UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION Securities Exchange Act of 1934 Release No. 41024 / February 8, 1999 Administrative Proceedings File No. 3-9244 _____________________________ : ORDER MAKING FINDINGS, In the Matter of : IMPOSING REMEDIAL SANCTIONS : AND CEASE-AND-DESIST ORDER MARSH BLOCK & CO., INC., : ALFRED G. BLOCK, : KENNETH L. MARSH, and : JEFFREY M. MILLER, : : Respondents. : : ______________________________: I. In these administrative and cease-and-desist proceedings instituted pursuant to Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), Respondents Marsh Block & Co., Alfred G. Block ("Block"), and Kenneth L. Marsh ("Marsh") have submitted Offers of Settlement ("Offers") which the Securities and Exchange Commission ("Commission") has determined to accept.[1] II. Solely for the purpose of these proceedings, and any other proceeding brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the findings set forth below, except as to the jurisdiction of the Commission over them and over the subject matter of these proceedings, which are admitted, Marsh Block, Block and Marsh withdraw their answers and consent to the entry of the findings, the imposition of remedial sanctions, and order of the Commission set forth herein. III. On the basis of this Order Making Findings, Imposing Remedial Sanctions and Cease-And-Desist Order ("Order") and the Offers, the Commission finds[2] that: SETTLING RESPONDENTS 1. Marsh Block, located in New York, New York, is a broker-dealer registered with the Commission, and is a National Association of Securities Dealers, Inc. ("NASD") member firm. Marsh Block ceased doing business in June 1997. 1. Block, 61, of Livingston, New Jersey, is a co-founder of Marsh Block. During 1993 and 1994, Block was Marsh Block's sole stockholder, as well as its chief executive officer and one of its registered principals. 1. Marsh, 62, of New York, New York, is a co-founder of Marsh Block. During 1994, Marsh was employed by Marsh Block as a registered representative and, although he had no ownership interest or formal role in firm management, he participated in certain of the firm's management decisions. OTHER RELEVANT PERSONS 1. Jeffrey M. Miller ("Miller"), 40, of Roslyn, New York, was a registered representative associated with Marsh Block from December 24, 1990 to March 31, 1994. In September 1993, Miller was censured by the New York Stock Exchange, Inc. ("NYSE") and barred from association with any NYSE member organization for ten years, with five years being deemed served. This sanction was stayed until March 15, 1994, when the Commission affirmed the NYSE's decision. In re Jeffrey Michael Miller, Exchange Act Release No. 33763 (Mar. 15, 1994), 56 SEC Docket 0781 (Apr. 5, 1994). On March 31, 1994, the NASD terminated Miller's registration with Marsh Block. Miller, however, continued to be associated with Marsh Block through November 17, 1994. 1. Howard F. Rubin ("Rubin"), 36, of New York, New York, was, on October 12, 1993, permanently enjoined by the United States District Court for the Southern District of New York, in SEC v. Rubin, 91 Civ. 6531 (MBM), from violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Exchange Act and Rule 10b-5. At that time, Rubin was a registered representative associated with Keane Securities Co., Inc. ("Keane"), a broker-dealer registered with the Commission. Rubin's registration with Keane terminated on February 3, 1994. From on or about March 2, 1994 through November 17, 1994, Rubin was associated with Marsh Block. On February 9, 1995, the Commission barred Rubin on consent from association with any broker, dealer, investment company, investment adviser or municipal securities dealer. In re Howard F. Rubin, Exchange Act Release No. 35349 (Feb. 9, 1995), 58 SEC Docket 1478 (Mar. 7, 1995). MARSH BLOCK VIOLATED, AND BLOCK AND MARSH EACH AIDED AND ABETTED, AND WAS A CAUSE OF, MARSH BLOCK'S VIOLATIONS OF, SECTIONS 15(b)(7) AND 17(a)(1) OF THE EXCHANGE ACT, AND RULES 15b7-1 AND 17a-3(a) 1. Miller, as a result of the sanctions imposed by the NYSE against him, became subject to a statutory disqualification with respect to membership or participation in, or association with, a member of any self-regulatory organization under Section 3(a)(39)(A) of the Exchange Act, and subject to a disqualification under Section 4(a) of Article II of the NASD By-Laws. 1. Rubin, as a result of the permanent injunction entered against him in SEC v. Rubin, became subject to a statutory disqualification