United States of America
before the
Securities and Exchange Commission

Securities Exchange Act of 1934
Release No. 47920 / May 23, 2003

Investment Advisers Act of 1940
Release No. 2132 / May 23, 2003

Administrative Proceeding
File No. 3-10608

I.

On September 28, 2001, the Securities and Exchange Commission ("Commission") instituted public administrative proceedings, pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Section 203 of the Investment Advisers Act of 1940 ("Advisers Act"), against Respondents Benefit Concepts Group, Inc. ("Benefit Concepts") and James D. Cannon ("Cannon").

In response to the institution of these administrative proceedings, Respondents Benefit Concepts and Cannon have submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings 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 those contained in paragraphs II.A and B below, which are admitted, Benefit Concepts and Cannon consent to the issuance of this Order Making Findings, Imposing Remedial Sanctions, and Imposing a Cease-and-Desist Order ("Order").

II.

On the basis of this Order and the Offer submitted by Benefit Concepts and Cannon, the Commission makes the following findings:

A. Benefit Concepts, located in Arlington, Virginia, was registered with the Commission as an investment adviser from March 1998 until July 31, 2001.

B. Cannon, age 43, was, at all relevant times, the president and owner of Benefit Concepts, which he bought in December 1997 and which he registered with the Commission as an investment adviser in March 1998. Cannon was responsible for Benefit Concepts's day-to-day operations. His duties included directing Benefit Concepts's advertising, investment policy and strategy, and overseeing all compliance matters. From 1991 through December 1999, Cannon was a registered representative with various broker-dealers registered with the Commission.

C. From approximately May 1999 through at least January 2001, Benefit Concepts, through Cannon, engaged in a course of conduct to attract clients by preparing and distributing false and misleading advertisements in which Benefit Concepts claimed performance for years in which it had no investment advisory clients. In addition, Cannon and Benefit Concepts failed to disclose that no basis existed for a substantial portion of its claimed performance record or the fact that its performance record was not derived using "proprietary" software or any market-timing model as the advertisements claimed. In addition, from approximately June 1998 through at least September 2000, Benefit Concepts failed to maintain records necessary to substantiate its advertised performance claims.

D. From approximately May 1999 through at least January 2001, Benefit Concepts committed and willfully violated, and Cannon caused and willfully aided and abetted Benefit Concepts' violations of Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-1(a)(5) thereunder, by making use of the means or instrumentalities of interstate commerce, in connection with Benefit Concepts's business as an investment adviser to, directly or indirectly: (1) employ devices, schemes, or artifices to defraud clients or prospective clients; (2) engage in transactions, practices or courses of business which operated as a fraud or deceit upon clients and prospective clients; or (3) engage in acts, practices or courses of business which were fraudulent, deceptive or manipulative by publishing, circulating and distributing advertisements that contained untrue statements of material fact and that were otherwise false and misleading. As part of the aforesaid conduct:

1. In spring 1999, approximately one year after Cannon registered Benefit Concepts as an investment adviser and first began to provide investment advice to clients, Cannon began to aggressively advertise Benefit Concepts. He did this by providing publications and wire services with what he claimed were the quarterly performance results for the period 1995 to 1999, as well as background information regarding the company.

2. Benefit Concepts, through Cannon, advertised false and misleading performance results in publications, brochures, a website and through press releases. The performance figures contained in all of the advertisements that claimed returns for Benefit Concepts's clients as far back as 1995 had no basis in fact. Moreover, Benefit Concepts falsely claimed that it had a long history of managing investment advisory client accounts, when it actually had no investment advisory clients until spring 1998.

3. For example, in approximately April 1999, Cannon contacted MoniResearch Newsletter, a bimonthly newsletter that presents the performance results of market timers, and provided it with performance figures purportedly achieved by Benefit Concepts's clients for the years 1995 through the first quarter of 1999. As a result of MoniResearch's review of the information provided by Cannon, it calculated a 71.57% compound annualized rate of return for that period. In its May/June 1999 issue, MoniResearch awarded Benefit Concepts its "leadership star" on the basis of this return.

4. Cannon knew there was no basis for the advertised performance figures. The performance results provided by Cannon to MoniResearch were not achieved by Benefit Concepts clients or any investment advisory clients until at least mid-1998. Cannon prepared and distributed press releases to Business Wire and PR Newswire repeating MoniResearch's ranking.

5. Benefit Concepts, through Cannon, also supplied what he purported to be the quarterly performance results of Benefit Concepts's clients to Nelson's World's Best Money Managers. Based on the information provided to it by Benefit Concepts and Cannon, Nelson's ranked Benefit Concepts second out of 897 money managers in the category of U.S. Equity money managers, based on the company's reported five-year annualized rate of return for a five year period ending March 31, 2000. Again, Cannon knew there was no basis for the advertised performance figures. Nonetheless, in June 2000, Cannon issued a press release through Business Wire touting Benefit Concepts's second place ranking in Nelson's.

