NASDAQ PHLX LLCNOTICE OF ACCEPTANCE OF AWC

Via Certified Mail, Return Receipt Requested
TO:

Maurice Bensoussan
c/o Derek C. Anderson, Esq.
Winget, Spadafora & Schwartzberg, LLP
1113 Spruce Street, Suite 502
Boulder, CO 80302

FROM:

Nasdaq PHLX LLC ("PHLX")
c/o Financial Industry Regulatory Authority ("FINRA")
Department of Enforcement
9509 Key West Avenue
Rockville, MD 20850

DATE:

August 29, 2018

RE:

Notice of Acceptance of Letter of Acceptance, Waiver and Consent No. 20120314807-06

Please be advised that your above-referenced Letter of Acceptance, Waiver and Consent ("AWC") has
been accepted on August 29, 2018 by the PHLX Review Council's Review Subcommittee, or by the
Office of Disciplinary Affairs on behalf of the PHLX Review Council, pursuant to PHLX Rule 9216. A
copy of the AWC is enclosed herewith.
You are again reminded of your obligation, if currently registered, immediately to update your Form U4(Uniform Application for Securities Industry Registration or Transfer) to reflect the conclusion of thisdisciplinary action. Additionally, you must also notify FINRA or PHLX if you are not a member of
FINRA) in writing of any change of address or other changes required to be made to your Form U4.
Please also note that this disciplinary action may change and/or advance the date by which you mustcomplete your continuing education.
You will be notified by the Registration and Disclosure Department regarding sanctions, and Nasdaq's
Finance Department will send you an invoice regarding the payment of any fine. Please be advised thatthe bar is effective immediately.

Mr. Maurice Elyezer BensoussanPage 2

If you have any questions concerning this matter, please contact W. Kwame Anthony, Senior Counsel,
at (646) 430-7030, or Elyse D. Kovar, Senior Counsel, at (646) 430-7050.

W. Kwame Anthony
Elyse D. Kovar
Senior Counsel
Department of Enforcement, FINRA
Signed on behalf of PHLX

Enclosure
FINRA District 10 - New York
Michael Solomon
Senior Vice President and Regional Director(Via email)NASDAQ PIILX LLCLETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO.
2012031480706
TO:

Nasdaq PIILX LLC
c/o Department of Enforcement
Financial Industry Regulatory Authority ("FINRA")RE:

Maurice Elyezer Bensoussan, Respondent
Former Associated Person
CRD No. 5581873

Pursuant to Rule 9216 of the Nasdaq PHLX LLC ("PHLX") Code of Procedure, Respondent
Maurice Elyezer Bensoussan ("Bensoussan") submits this Letter of Acceptance, Waiver andConsent ("AWC") for the purpose of proposing a settlement of the alleged rule violations
described below. This AWC is submitted on the condition that, if accepted, PHLX will not bringany future actions against me alleging violations based on the same factual findings describedherein.
I.
ACCEPTANCE AND CONSENT
A.

Bensoussan hereby accepts and consents, without admitting or denying the findings, andsolely for the purposes of this proceeding and any other proceeding brought by or on
behalf of PHLX, or to which PHLX is a party, prior to a hearing and without an
adjudication of any issue of law or fact, to the entry of the following findings by PHLX:BACKGROUND
In approximately early 2008, with a business partner, Bensoussan formed "Fund A," aforeign, unregistered proprietary trading firm that operated as a trading fund. On or about
August 25, 2011, Bensoussan and his partner bought SMF Trading, Inc., a member of
FINRA since August 2005 and a former member of several exchanges.' They brought on
additional partners and added additional entities to their partnership. Collectively, thepartners made decisions about all of the entities, including the securities business of Fund
A and SMF Trading. On May 14, 2013, SMF began doing business as World-Xecution
Strategies ("World-Xecution").
In May 2013, Bensoussan and his original partner formed BD No. 5, a registered brokerdealer that was registered with the PHLX from July 31, 2014 to August 3, 2015, reregistered on September 1, 2017, and remains a member organization. (BD Nos. 1-4 arereferenced within.) Also in 2013, they formed "Fund B," another foreign, unregisteredproprietary trading firm that operated as a trading fund, and they brought on additional
partners. Collectively, the partners made decisions about all of the entities, including thesecurities business of Fund A, Fund B, World-Xecution, and BD No. 5. Bensoussan was

I SMF Trading is the subject of separate settlement agreements with other self-regulatory organizations.

