Edward Beyn, of Syosset, New York, a stockbroker with Craig Scott Capital LLC, was charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint alleging that Beyn engaged in excessive trading or churning of his firm’s customers’ accounts. Department of Enforcement v. Beyn, No. 2015044823502 (Mar. 16, 2016).
According to the Complaint, ever since Beyn started working with Craig Scott Capital in 2012, he had engaged in aggressive trading of his firm’s customers’ accounts, despite not having addressed customers’ suitability for such transactions prior to his trading recommendations. The Complaint stated that Beyn pursued his trading strategy with customers who had not indicated their risk tolerances in the firm’s new account forms.
The Complaint indicated that Beyn engaged in a strategy built on short-term trading of securities in order to generate significant commissions. Beyn reportedly utilized earnings reports released from companies to justify his equity trading. Yet, in all cases where Beyn purchased and sold securities in customer accounts, he would cause customers to bear a 3-5% markup or commission, in addition to causing investors to bear a $99 firm commission charge.
FINRA alleged in the Complaint that customers did not stand any reasonable chance of profiting as a result of Beyn’s trading conduct. Apparently, Beyn’s trading, which the Complaint alleged consisted of excessive trading and churning (the majority of which Beyn apparently solicited), led six of the firm’s customers to bear inordinate cost/equity ratios reaching 573%, and turnover rates reaching 188%.
The Complaint indicated that such customers relied upon Beyn to act in their best interests, and were misled into believing that Beyn was appropriately managing their accounts. FINRA alleged that such customers’ trust in Beyn was abused by Beyn based on Beyn’s aforementioned churning and excessive trading.
The Complaint alleged Beyn to have intentionally acted to deceive and manipulate customers. Specifically, he is alleged to have intended on defrauding customers or otherwise had recklessly disregarded customers’ interests in order to benefit Beyn’s financial interests through gaining high commissions. FINRA alleged that Beyn acted in a willful manner to violate Securities Exchange Act of 1934 Section 10(b), Rule 10b-5, as well as FINRA Rules 2010 and 2010.
FINRA further alleged that Beyn traded his customers’ investments in a manner which deviated from the financial situations and objectives of such customers. The Complaint alleged that Beyn had no adequate basis to conclude that his recommendations were actually quantitatively or qualitatively suitable for such customers. Consequently, FINRA alleged that Beyn violated FINRA Rules 2010, 2111, and NASD Conduct Rule 2310.
Public disclosure records via FINRA’s BrokerCheck reveal that Beyn has been subject to eight disclosure incidents, nearly all of which are customer disputes. On December 6, 2013, Beyn settled a customer dispute for $178,500.00 amid allegations of unsuitability, negligence, and excessive trading. On August 22, 2014, Beyn became subject to a pending customer dispute, in which a customer is demanding $200,000.00 in damages in connection with allegations of fraud, breach of fiduciary duty, and negligent supervision.
On September 3, 2014, Beyn became subject to three additional pending disputes, where claimants alleged misrepresentation on commissions; unsuitable trades; breach of fiduciary duty; and negligence. On December 27, 2014, another customer lodged a complaint against Beyn, claiming excessive and unauthorized trading.
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