Paul Joseph Benz

SECURITIES EXCHANGE ACT OF 1934
Rel. No. 51046 / January 14, 2005

Admin. Proc. File No. 3-11523

ORDER SUSTAINING DISCIPLINARY ACTION TAKEN BY REGISTERED SECURITIES ASSOCIATION

On the basis of the Commission's opinion issued this day, it is

ORDERED that the disciplinary action taken by NASD against Paul Joseph Benz be, and NASD's assessment of costs, be, and they hereby are, sustained.

By the Commission.

Endnotes

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¹ NASD Rule 2110 requires compliance with high standards of commercial honor and just and equitable principles of trade.

² 17 C.F.R. § 240.15c3-1.

³ NASD also assessed costs.

⁴ In addition, NASD found that Benz violated NASD Rules 2110 and 8210 by failing to respond timely to NASD requests for information. For these violations, NASD imposed a $2,500 fine, a thirty-day suspension, and a requirement that Benz requalify as a principal. Benz does not challenge this finding on appeal before us.

⁵ Christopher Benz did not appear before the Hearing Panel and stated through counsel that he would accept a decision by default. Thus, a default decision was entered against him on March 20, 2003, which imposed a six-month suspension and a fine of $25,000.

⁶ An introducing broker deals directly with the public and originates customer accounts. See Katz v. Fin. Clearing & Serv. Corp., 794 F. Supp. 88, 90 (S.D.N.Y. 1992).

⁷ A clearing broker handles functions related to the clearance and settlement of trades in the accounts of the customers of its introducing broker. See Dillon v. Militano, 731 F. Supp. 634, 636 (S.D.N.Y. 1990).

⁸ The record also contains a clearing agreement dated December 15, 1998, which includes indemnification provisions that are identical to those in the October 30, 1998 Clearing Agreement. The record does not indicate the significance of the December Clearing Agreement.

⁹ Ultimately, CCS sold a small portion of the GlobalNet stock in Rubin's account and purchased the remainder of GlobalNet stock in Rubin's account. On April 16, 2001, Beacon filed an arbitration claim against CCS and CCS filed a counterclaim with NASD Dispute Resolution to determine liability for the Rubin stock. On June 30, 2003, the NASD arbitration panel found Beacon to be liable and determined it should pay CCS the sum of $1,312,742 in compensatory damages. (2003 WL 21694002 (N.A.S.D.)).

¹⁰ NASD specifically found that Benz, by conducting a securities business when the Firm did not meet its net capital requirement under Exchange Act Rule 15c3-1, violated Conduct Rule 2110, which requires conduct consistent with just and equitable principles of trade.

¹¹ Russo Securities, Inc., Securities Exchange Act Rel. No. 44186 (Apr. 17, 2001), 75 SEC Docket 1124A, 1124G; L.H. Alton & Co., 53 S.E.C. 1118, 1121 (1999), petition denied, 229 F.3d 1156 (9th Cir. 2000) (Table).

¹² William H. Gerhauser, 53 S.E.C. 933 (1998) (finding without submission to NASD for approval, there was no effective amendment to the clearing agreement).

¹³ Gerhauser, 53 S.E.C. at 939.

¹⁴ He had not delegated his responsibility for compliance to others in the Firm. See Gerhauser, 53 S.E.C. at 940-41 (finding president of a broker-dealer responsible for compliance with requirements imposed on the firm "unless and until he reasonably delegates particular functions to another person in that firm, and neither knows nor has reason to know that such person's performance is deficient"); David M. Haber, 52 S.E.C. 201, 207 n.22 (1995) (same).

¹⁵ See W. N. Whelen & Co., Inc., 50 S.E.C. 282, 287 (1990) (finding proof of intent to violate is unnecessary to establish a net capital violation). See also Hutchison Fin. Corp., 51 S.E.C. 398, 403-04 (1993) (explaining that officers of securities firms are responsible for ensuring a firm's compliance with applicable rules and regulations, including net capital requirements).

Conduct Rule 2110 requires the observance of high standards of commercial honor and just and equitable principles of trade. The Commission has found that a violation of the securities laws, including the net capital rule, is a violation of Conduct Rule 2110. See Gerhauser, 53 S.E.C. at 942-43.

¹⁶ See Exchange Act Section 19(2)(2), 15 U.S.C. § 78s(e)(2). Benz does not claim, and the record does not show, that NASD's action has imposed an undue burden on competition.

¹⁷ NASD Sanction Guidelines at 33 (2001).

¹⁸ Id.

¹⁹ We have considered all of the parties' contentions. We have rejected or sustained them to the extent that they are inconsistent or in accord with the views expressed in this opinion.