UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7296 / May 21, 1996 SECURITIES EXCHANGE ACT OF 1934 Release No. 37233 / May 21, 1996 INVESTMENT ADVISERS ACT OF 1940 Release No. 1565 / May 21, 1996 ADMINISTRATIVE PROCEEDING File No. 3-8825 : In the Matter of : ORDER MAKING FINDINGS, IMPOSING : REMEDIAL SANCTIONS, AND ISSUING ANTHONY J. BENINCASA : A CEASE-AND-DESIST ORDER : : I. In these proceedings instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act"), Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), and Section 203(k) of the Investment Advisers Act of 1940 ("Advisers Act"), Respondent Anthony J. Benincasa ("Benincasa") has submitted an Offer of Settlement ("Offer") which the Securities and Exchange Commission ("Commission") has determined to accept.-[1]- Solely for the purpose of this proceeding and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained herein, except for those set forth in paragraph II.C. below, which are admitted, Benincasa by his Offer consents to the findings and the imposition of the sanctions and other relief contained in this Order Making Findings, Imposing Remedial Sanctions, and Issuing a Cease-and-Desist Order ("Order"). ---------FOOTNOTES---------- -[1]- An Order Instituting Public Proceedings against Benincasa was issued by the Commission on September 25, 1995. ==========================================START OF PAGE 2====== II. On the basis of this Order, the Order Instituting Public Proceedings, and the Offer submitted by Benincasa, the Commission finds that:-[2]- A. Peter T. Jones ("Jones") was, at all times relevant to these proceedings, acting, and holding himself out, as an investment adviser, without registering with the Commission as such. Additionally, Jones was, at all times relevant to these proceedings, the president, general partner and principal of Independence Asset Management ("IAM") and MRMG Investment Corporation ("MRMG"). IAM, which purported to be a general partnership and investment club, began operations in or about 1985 under the name MRMG. Jones was solely responsible for the daily operations of both entities. B. From at least 1985 through November 1993, Jones willfully violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act, in that Jones, through IAM and its predecessor MRMG, engaged in a Ponzi scheme through which he raised at least $9.2 million from over 400 investors. Jones falsely represented to prospective investors that he would establish individual accounts for each investor and invest their money in three separate IAM investment funds. He represented that each fund owned various types of securities and earned rates of return as high as 20 percent. In fact, Jones commingled all of the investors' funds in a single bank account. He used at least $5 million to pay existing investors periodic redemptions and withdrawals. In addition, Jones misappropriated at least $300,000. In furtherance of the fraudulent scheme, Jones also made false and misleading statements of material fact and omitted to state material facts concerning, among other things: 1. the use of investor proceeds; 2. the value of individual IAM investments; 3. the value, nature and existence of securities in the IAM portfolio; 4. the degree of risk involved in an investment; and ---------FOOTNOTES---------- -[2]- The findings contained herein are pursuant to Benincasa's Offer of Settlement and are not binding upon any other person in this or any other proceeding. ==========================================START OF PAGE 3====== ==========================================START OF PAGE 4====== 5. the registration status and professional credentials of Jones and IAM. C. Benincasa was employed as a registered representative with three different broker-dealers from 1985 until January 28, 1994. D. From approximately 1985 to November 1993, Benincasa was the sole registered representative for IAM's brokerage accounts at the various brokerage firms where he had been employed. E. From approximately December 1987 to November 1993, Benincasa willfully aided and abetted Jones' and IAM's violations of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that he assisted Jones and IAM, who, in connection with the offer, purchase and sale of certain securities, namely investment contracts offered through IAM, directly and indirectly, by use of the means or instruments of transportation or communication in interstate commerce, the means or instrumentalities of interstate commerce, the mails, or the facilities of a national securities exchange: employed devices, schemes, or artifices to defraud; obtained money and property by means of, and made, untrue statements of material fact, and omitted to state material facts necessary to make the statements made, in the light of the circumstances under which they were made, not misleading; and engaged in acts, transactions, practices, and courses of business which operated as a fraud and deceit upon the offerees, purchasers and prospective purchasers of such securities. F. As part of the aforesaid conduct described in paragraph II.E. above, Benincasa opened accounts which falsely identified IAM as a partnership involving only Jones and another individual, and he forged signatures on new account forms. In so doing, Benincasa concealed that the