with respect to membership or participation in, or association with, a member of any self-regulatory organization under Section 3(a)(39)(F) of the Exchange Act, and subject to a disqualification under Section 4(g) of Article II of the NASD By-Laws. 1. During the period from in or about October 1993 through November 17, 1994, Marsh Block willfully[3] violated: (a) Section 15(b)(7) of the Exchange Act and Rule 15b7-1 thereunder, in that Marsh Block effected transactions in, or induced the purchase or sale of, securities when Miller, Rubin and another natural person associated with Marsh Block, who effected or were involved in effecting such transactions, were not registered or approved in accordance with the standards of training, experience, competence, and other qualification standards (including but not limited to submitting and maintaining all required forms, paying all required fees, and passing any required examinations) established by the rules of the NASD ("NASD Standards"), the national securities association of which Marsh Block is a member; and (b) Section 17(a)(1) of the Exchange Act and Rule 17a-3(a) thereunder, in that Marsh Block failed to make and keep current such records as the Commission, by rule, prescribes as necessary and appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Exchange Act. 1. Block willfully aided and abetted, and was a cause of, Marsh Block's violations of Sections 15(b)(7) and 17(a)(1) of the Exchange Act, and Rules 15b7-1 and 17a-3(a) thereunder, in that Block, among other things: (a) failed to have Marsh Block discharge Miller or obtain the requisite approvals for Miller's continued association, failed to have Marsh Block register Rubin or obtain the requisite approvals for Rubin's association, and failed to register another natural person, in accordance with the NASD Standards; (b) permitted Miller, Rubin and another natural person to engage in the securities business carried on by Marsh Block as associated persons when none of them were registered or approved in accordance with the NASD Standards; (c) knew or reasonably should have known that Miller and Rubin were disqualified from being associated with Marsh Block; (d) knew or reasonably should have known that Marsh Block had failed to register another natural person in accordance with the NASD Standards; (e) took actions to conceal the unlawful associations of Miller, Rubin and another natural person, including: (i) signing and having Marsh Block file with the NASD two false Uniform Termination Notices for Securities Industry Registration, dated May 10, and June 9, 1994, which inaccurately report that Miller's association with Marsh Block had been terminated voluntarily as of April 21, 1994 when, in fact, Miller's association did not terminate until November 17, 1994; (ii) signing and having Marsh Block file with the NASD a false Uniform Application for Securities Industry Registration or Transfer ("Form U-4") for another natural person, dated October 10, 1994, which inaccurately reports that such person's association with Marsh Block began on September 30, 1994 when, in fact, such association began in or about October 1993; (iii) failing to have Marsh Block file with the NASD a Form U-4 for Rubin reporting that Rubin was associated with Marsh Block from March 2, through November 17, 1994; and (iv) directing Marsh Block to make and keep certain false books and records that concealed Miller's and Rubin's unlawful association; (f) failed to have Marsh Block make and keep current the required questionnaires or employment applications for Miller, Rubin and another natural person, or full, correct and complete copies of any application for registration of each of them with the NASD, or any approval thereof; (g) had Marsh Block place his registered representative number on account statements for Rubin's customers, and had Marsh Block place another natural person's name and registered representative number on account statements for Miller's customers; and (h) directed others at Marsh Block to create and maintain certain false books and records, including: (i) the account statements for Miller's customers bearing another natural person's registered representative number; (ii) the account statements for Rubin's customers bearing Block's registered representative number; (iii) records created and maintained under the name of Miller's spouse and another natural person, by which Marsh Block recorded Miller's trading profits and losses, expenses, commission income and compensation, and caused Miller to be compensated; and (iv) records under the name "Broad Comm," by which Marsh Block recorded Rubin's trading profits and losses, expenses, commission income and compensation, and paid Rubin's creditors or transferred funds to Rubin's bank accounts. 