Cease and desist order issued to CSI Holdings, Inc. for failure to file notice of exemption
DENVER — A consent order signed by Colorado Securities Commissioner Gerald Rome stipulates that Christopher Smith and his company CSI Holdings, LLC will immediately cease and desist from all unregistered securities activity in Colorado and all violations of the Colorado Securities Act.
The Colorado Division of Securities, part of the Department of Regulatory Agencies (DORA), discovered advertisements in the Denver Post offering investments in “private investment notes” through CSI Holdings that came with varying interest rates between six and eight percent, and for which a minimum investment of $20,000 was expected. Through investigation it was discovered that six people had contributed $320,000 between September 2015 and February 2016.
As alleged by the staff of the Division of Securities, even though CSI made timely scheduled payments of principal and interest to the investors, the company failed to timely inform the Division that they were claiming an exemption from registration by filing the necessary exemption paperwork, known as a “Form D” notice. The staff additionally alleged that the respondents did not have adequate measures in place to confirm that investors were accredited, meaning that they had sufficient net worth and income that would have supported an exemption from registration.
“Form D filings allow for private offerings to accredited investors who are sophisticated in their knowledge, and who can handle a larger degree of risk with their funds,” stated Rome. “If regulators do not receive the notice, however, we cannot verify that solicitations are in fact being made to the right people, and that could mean that unaccredited investors are getting involved in an enterprise that could get them in a lot of financial trouble.”
Both Respondents have agreed to the cease and desist order, while neither confirming nor denying the Division’s allegations.