Former Craig Scott Capital, LLC Financial Advisor Edward Beyn Barred by FINRA
Posted on Tuesday, April 30th, 2019 at 8:11 pm
Former Craig Scott Capital, LLC financial advisor Edward Beyn (CRD# 5406273) was barred by FINRA for churning and excessive trading in customer accounts. Beyn was registered with Rothschild Lieberman LLC in Syosset, New York from 2015 to 2016 and previously with Craig Scott Capital, LLC in Uniondale, New York from 2012 to 2015.
In January 2019, FINRA barred Beyn after he failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance. The FINRA complaint alleged that Beyn engaged in excessive trading and churned customer accounts without regarding to the suitability of his recommended trading. This complaint is regarding exchange traded notes and common and preferred stocks.
According to Beyn’s BrokerCheck report, “While some of Beyn’s customers listed -speculative- as the investment objective on new account forms, Beyn traded actively even in instances when his customers did not identify on new account forms that they had a speculative investment objective. Beyn implemented this aggressive active trading in the accounts of the customers. Beyn used a short-term trading strategy in the customers’ accounts as a means to turn over the accounts quickly and generate outsize commissions for himself and his member firm. To do this, Beyn relied heavily on buying and selling equities of companies releasing their earnings reports as a catalyst for excessively trading accounts. Based on the level of trading and commissions charged, there was little to no possibility that the customers would profit from such trading. The churning and excessive trading in the accounts of the customers resulted in annualized turnover rates as high as 188 and annualized cost-to-equity ratios as high as 573 percent. Beyn made the recommendations for the customers’ accounts. The overwhelming majority of the trades in the customers’ accounts were marked solicited. Beyn, with scienter, engaged in a manipulative, deceptive and fraudulent scheme by churning the customers’ accounts. Beyn acted with intent to defraud and/or with reckless disregard of the customers’ interests by seeking to maximize his own remuneration in disregard of the interests of them. The complaint also alleges that Beyn exercised control over the customers’ accounts. The customers did not question Beyn’s trading strategies and were not fully aware of the nature of trading in their accounts. The trading was executed at such a volume and pace that it was difficult for the customers to follow the activity despite receiving confirmations and monthly statements. The customers believed that Beyn had their best interests at heart, that he was providing them with sound investment advice, and managing their accounts in line with their intentions. Beyn abused their trust by excessively and fraudulently trading the accounts. The trading in the accounts of the customers was excessive, as evidenced by the high turnover rates and cost-to-equity ratios, and inconsistent with the customers’ investment objectives and financial situations. Beyn did not have reasonable grounds or a reasonable basis to believe that the recommended transactions were suitable for the customers in light of their investment objectives and financial situations. The complaint further alleges that Beyn exercised control over one of the customers’ account. He relied on Beyn for investment recommendations and advice. He was unfamiliar with the securities that were being purchased and sold in his account. Beyn concealed the true cost of trading by executing the majority of the trades on a riskless principal basis even though he did not discuss or explain to the customer what riskless principal trading was and how the cost of such trades was reflected on the trade confirmations. Beyn also executed exchange traded note (ETN) transactions in the customer’s account. The customer had not traded previously in ETNs and was unfamiliar with the products. Beyn purchased of ETN for the customer’s account resulted in unrealized losses. Beyn recommended the ETN transactions to the customer. Beyn’s recommendations lacked reasonable grounds for believing that these risky and speculative securities were suitable for the customer and that the customer understood and was willing to assume the risks particular to these securities.”
Beyn has been the subject of seven customer complaints between 2013 and 2018, one of which was denied, according to his CRD report:
March 2018. “Respondent Edward Beyn was named in a customer complaint that asserted the following causes of action: churning, suitability, unauthorized trading, fraud, misrepresentation and violation of Securities Law Sec. 10b-5. The causes of action relate to various securities.” The customer is seeking $50,000 in damages and the case is currently pending.
September 2014. “Claimant alleges that trades were highly speculative and unsuitable the rep breached his fiduciary responsibilities as well as being negligent.” The customer is seeking $1 million in damages and the case is currently pending.
September 2014. “Client contends misrepresentation by the rep with regard to the commissions and or mark up/downs charged; alleging that the rep agreed to charge no more than $99.00 on all trades.” This case is currently pending.
August 2014. “The customer initiated a kitchen sink inspired statement of claim through [firm], a group of non-lawyer legal practitioners operating in the finra arbitral forum. The statement of claim alleges fraud, negligent misrepresentation, unsuitability, violations of federal securities laws, breach of fiduciary duty and negligent supervision. The registered representative denies the allegations. The firm intends to vigorously defend the matter.” The customer is seeking $200,000 in damages and the case is currently pending.
December 2013. “The statement of claim (“SOC”) filed by this customer alleges various sales practice violations by Mr. Beyn in connection with the management of his accounts including unsuitability, excessive trading, and negligence. Mr. Beyn intends to vigorously defend himself against these allegations.” The customer sought $250,000 in damages and the case was settled for $178,500.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Craig Scott Capital, LLC may be liable for investment or other losses suffered by Beyn’s customers.
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