STAR No. 20120314807 (includes 20130354712, 20140423738, and 20160508555) (EK and KA)

an associated person of BD No. 5 until August 3, 2015, when BD No. 5 temporarily
ceased being a member organization. By letter dated May 24, 2016, Bensoussan was
notified of this investigation.
RELEVANT PRIOR DISCIPLINARY HISTORY
Bensoussan has no disciplinary history.
SUMMARYIn Matter Nos. 20120314807, 20130354712, 20140423738, and 20160508555, the staff
in the Quality of Markets Section of FINRA' s Department of Market Regulation
reviewed Bensoussan's activity with respect to partially owning and controlling two
unregistered proprietary trading firms, Fund A and Fund B, which engaged in trading
activity that included market manipulation and fraud, including layering and spoofing, on
multiple markets, including PHLX. The staff also reviewed activity by World-Xecution,
which introduced Fund A's and Fund B's order flow, and Bensoussan's activity withrespect to partially owning and controlling World-Xecution and BD No. 5, which
introduced or executed Fund A's and Fund B's trades.
Pursuant to Section 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
Bensoussan is liable as a controlling person for Fund A's and Fund B's violations ofSections 9(a)(2) and 10(b) of the Exchange Act, and Rule 10b-5(a) and (c) thereunder. In
addition, Bensoussan violated PHLX Rule 707 as a controlling person of two proprietary
trading firms that engaged in trading activity that included market manipulation andfraud, particularly layering and spoofing, from July 31, 2014 to August 3, 2015, througha broker-dealer of which he also was a controlling person.
FACTS AND VIOLATIVE CONDUCT
Layering and Spoofing1.

"Layering" is a form of market manipulation that typically includes placement ofmultiple limit orders on one side of the market at various price levels that are intended tocreate the appearance of a change in the levels of supply and demand. In some instances,layering involves placing multiple limit orders at the same or varying prices acrossmultiple exchanges or other trading venues. An order is then executed on the opposite
side of the market and most, if not all, of the multiple limit orders are immediately
cancelled. The purpose of the multiple orders that are subsequently cancelled is to induce,or trick, other market participants to enter orders due to the appearance of interest createdby the orders such that the trader is able to receive a more favorable execution on the
opposite side of the market.

2.

Similar to layering, "spoofing" is a form of manipulative trading which involves a market
participant placing non-bona fide orders, generally inside the existing national best bid
and offer ("NBBO"), with the intention of briefly triggering some type of response fromanother market participant, followed by cancellation of the non-bona fide order, and theentry of an order on the other side of the market.
2

Bensoussan and His Business Partner Form Fund A
3.

In 2008, Bensoussan, a resident of France, and his partner formed Fund A under the lawsof the Cayman Islands as a proprietary trading firm. In early 2012, they brought on
additional partners, after which Bensoussan owned 38 percent of Fund A. Fund A enteredinto contracts with trading managers that managed groups of traders, resulting in Fund A
having thousands of overseas, unregistered day traders in foreign countries to trade forFund A's account. Bensoussan personally did not trade for Fund A.

4.

Bensoussan and his partners hired unregistered risk managers in Canada to identify
potential groups of traders for Fund A. Based upon recommendations and information
provided by the risk managers about proposed trading groups' strategies, buying power
requirements, and history of success, they decided which groups of traders to accept.
Fund A entered into negotiated agreements with each trading group pursuant to which thetrading group kept approximately 85 to 90 percent of the trading profits, and Fund A
retained approximately 10 to 15 percent. Generally, neither the trading managers nor the
traders contributed any capital, and they did not absorb trading losses. Bensoussan andhis partners, as Fund A's owners, bore the trading risks. Fund A paid each group's shareto the trading manager, and the manager was responsible for paying each group's traders.

5.