IAM account contained the funds of many investors rather than only the funds of Jones and the other investor. Benincasa had known since the fall of 1987 that MRMG, as IAM was known at the time, had at least approximately 75 investors. By 1989, Benincasa became aware that IAM had approximately 100 investors. Despite this knowledge, Benincasa never told his supervisors at any of the broker-dealers where he was employed that IAM was not a partnership, and he continued to process trades for Jones and the MRMG and IAM accounts. G. Benincasa made many of the trading decisions for the IAM accounts. Benincasa also concealed the fact that he had reason to believe that Jones was making material misrepresentations and omissions concerning the extent, value and performance of the securities in IAM's brokerage accounts. Despite this knowledge, Benincasa continued to use the IAM investors' funds to execute transactions for the IAM accounts. ==========================================START OF PAGE 5====== H. As part of the aforesaid conduct described in paragraph II.E. above, Benincasa also made material misstatements to investors by telling them that the IAM account was doing well when he knew it was losing money. I. While Benincasa was engaging in the conduct described above, the IAM accounts with Benincasa lost more than $1 million, generated at least $860,000 in gross commissions for the firms at which Benincasa was employed, and generated net commissions for Benincasa of at least $333,000. J. From approximately December 1987 to November 1993, Benincasa willfully aided and abetted Jones' and IAM's violations of Sections 206(1) and 206(2) of the Advisers Act, in that they, directly and indirectly, by use of the means or instrumentality of interstate commerce, or by use of the mails, employed devices, schemes or artifices to defraud; and engaged in transactions, practices and courses of business which operated as a fraud and deceit upon investment advisory clients and prospective clients, as more fully described in paragraphs II.E. through II.I. above. K. From July 1991 to November 1993, Benincasa willfully aided and abetted the broker-dealer's violations of Section 17(a) of the Exchange Act and Rule 17a-3(a)(9) thereunder in that he placed or directed the placement of false information on books and records required to be made and kept by the broker-dealer. For example, the books and records contained false information regarding the net worth of IAM, the nature of the account, and the identities of the actual beneficial owners of the account. III. On the basis of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions and other relief specified in the Offer. Accordingly, IT IS HEREBY ORDERED that: A. Benincasa, pursuant to Section 8A of the Securities Act, Section 21C of the Exchange Act and Section 203(k) of the Advisers Act, cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Act; Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; Section 17(a) of the Exchange Act and Rule 17a- 3(a)(9) thereunder; and Sections 206(1) and 206(2) of the Advisers Act. B. Benincasa be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment company or investment adviser; ==========================================START OF PAGE 6====== C. Benincasa disgorge $333,000, plus interest, dating to the date of this Order, at the prejudgment rate, provided, however, that the payment of such disgorgement is waived, and a civil penalty is not imposed, based upon Benincasa's demonstrated inability to pay, except as to $16,000 in disgorgement, such amount to be paid within thirty (30) days of the date of the entry of this Order. The Commission may, at any time, reopen this matter to consider Benincasa's financial inability to pay additional disgorgement, plus interest, or a civil penalty, if the Commission obtains information from any source that the financial information provided by Benincasa was inaccurate or incomplete in any material respect. In such event, the Commission may consider ordering Benincasa to pay the balance of disgorgement remaining, plus prejudgment and postjudgment interest, and a civil penalty. Further, in such event, Benincasa may not, by way of defense, contest the findings and conclusions of law in this Order, the amount of disgorgement and interest, or assert that disgorgement or a civil penalty should not be ordered for the violations of the federal securities laws alleged herein; and D. The payment required by paragraph III.C. of this Order shall by made by United States postal money order, certified check, or cashier's check; made payable to Robert F. Sanville, Trustee of the I.A.M. Trust in the matter of SEC v. Independence Asset Management, et al., Civil Action No. 94-CV-1698 (E.D. Pa.), for distribution to investors; transmitted to Robert F. Sanville, CPA, 1514 Old York Road, Abington, PA 19001; and submitted under cover letter which identifies Benincasa as the Respondent in this proceeding, and the file number of this proceeding. A copy of the cover letter and money order or check shall be simultaneously sent to Donald M. Hoerl, District Administrator, Securities and Exchange Commission, Philadelphia District Office, 601 Walnut Street, Suite 1005E., Philadelphia, PA 19106. By the Commission. Jonathan G. Katz Secretary