1. Marsh willfully aided and abetted, and was a cause of, Marsh Block's violations of Sections 15(b)(7) and 17(a)(1) of the Exchange Act, and Rules 15b7-1 and 17a-3(a) thereunder, in that Marsh, among other things: (a) participated in or acceded to the decisions that enabled Miller and Rubin to associate with Marsh Block and to effect or be involved in effecting securities transactions through Marsh Block, when Marsh knew or reasonably should have known that Miller and Rubin each was statutorily disqualified from being associated with Marsh Block, and were not registered or approved in accordance with the standards of training, experience, competence, and other qualification standards (including but not limited to submitting and maintaining all required forms, paying all required fees, and passing any required examinations) established by the rules of the NASD, the national securities association of which Marsh Block is a member; (b) participated in or acceded to the decision by which Marsh Block filed with the NASD two Uniform Termination Notices for Securities Industry Registration, dated May 10, and June 9, 1994, which concealed the unlawful associations by inaccurately reporting that Miller's association with Marsh Block had been terminated voluntarily as of April 21, 1994, when, in fact, Miller continued to associate with the firm, within the meaning of Section 3(a)(18) of the Exchange Act and the Rules established by the NASD, until November 17, 1994; and (c) participated in or acceded to the decisions that resulted in Marsh Block's entering into compensation arrangements with Rubin that resulted in inaccurate books and records. 1. Marsh Block was unjustly enriched by $276,674 as a result of the unlawful associations of Miller and Rubin. MARSH BLOCK'S DEMONSTRATED FINANCIAL INABILITY TO PAY DISGORGEMENT PLUS PREJUDGMENT INTEREST, OR A CIVIL PENALTY 1. Marsh Block has submitted its most recent FOCUS report, dated August 31, 1997 ("Focus Report"), a Declaration of Alfred G. Block Supplementing Financial Disclosure sworn to on August 26, 1998 ("Supplemental Declaration") and other evidence and has asserted its financial inability to pay disgorgement and prejudgment interest, or a civil penalty. The Commission has reviewed the Focus Report and Supplemental Declaration, and other evidence provided by Marsh Block, and has determined that Marsh Block does not have the financial ability to pay disgorgement of $276,674 plus prejudgment interest, or a civil penalty. IV. In view of the foregoing, the Commission deems it appropriate and in the public interest to accept the Offers and to impose the sanctions specified in the Offers. Accordingly, IT IS HEREBY ORDERED that, pursuant to Section 21C of the Exchange Act, Marsh Block cease and desist from committing or causing, and Block and Marsh each cease and desist from causing, any violation and any future violation of Sections 15(b)(7) and 17(a)(1) of the Exchange Act, and Rules 15b7-1 and 17a-3(a) thereunder. IT IS FURTHER ORDERED that, pursuant to Section 15(b) of the Exchange Act, Marsh Block's registration as a broker-dealer is hereby revoked. IT IS FURTHER ORDERED that, pursuant to Sections 21B and 21C of the Exchange Act, Marsh Block pay disgorgement of $276,674 plus prejudgment interest, but that payment of such amount is waived based on Marsh Block's demonstrated financial inability to pay. IT IS FURTHER ORDERED that the Division of Enforcement ("Division") may, at any time following the entry of the Order, petition the Commission to: (1) reopen this matter to consider whether Marsh Block provided accurate and complete financial information at the time such representations were made; (2) determine the amount of the civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in these proceedings if Marsh Block's Offer had not been accepted. No other issues shall be considered in connection with this petition other than: (1) whether the financial information provided by Marsh Block was fraudulent, misleading, inaccurate or incomplete in any material respect; (2) the amount of civil penalty to be imposed; and (3) whether any additional remedies should be imposed. Marsh Block may not, by way of defense to