Bensoussan and his original partner allocated money for Fund A to trade through each of
the trading groups. They imposed strict credit limits and controls on the type and volumeof activity and financial exposure of the trading. The individual traders and groups oftraders for Fund A were fungible and could be terminated at any time by Bensoussan andhis partners at will, and each trading group could terminate its individual traders. Fund A
retained the unpaid trading profits of any terminated traders dismissed for questionable
activities.
Fund A Engages in Layering and Spoofing in the United States

6.

In 2008, Fund A became a customer of BD No. 1, a U.S. registered broker-dealer. BD
No. 1 provided Fund A with direct market access to a number of exchanges in the
United States, including 131-ILX. Fund A's traders utilized third-party ordermanagement systems and entered orders directly on U.S. markets using BD No. l'smarket participant identifier ("Nei D").

7.

Through the access provided by BD No. 1, Fund A engaged in trading activity that
included a pattern and practice of layering and other manipulative trading. Between
2008 and 2013, Fund A's trading triggered hundreds of thousands of regulatory alerts
at FINRA and multiple exchanges for layering and other manipulative trading.

8.

FINRA and the Securities and Exchange Commission ("SEC") directed regulatoryinquiries to BD No. 1 about Fund A's activity. BD No. 1 also received reports from theexchanges showing exceptions that evidenced potentially violative trading activity. BD
No. 1 in turn forwarded some of the reports to Fund A. For example, on January 7,
2010, BD No. 1 sent an email to Bensoussan's partner and a Fund A employee with3

attachments showing potential wash trades on three exchanges, with the message,"Please provide written confirmation of your review and if wash trades have been
detected, what action has been taken to prevent future occurrences." BD No. 1
routinely sent identical emails to Bensoussan or his partner and others at Fund A aboutother instances throughout the year.
9.

Fund A and Fund B cleared their trades through registered broker-dealers. On
November 3, 2010, the SEC adopted its Market Access Rule, Exchange Act Rule15c3-5, requiring broker-dealers providing market access to have adequate risk
management and supervisory systems to surveil for and prevent layering and othermanipulative trading activity, among other things.

10. In approximately July 2011, after the SEC had expressed concerns to BD No. 1 about
Fund A's trading, BD No. 1 discussed with Bensoussan and his partner the idea of
having their own broker-dealer introduce Fund A's orders to BD No. 1.
Bensoussan and his Partner Purchase World-Xecution
11. In August 2011, Bensoussan and his partner purchased World-Xecution, a broker-dealer
already registered with FINRA and multiple other exchanges. Bensoussan was notlicensed but was an associated person based on partial ownership and control. They
installed other licensed securities professionals as officers and executives of WorldXecution. Fund A continued trading directly with BD No. 1 through December 2011. In
January 2012, World-Xecution began introducing Fund A's order flow to BD No. 1,
which continued Fund A's access to multiple securities exchanges, and Fund A's traders
continued to engage in manipulative layering.
12. By mid-2012, Bensoussan and his original partner each owned 38 percent of WorldXecution and its affiliates, including Fund A, and the minority partners owned 24
percent. The minority partners were licensed securities professionals.
Fund A Continues Layering and Spoofing through World-Xecution
13. From January 2012 through January 2013, World-Xecution introduced Fund A's order
flow to BD No. 1, and Fund A traders continued manipulative layering, triggering morethan 200,000 surveillance alerts at FINRA.
14. Bensoussan and World-Xecution were on notice of certain manipulative activity by FundA through regulatory inquiries sent to BD No. 1. BD No. 1, in turn, sent inquiries to Fund
A about the manipulative trading. For example, on March 29, 2012, BD No. 1 sent anemail to Bensoussan's partner and others at Fund A stating, in part, "[An exchange] hasdetected potential layering and other manipulative activity in these symbols through [BDNo. l's MPID] in today's market."
15. In the middle of receiving these inquiries, in July 2012, Bensoussan and his partner
exchanged emails containing a Wall Street Journal article about disciplinary action taken
against another firm for layering.

