as required by Section 17(a) of the Securities Exchange Act of 1934 and Rule 17 C.F.R. 240.17a-3 promulgated thereunder: a securities record or ledger reflecting separately for each security as of the clearance date all 'long' and 'short' positions (including securities in safekeeping) carried by such member, broker or dealer for his account or for the account of his customers or partners and showing the location of all securities long and the offsetting position to all securities short and in all cases the name or designation of the account in which each position is carried, was not made and retained since on or about May 5, 1960.
'13. Defendants' failure to maintain and keep current the above mentioned securities record prevented the Commission from making an independent verification and authentication of its financial picture at that time.
'14. During the course of the aforementioned inspection plaintiff's authorized representative abstracted and analyzed a trial balance as of June 24, 1960 to determine whether the firm was in compliance with Rule 17 C.F.R. 240.15c3-1 and discovered that the firm's aggregate indebtedness was $ 40,382; their required adjusted net capital was $ 2,019; their net capital was a deficit of $ 3,523; the prescribed addition to its net capital deficit in proprietary securities positions was $ 2,740; their adjusted net capital was a deficit of $ 6,263; therefore Phoenix Securities needed $ 8,082 to come into compliance with the ratio limitations of the net capital rule.
'15. This examination also revealed that:
'(a) On April 27, 1960 a contribution was made to the capital account of the defendants' firm in the amount of $ 3,500 by means of a check drawn by Charles E. Cohn, a general partner of the firm, and deposited in the Montclair National Bank and Trust Company on April 27, 1960. On May 3, 1960 this check was returned by the bank marked: 'Payment Stopped.' The entry for this charge to the capital account was not made until June 3, 1960.
'(b) On May 31, 1960 a contribution was made to the capital account of Phoenix Securities in the amount of $ 5,000 by the son of Henry Giannetti, Sr. This check was not deposited in the Montclair National Bank and Trust Company until June 6, 1960 and the defendant firm immediately drew check #4962 for $ 5,000 to the order of FRANK COLLURA, a salesman of the firm. The proceeds were thereupon given by Collura to Giannetti's son. This amount was charged to the personal account of Henry Giannetti, Sr. and not to the capital account of Phoenix Securities.
'16. An analysis of the two foregoing transactions indicated that the capital of the defendant firm was not increased as purported in the trial balances of April 22nd and May 31, 1960 but were mere bookkeeping entries. Since these entries did not reflect the true facts, no credit was given for purposes of arriving at the firm's financial position, and it was determined that the defendant firm on those dates was not in compliance with the ratio limitations of the Commission's net capital rule, 17 C.F.R. 240.15c3-1.
'17. The defendant Phoenix Securities, from the period May 31, 1960 through June 23, 1960, made use of the mails or means or instrumentalities of interstate commerce to effect transactions in or to induce the purchase or sale of securities (other than an exempted security, commercial paper, bankers' acceptances or commercial bills) otherwise than on a national security exchange.
'26. The defendants Charles E. Cohn and Henry S. Giannetti, Sr. d/b/a Phoenix Securities for the period May 5, 1960 through June 23, 1960 were conducting business as a broker-dealer in securities by use of the United States mails and the means and instrumentalities of interstate commerce during and at a time when they failed to maintain and keep current their books and records as required by 17(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78q(a) and Rule 17 C.F.R. 240.17a-3 promulgated thereunder.
'27. The defendants had been engaged as a broker-dealer in securities and as such broker-dealer during the period from approximately May 30, 1960 to February 24, 1961 and during said time made use of the mails and the means and instrumentalities of interstate commerce and by such use had effected transactions in and had induced and attempted to induce the purchase and sale of securities (other than the exempted security or commercial paper, bankers' acceptances or commercial bills) otherwise defendants had permitted their aggregate indebtedness to all other persons to exceed two thousand (2000) per centum of their net capital in contravention to Rule 17 C.F.R. 240.15c3-1.'