In the Matter of the Application of Christopher J. Benz

Gilford Securities, Inc. (Gilford) was a member of the National Association of Securities Dealers, Inc. (NASD) (plaintiff). Ralph Worthington was Gilford’s president and chief executive officer. Worthington asked Christopher Benz (defendant), who had been working on the trading desk in New York, to become the branch manager of Gilford’s Los Angeles office. Worthington warned Benz that Elias Argyropolous, one of the registered representatives in the Los Angeles office, could be “tricky” and cause headaches. Argyropolous was a senior employee and generated substantial revenue for Gilford. While working in the Los Angeles office, Benz reviewed order tickets, account statements, family-related accounts, margin activity, and incoming mail; approved new accounts; reviewed and responded to customer complaints; approved cross trades; and identified himself as the branch manager in correspondence. Benz received subpoenas and document requests from the Securities and Exchange Commission (SEC) (plaintiff) and stock exchanges relating to trades made by Argyropolous, noticed unusually high numbers of margin calls in Argyropolous’s client accounts, and received customer complaints about Argyropolous. Benz notified Worthington about the subpoenas and margin calls, discussed customer complaints with Worthington and with Argyropolous, and sent a memo to Worthington expressing concern about Argyropolous’s activities. Benz resigned two years after assuming the duties of branch manager. The NASD filed a complaint against Gilford, Worthington, Argyropolous, and Benz, alleging in part that Argyropolous had engaged in sales-practice abuses and manipulative and deceptive devices and that Benz had failed to adequately supervise him. Gilford, Worthington, and Argyropolous settled with the NASD. The NASD found that Benz violated the NASD Rules of Fair Practice by failing to adequately supervise Argyropolous and enforce Gilford’s supervisory procedures. Benz was censured, fined, assessed costs, and required to requalify as a general securities principal before acting in a principal capacity again. Benz applied to the SEC for review of the NASD’s disciplinary action, arguing that Worthington actually controlled the Los Angeles office and Benz did not have the authority to supervise Argyropolous or fire him without Worthington’s approval. Benz acknowledged that he had the authority to supervise the other registered representatives in the Los Angeles office.