416. Bensoussan and his partner frequently communicated about regulatory issues, includingin August 2012, when Bensoussan and his partner exchanged emails about Fund A
operating in "grey areas" and regulators not liking Fund A's business.
17. Also, FINRA began sending regulatory inquiries directly to World-Xecution, of which
Bensoussan was a controlling person, in its capacity as the introducing broker for FundA.
18. On September 5, 2012, an employee at BD No. 1 sent an email to Bensoussan's partnerand others at Fund A that stated the following:[Bensoussan's business partner], please be aware that we receive
frequent contacts from exchanges, and one exchange has told methat they don't see this type of pattern from ANY other MPID
across the market. Market makers are complaining to theexchanges. This pattern of entering orders which move the NBBO,
enticing market makers into these prices, entering a large order on
the opposite side of the market which executes, then cancelling theorders that moved the NBBO, is raising a lot of red flags.
19. Five weeks later, by letter dated October 10, 2012, BD No. 1 notified World-Xecution,
including a copy directly to Bensoussan's partner, that it was terminating BD No. l's
relationship with World-Xecution in 30 days. A copy of the letter was forwarded to
Bensoussan the same day. BD No. 1 extended the deadline, and Fund A continued
trading through BD No. 1 through January 2013.
20. After BD No. 1 informed World-Xecution that it was terminating the relationship,
Bensoussan and his partners began establishing relationships on behalf of WorldXecution and Fund A with BD No. 2, an unaffiliated registered broker-dealer, inNovember 2012, and BD No. 3, another unaffiliated registered broker-dealer, in
December 2012.
21. Fund A's traders engaged in layering and spoofing from approximately November 2012
through May 2013 through BD No. 2.
22. Fund A's traders engaged in layering and spoofing from approximately January 2013
through October 2013 through BD No. 3.
Fund B
23. Back in March 2013, Bensoussan and his partners had formed Fund B, a second
unregistered, foreign proprietary firm that also operated as a trading fund, with the sameowners as Fund A (38 percent Bensoussan, 38 percent his partner, and 24 percent theother partners). They created it, in part, because they thought it would be a good vehicle
for raising capital. Fund A became Fund B's "investment agent," and in approximately
October 2013, an account was opened for Fund B at BD No. 4. Fund A's traders now
traded for Fund B's account. Bensoussan personally did not trade for Fund B.

