United States Securities and Exchange Commission
Securities Exchange Act of 1934
Release No. 44880 / September 28, 2001
Investment Advisers Act of 1940
Release No. 1986 / September 28, 2001
File No. 3-10608
ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS INSTITUTED AGAINST BENEFIT CONCEPTS GROUP, INC. AND JAMES D. CANNON
The Securities and Exchange Commission ("Commission") announced that it has instituted public administrative and cease-and-desist proceedings against Benefit Concepts Group, Inc. ("Benefit Concepts"), an investment adviser, and its president and owner, James D. Cannon ("Cannon"). Benefit Concepts, located in Arlington, Virginia, was registered with the Commission from March 1998 until July 31, 2001.
In the Order Instituting Public Proceedings ("Order"), the Division of Enforcement ("Division") alleges that from approximately May 1999 through at least January 2001, Benefit Concepts, through Cannon, engaged in a fraudulent 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 mid-1998 through at least September 2000, Benefit Concepts failed to maintain records necessary to substantiate its advertised performance claims.
The Division alleges that, 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. 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' 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.
The Division further alleges that, based on false information provided by Cannon, the publication Nelson's World's Best Money Managers 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 the five years ending March 31, 2000.
The Order alleges that Benefit Concepts, aided and abetted by Cannon, willfully violated Sections 204, 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940, and Rules 204-2(a)(16) and 206(4)-1(a)(5) thereunder.
A hearing will be scheduled before an administrative judge to determine whether the allegations contained in the Order are true, to provide Benefit Concepts and Cannon an opportunity to dispute these allegations, and to determine what sanctions, if any, are appropriate and in the public interest.