State of Maine prior to September 7, 2000, and the Office of Securities is
not aware of any exemption from licensing for which HIM might have qualified.
17.
HIM acted as an unlicensed investment adviser in the State
of Maine in violation
of 32 M.R.S.A. § 10303(1) when
it acted as an investment adviser in the State of Maine from the
latter part of 1999 until September 7,
2000.
18.
HIM acted as an unlicensed investment adviser in the State
of Maine in violation
of 32 M.R.S.A. § 10303(1) when
Conary solicited Maine clients of
Mustang to become clients of HIM in the latter part of 1999.
19.
HIM acted as an unlicensed investment adviser in the State
of Maine in violation
of 32 M.R.S.A. § 10303(1) when
Maine investment
advisory clients of Mustang became investment advisory clients of HIM in the
latter part of 1999.
20.
HIM engaged in unlawful, unethical or dishonest conduct or
practice in the securities business when it acted as an unlicensed investment
adviser in the State of Maine from the
latter part of 1999 until September 7,
2000.
21.
Pursuant to 32 M.R.S.A. §
10313(1)(G), the Administrator may, after notice and opportunity for hearing,
by order, deny any license, if the Administrator finds that the order is in the
public interest and that the applicant has engaged in any unlawful, unethical
or dishonest conduct or practice in the securities business.
NOTICE
Pursuant to 32 M.R.S.A. §10708,
notice is hereby given that the Securities Administrator intends to issue an
Order to Deny HIM’s application for investment
adviser licensure pursuant to 32 M.R.S.A. §10313(1)(G).
Pursuant to 32 M.R.S.A. § 10708(2),
HIM has thirty (30) calendar days from the entry of this Notice of Intent to
file a written request for a hearing.
Date:_June 7, 2002_____________ _Christine A. Bruenn__________
Christine
A. Bruenn
Securities
Administrator