5

24. From October 2013 through July 2014, Fund A's traders continued layering and spoofingin Fund B's account at BD No. 4.
25. BD No. 4's relationship with World-Xecution terminated, effective July 10, 2014.
Bensoussan and His Partners Form BD No. 5
26. Bensoussan and his partners formed BD No. 5 on May 7, 2013. Bensoussan remained
unlicensed but was an associated person based on partial ownership and control. As withWorld-Xecution, they installed licensed securities professionals as officers andexecutives of BD No. 5. Bensoussan and his partners capitalized BD No. 5 with millionsof dollars. Bensoussan and his partner each owned a 38-percent stake in BD No. 5, andthe other partners collectively owned a 24-percent stake in BD No. 5. As time went on,
they brought on additional partners, and Bensoussan sold his remaining ownershipinterest in August 2016.
27. BD No. 5 provided market access to Fund B beginning in July 2014. BD No. 5 also
introduced Fund B's order flow to BD No. 2, a registered broker-dealer, between July
2014 and July 2015. BD No. 5 has introduced Fund B's order flow to BD No. 6, aregistered broker-dealer, since approximately July 2015.
28. Bensoussan was indirectly involved in the development of a trade surveillance system at
BD No. 5.
29. Fund A and Fund B generated substantial revenues for Bensoussan and his partners, anda portion of these revenues resulted from transactions that involved layering andspoofing, including transactions that were not detected by the surveillance system at BD
No. 5.
30. As noted above, Fund A and Fund B profited by retaining between 10 and 15 percent of
net revenues from their trading, including the portion from layering, and Bensoussan andhis partners profited as owners of Fund A and Fund B. Although the total amount has notbeen quantified, Fund A and Fund B kept any unpaid profits from traders who had been
terminated due to suspicious trading.
31. World-Xecution also profited from transactions executed by Fund A, including those
involving layering, through commissions, fees, and rebates. Bensoussan and his partners
also profited through ownership of BD No. 5 that introduced and executed Fund A's andFund B's trades.
32. As set forth above, when relationships ended between unaffiliated broker-dealers andFund A or World-Xecution, Bensoussan and his partners established relationships withother registered broker-dealers and created their own registered broker-dealer, BD No. 5,
to ensure continued market access for Fund A and Fund B.
33. Bensoussan directed that certain steps be taken to address Fund A's and Fund B's
layering, but his efforts focused on individual instances of layering by individual traders.
Bensoussan directed that individual traders be terminated and substantially shrank the
6business transacted, but he never otherwise changed Fund A's or Fund B's businessmodel or took action to prevent their manipulative activity. Fund A and Fund B kept theunpaid profits that the terminated traders had generated. Bensoussan directly or indirectly
controlled Fund A and Fund B while fund traders engaged in layering, and layeringcontinued through Fund A and Fund B in varying degrees for years.
34. At least three registered broker-dealers who executed Fund A's order flow were charged
or settled disciplinary actions in connection with Fund A's trading. In June 2014, the SEC
charged BD No. 1 with numerous violations, including failing to reasonably supervise toprevent or detect pre-arranged trading, wash trades, and layering, a portion of which
consisted of Fund A's trades. In August 2014, FINRA filed a complaint against BD No. 1
for violating its supervisory obligations, and Fund A's trading constituted most of the
trading that BD No. I had failed to supervise. The same day FINRA's complaint was
filed, BD No. 5's chief compliance officer circulated a copy of the complaint to
Bensoussan. Later, in 2014 and 2015, the SEC and multiple self-regulatory organizations
collectively fined BD No. 1 over $4.2 million for failing to supervise its direct market
access business, including in part for failing to prevent or detect Fund A's layering.
35. In 2015, FINRA and multiple exchanges censured and imposed a fine of $1 million
against BD No. 2 for inadequate supervision of layering, among other things, and someof the trading was attributable to Fund A.
36. In April 2018, FINRA and multiple exchanges censured and imposed a fine of$1,575,000 against BD No. 3 for violations of SEC Rule 15c3-5 and inadequate
supervision of layering, among other things, and some of the conduct was attributable toFund A.
Summary of Violations
37. By reason of the conduct described above, Fund A and Fund B directly or indirectly,
acting intentionally, knowingly or recklessly, by the use of the mails or means or
instrumentalities of interstate commerce, or a facility of a national securities exchange,
effected, alone or with one or more other persons, a series of transactions in securities
creating actual or apparent active trading in such securities, or raising or depressing theprice of such securities, for the purpose of inducing the purchase or sale of such securities
by others.
38. Fund A and Fund B, directly or indirectly, acting intentionally, knowingly or recklessly,
in connection with the purchase or sale of securities, by use of the means or
instrumentalities of interstate commerce or the facilities of a national securities exchangeor the mail: (a) employed devices, schemes, or artifices to defraud; and (b) engaged inacts, practices, or courses of business which operated or would have operated as fraud or
deceit upon other persons.
39. As a result of the foregoing conduct, Fund A and Fund B violated Exchange Act Sections
9(a)(2) and 10(b), and Rule 10b-5(a) and (c) thereunder.

7

40. By reason of the conduct described above, Bensoussan directly or indirectly controlled
Fund A and Fund B. Accordingly, pursuant to Section 20(a) of the Exchange Act,
Bensoussan is liable as a controlling person for Fund A's and Fund B's violations ofSections 9(a)(2) and 10(b) of the Exchange Act, and Rule 10b-5(a) and (c) thereunder.
Bensoussan's conduct in controlling persons that violated Sections 9(a)(2) and 10(b) of
the Exchange Act and Rule 10b-5(a) and (c) thereunder was willful.
41. Pursuant to PHLX Rule 707, Bensoussan was required to observe high standards ofcommercial honor and just and equitable principles of trade. As set forth above, Fund A
and Fund B knowingly and recklessly engaged in manipulative trading in violation of
Exchange Act Sections 9(a)(2) and 10(b), and Rule 10b-5(a) and (c) thereunder. In
addition, Fund A and Fund B, in connection with the offer or sale of securities, directly or
indirectly, by the use of any means or instruments of transportation or communication ininterstate commerce or by use of the mails, engaged in a transaction, practice, or courseof business which operated or would have operated as a fraud or deceit upon thepurchaser, thereby violating Section 17(a)(3) of the Securities Act of 1933. Bycontrolling firms that violated the Exchange Act and the Securities Act, Bensoussanviolated PHLX Rule 707.
B.

