STATE HOUSE STATION
AUGUSTA, MAINE 04333
IN THE MATTER OF: )
Sandgrain Securities Inc. ) CONSENT AGREEMENT
Franklin Avenue ) No. 03-004-CAG
Suite 101 )
This Agreement is entered into by
the Maine Office of Securities ("Securities") and Sandgrain
Securities Inc. (“Sandgrain”), CRD# 26004, a broker-dealer incorporated pursuant
to the laws of New York with a principal place of business in Garden City, New
the parties agree as follows:
At all relevant times, it has been
unlawful in Maine for a person to act as a broker-dealer unless licensed or
exempt from licensing under the Revised Maine Securities Act, 32 M.R.S.A.
On June 26, 2002, Securities
received from a letter from Marc Luxenberg, Branch Liaison for Sandgrain, dated
June 24, 2002, in which Mr. Luxenberg requested that the Securities Administrator grant
Sandgrain an exclusion from the licensing laws for the firm’s one Maine client. In the letter, Mr. Luxenberg represented that
the Maine client had established a relationship with Sandgrain in March 2002
while living in Florida and the client had requested that his address be changed to Maine.
On July 3, 2002, a
Securities staff person called Mr. Luxenberg to let him know that the exclusion
would not be considered until Securities had contacted the Maine client and had
communicated to him the disclosure history of the firm and sales
representative. Mr. Luxenberg was not
available, but the Securities staff person left a voice mail message explaining
the reason for her call and requesting that he return her call.
Having received no response to the July 3, 2002, voice mail message, the Securities staff person called Mr. Luxenberg
again on July 17, 2002, at which time
she was able to speak with him. The
Securities staff person obtained from Mr. Luxenberg the Maine client’s
telephone number and reiterated to him that Securities would be contacting the Maine client.
On July 17, 2002, Securities
contacted the Maine client. During the telephone
call, the Maine client revealed that he had been living in Maine since April 2002,
that he had told Sandgrain to change the address on his account to his Maine address before he
returned to Maine, and that he had effected a number of securities transactions through
Sandgrain since moving to Maine. The Maine client said that
the firm had never discussed with him that they were not licensed in Maine, nor had they
discussed the requirement that they be licensed in Maine in order to
handle his account.
By letter dated July 19, 2002, the Securities staff person sent a letter to the president of
Sandgrain, Paul Chinchar, in which she informed him that the remedy for
unlicensed activity was rescission.
On July 22, 2002, the
Securities staff person spoke with Mr. Chinchar regarding the unlicensed
activity. Mr. Chinchar represented to
her during that telephone call that Sandgrain would offer rescission to the Maine client.
On July 24, 2002, Securities
sent a letter to Mr. Chinchar in which, among other things, she confirmed Mr.
Chinchar’s representation to her that he would offer rescission to the Maine client.
On August 8, 2002, Securities
received a letter from Frank Tauches, Jr., General Counsel for Sandgrain, in
which he indicated that it was Sandgrain’s belief that the firm qualified for
an exemption from licensing under Maine law. Essentially, Sandgrain believed that the firm
qualified for the exemption because the Maine client had represented that he
was a resident of Florida, had not represented that he had a principal place of
residence anywhere other than Florida, and when he notified Sandgrain of his
change of address in writing on June 18, 2002, the Maine client indicated that
it was only a temporary change of address and that he would be returning to
Florida on October 20, 2002.
A review of the Maine client’s account
statements revealed that Sandgrain effected at least forty transactions in the Maine client’s account
after he had relocated to Maine in April 2002.
It is Securities’ position that
Sandgrain has acted as a broker-dealer in Maine without being
licensed or exempt from licensing.
Sandgrain has represented that its
failure to be licensed before transacting business in Maine was due to the fact
that the Maine client did not put his change of address in writing; therefore,
the firm had no way of knowing that the Maine resident had a change of address.
The firm represented that once they were
informed in writing of the change of address, they acted promptly by sending
the letter to Securities requesting the exclusion, which they assumed would be
All parties desire an expeditious
resolution of this matter.
NOW THEREFORE, without trial or adjudication of any issue of fact or law, and without
Sandgrain admitting or denying that their conduct violated the Revised Maine
Securities Act, it is agreed that:
Sandgrain will comply with all
licensing and other legal requirements governing persons acting as securities
broker-dealers and sales representatives in the State of Maine at all times
from the date hereof;
Sandgrain agrees to neither seek nor
assert an exemption under 32 M.R.S.A. §10302(1)(B) for any prospect or customer
who has a residence in the State of Maine;
In lieu of Securities seeking the
imposition of a penalty for the allegations contained herein, Sandgrain will
pay the sum of $15,000.00 to the Maine client upon Sandgrain’s
execution of this Agreement;
Securities will not take further
action against Sandgrain based upon the unlicensed status of Sandgrain during
the period preceding and including the date of execution of the Agreement, PROVIDED, however, that this paragraph
applies only to the transactions previously disclosed to Securities by
Sandgrain and its clearing firm.
10, 2003 /s/ Frank A. Tauches,
A. Tauches, Jr., President
20, 2003 /s/ Christine A. Bruenn
20, 2003 /s/ Bonnie E. Russell
Bonnie E. Russell
Assistant Securities Administrator
20, 2003 /s/ Jacqueline M. Drouin
Jacqueline M. Drouin