Crews & Associates, the Little Rock bond brokerage, on Tuesday reached a settlement (PDF) with the Arkansas Securities Department over its role in selling $17 million worth of debentures for a defunct oil and gas exploration company called Bamco Gas LLC.
Securities Commissioner Heath Abshure also issued on Tuesday two cease-and-desist orders against Bamco and two of its “control persons,” Ernest Bartlett III of Little Rock and Howard Appel of Pennsylvania.
The bonds — $10 million worth of senior debentures sold in 2005 and $7 million in subordinate debentures sold in 2008 — had been sold to investors in Arkansas and 15 other states by Crews & Associates. The bonds had begun to default by May 2009, in part because of debts and liens against Bamco that had not been disclosed to investors.
More: Read the cease-and-desist orders here and here (PDFs).
Although Crews neither admitted nor denied the findings, state regulators say the brokerage violated state law and national securities regulations by failing to “conduct a reasonable due diligence investigation” for either of the Bamco offerings; by withholding important information about Bamco and its principals; and by failing to properly supervise the agents who sold the bonds.
The ASD did not fine Crews, which had offered to buy back all the Bamco bonds, those it sold and those sold by any other broker. Instead, the department allowed Crews to make a $150,000 donation to the North American Securities Administrators Association “to advance the training and investor-protection programs offered by NASAA.”
Rush Harding, CEO of Crews & Associates, issued the following statement after the settlement was announced.
“In this constantly evolving industry, our obligations to our customers and to our regulators are of utmost imiportant to us. We are pleased that we were able to resolve this matter favorably for our customers. We are also appreciative of the professionalism demonstrated by Heath Abshure and the staff of the Arkansas Securities Department. As we navigate through this economy in a changing regulatory environment, Crews remains dedicated to achieving positive results for its customers as it has since 1979.”
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