Respondent consents to the imposition of a bar.
The sanctions imposed herein shall be effective on a date set by FINRA's staff. Pursuant
to 1M-8310-3(e), a bar or expulsion shall become effective upon approval or acceptanceof this AWC.
The Respondent understands that if he is barred or suspended from associating with any
PHLX member, he becomes subject to a statutory disqualification as that term is definedin Section 3(a)(39) of the Securities Exchange Act of 1934, as amended. Accordingly,
Bensoussan may not be associated with any PHLX member in any capacity, including
clerical or ministerial functions, during the period of the bar. (See PHLX Rule 8310 and
IM-8310-1.)

8

II.
WAIVER OF PROCEDURAL RIGHTS
Respondent Bensoussan specifically and voluntarily waives the following rights granted under
PHLX's Code of Procedure:A.

To have a Formal Complaint issued specifying the allegations against him;

B.

To be notified of the Formal Complaint and have the opportunity to answer the
allegations in writing;C.

To defend against the allegations in a disciplinary hearing before a hearing panel,to have a written record of the hearing made and to have a written decision issued;andD.

To appeal any such decision to the PHLX Review Council and then to the U.S.
Securities and Exchange Commission and a U.S. Court of Appeals.

Further, Respondent specifically and voluntarily waives any right to claim bias or prejudgmentof the Chief Regulatory Officer, the PHLX Review Council, or any member of the PHLX
Review Council, in connection with such person's or body's participation in discussions
regarding the terms and conditions of this AWC, or other consideration of this AWC, including
acceptance or rejection of this AWC.
Respondent further specifically and voluntarily waives any right to claim that a person violated
the ex parte prohibitions of Rule 9143 or the separation of functions prohibitions of Rule 9144,
in connection with such person's or body's participation in discussions regarding the terms andconditions of this AWC, or other consideration of this AWC, including its acceptance orrejection.

OTHER MATTERS
Respondent understands that:A.

Submission of this AWC is voluntary and will not resolve this matter unless anduntil it has been reviewed and accepted by F1NRA's Department of Enforcement
and the PHLX Review Council, the Review Subcommittee, or the Office ofDisciplinary Affairs ("ODA"), pursuant to PI ILA Rule 9216;

B.

If this AWC is not accepted, its submission will not be used as evidence to prove
any of the allegations against him; andC.

If accepted:
1.

This AWC will become part of Respondent's permanent disciplinary

9

record and may be considered in any future actions brought by PHLX or
any other regulator against him;
2.

PHLX may release this AWC or make a public announcement concerning
this agreement and the subject matter thereof in accordance with PHLX
Rule 8310 and 1M-8310-3; and3.

Respondent may not take any action or make or permit to be made any
public statement, including in regulatory filings or otherwise, denying,directly or indirectly, any finding in this AWC or create the impressionthat the AWC is without factual basis. Respondent may not take any
position in any proceeding brought by or on behalf of PHLX, or to which
PHLX is a party, that is inconsistent with any part of this AWC. Nothing
in this provision affects Respondent's right to take legal or factual
positions in litigation or other legal proceedings in which PHLX is not a
party.

I certify that I have read and understand all of the provisions of this AWC and have been riven afull opportunity to ask questions about it; that I have agreed to the AWC's provisions
voluntarily; and that no offer, threat, inducement, or promise of any ki
the tsms-set
forth herein and the prospect of avoiding the issuance of a Co
6 induceme to ub
it.
ce E ezer Bensoussan
Respon nt"tworea.

Derek C. Anderson
Winget, Spadafora & Schwartzberg, LLP
1113 Spruce Street, Suite 502
Boulder, Colorado 80302(303) 482-1046
anderson.d@wssllp.com
Counsel for Respondent
Accepted by PHLX:.? 90, 9.01Date

W. Kwame Anthony, Sen. Counsel
Elyse D. Kovar, Senior Counsel
Department of Enforcement
Signed on behalf of PHLX, by delegatedauthority from the Director of ODA

11