any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceedings. IT IS HEREBY FURTHER ORDERED that, pursuant to Section 15(b) of the Exchange Act, effective on the second Monday following the date of this Order, Block and Marsh be, and hereby are, suspended from association with any broker, dealer, investment adviser, investment company or municipal securities dealer for a period of four months. Block and Marsh each shall deliver a sworn statement of compliance ("Statement") to the Division within ten (10) days following the conclusion of his period of suspension stating that he has complied fully with the terms of his suspension. Block and Marsh each shall deliver such Statement to: Securities and Exchange Commission, Northeast Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048, Attn: Lisa Rosenthal, Esq. IT IS HEREBY FURTHER ORDERED that, pursuant to Section 15(b) of the Exchange Act, Block and Marsh be, and hereby are, barred from associating in a supervisory or proprietary capacity with any broker, dealer, investment adviser, investment company or municipal securities dealer. IT IS HEREBY FURTHER ORDERED that, pursuant to Section 21B of the Exchange Act, Block pay, within thirty (30) business days following the date of this Order, a civil penalty in the amount of $50,000 to the United States Treasury. Payment shall be: (a) made by United States postal money order, certified check, bank cashier's check or bank money order; (b) made payable to the Securities and Exchange Commission; (c) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Mail Stop 0-3, 450 Fifth Street, N.W., Washington, D.C. 20549; and (d) submitted under cover of a letter which identifies Block as a Respondent in these proceedings, states the file number of these proceedings, and identifies the payment as a civil penalty pursuant to Section 21B of the Exchange Act. Block shall send a copy of such cover letter and money order or check to counsel for the Division at: Securities and Exchange Commission, Northeast Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048, Attn: Lisa Rosenthal, Esq. IT IS HEREBY FURTHER ORDERED that, pursuant to Section 21B of the Exchange Act, Marsh pay, within ten (10) business days following the date of the Order, a civil penalty in the amount of $25,000 to the United States Treasury. Payment shall be: (a) made by United States postal money order, certified check, bank cashier's check or bank money order; (b) made payable to the Securities and Exchange Commission; (c) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Mail Stop 0-3, 450 Fifth Street, N.W., Washington, D.C. 20549; and (d) submitted under cover of a letter which identifies Marsh as a Respondent in these proceedings, states the file number of these proceedings, and identifies the payment as a civil penalty pursuant to Section 21B of the Exchange Act. Marsh shall send a copy of such cover letter and money order or check to counsel for the Division at: Securities and Exchange Commission, Northeast Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048, Attn: Lisa Rosenthal, Esq. By the Commission. Jonathan G. Katz Secretary **FOOTNOTES** [1]: The Order Instituting Public Administrative And Cease-And- Desist Proceedings Pursuant to Sections 15(b), 19(h) And 21C Of The Securities Exchange Act of 1934, And Notice Of Hearing, was issued by the Commission on February 11, 1997. See Exchange Act Release No. 38263 (Feb. 11, 1997), 63 SEC Docket 2410 (Mar. 11, 1997) (Admin. Proc. Release). [2]: The findings herein are made pursuant to the Offers and shall not be binding on any other person or entity in these or any other proceedings. [3]: In applying the term "willful" in Commission administrative proceedings instituted pursuant to Sections 15(b), 15B, 15C, 17A, 19(h) and 21B of the Exchange Act, Section 9 of the Investment Company Act of 1940, and Section 203 of the Investment Advisers Act of 1940, the Commission evaluates on a case-by-case basis whether the respondent knew or reasonably should have known under the particular facts and circumstances that his conduct was improper. In this case, as in all Commission administrative proceedings charging a willful violation under these statutory provisions, the Commission applies this standard to persons -- specifically, securities industry professionals -- who are directly subject to Commission jurisdiction, and who have a responsibility to understand their duties to the investing public and to comply with the applicable rules and regulations which govern their behavior.