6. Cannon also created and distributed false advertisements in the form of a glossy brochure and a website that contained performance figures from 1995 through the quarter ending September 30, 2000.

7. Benefit Concepts falsely claimed that it possessed and used a "proprietary" software program in performing a marketing timing service.

E. From mid-1998 through at least September 2000, Benefit Concepts committed and willfully violated, and Cannon caused and willfully aided and abetted Benefit Concepts's violations of Section 204 of the Advisers Act and Rule 204-2(a)(16) thereunder by making use of the mails or the means or instrumentalities of interstate commerce in connection with Benefit Concepts's business as an investment adviser while failing to make or keep true, accurate or current books or records relating to Benefit Concepts's investment adviser business; specifically, accounts, books, internal working papers or other records or documents that were necessary to form the basis for and demonstrate the calculation of the performance or rates of return of any or all managed accounts or securities recommendations in notices, circulars, advertisements, newspaper articles, investment letters, bulletins, or other communications that Benefit Concepts circulated or distributed to ten or more persons as required by Rule 204-2(a)(16). Among other things, Benefit Concepts failed to retain copies of account statements and/or worksheets necessary to demonstrate the calculation of the advertised performance figures for the period from mid-1998 through at least September 2000, the period for which Benefit Concepts advertised performance results that Cannon claimed had been achieved by actual advisory clients of Benefit Concepts.

F. Based on the above-described conduct, Benefit Concepts committed violations of and willfully violated, and Cannon caused and willfully aided and abetted Benefit Concepts's violations of:

1. Sections 206(1), 206(2) and 206(4) of the Advisers Act and Rule 206(4)-1(a)(5) thereunder, by making use of the means or instrumentalities of interstate commerce, in connection with Benefit Concepts's business as an investment adviser to, directly or indirectly: (1) employ devices, schemes, or artifices to defraud clients or prospective clients; (2) engage in transactions, practices or courses of business which operated as a fraud or deceit upon clients and prospective clients; or (3) engage in acts, practices or courses of business which were fraudulent, deceptive or manipulative by publishing, circulating and distributing advertisements that contained untrue statements of material fact and that were otherwise false and misleading; and

2. Section 204 of the Advisers Act and Rule 204-2(a)(16) thereunder by making use of the mails or the means or instrumentalities of interstate commerce in connection with Benefit Concepts's business as an investment adviser while failing to make or keep true, accurate or current books or records relating to Benefit Concepts's investment adviser business; specifically, accounts, books, internal working papers or other records or documents that were necessary to form the basis for and demonstrate the calculation of the performance or rates of return of any or all managed accounts or securities recommendations in notices, circulars, advertisements, newspaper articles, investment letters, bulletins, or other communications that Benefit Concepts circulated or distributed to ten or more persons as required by Rule 204-2(a)(16).

G. Respondents Benefit Concepts and Cannon have submitted sworn Statements of Financial Condition, dated February 13, 2002, and December 31, 2001, respectively, and other evidence and have asserted their inability to pay a civil penalty.

III.

On the basis of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Respondents Benefit Concepts and Cannon and imposes the sanctions and other measures specified therein.

Accordingly, IT IS HEREBY ORDERED:

1. That Benefit Concepts and Cannon, pursuant to Section 203(k) of the Advisers Act, shall cease and desist from committing or causing any violation and any future violation of Sections 204, 206(1), 206(2) and 206(4) of the Advisers Act and Rules 204-2(a)(16) and 206(4)-1(a)(5) thereunder ;

2. That Benefit Concepts be, and is hereby, censured pursuant to Section 203(e) of the Advisers Act;

3. That Cannon be, and is hereby, barred, pursuant to Sections 15(b) of the Exchange Act and Section 203(f) of the Advisers Act, from association with any broker or dealer or investment adviser, with the right to reapply for association after three years to the appropriate self-regulatory organization, or if there is none, to the Commission; and

4. That based upon Benefit Concepts's and Cannon's sworn representations in their Statements of Financial Condition, dated February 13, 2002, and December 31, 2001, respectively, and other documents submitted to the Commission, the Commission is not imposing a penalty against Respondents.

5. IT IS FURTHER ORDERED that the Division of Enforcement ("Division") may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Respondents provided accurate and complete financial information at the time such representations were made; and (2) seek an order directing payment of the maximum civil penalty allowable under the law. No other issue shall be considered in connection with this petition other than whether the financial information provided by Respondents was fraudulent, misleading, inaccurate, or incomplete in any material respect. Respondents may not, by way of defense to any such petition: (1) contest the findings in this Order; (2) assert that payment of a penalty should not be ordered; (3) contest the imposition of the maximum penalty allowable under the law; or (4) assert any defense to liability or remedy, including, but not limited to, any statute of limitations defense.

By the Commission.

Jonathan G. Katz
Secretary

http://www.sec.gov/litigation/admin/34-47920.htm