But no fines or restitution imposed because two of the three have filed for bankruptcy.
A Finra hearing panel has barred broker Edward Beyn and the principals of his former employer, Craig Scott Capital of Uniondale, N.Y., from the securities industry for churning customer accounts.
The Financial Industry Regulatory Authority said that the principals, Craig Scott Taddonio and Brent Morgan Porges, had failed to supervise Mr. Beyn and had given false testimony to Finra in an on-the-record interview.
From January 2012 through December 2014, according to a Finra complaint filed in December 2015, "the firm and its owners had fostered a culture of aggressive and excessive trading of customer accounts."
It went on to say that by encouraging its brokers to use upcoming earnings announcements as a catalyst for recommending thousands of short-term trades in customer accounts, the firm, "along with its owners and brokers, had earned more than $5 million in commissions while customers had suffered more than $9 million in losses."
In employing their earnings play strategy, Finra said, the firm and its brokers "effected frequent, short-term trades in their customers' accounts, placing the trades primarily as 'riskless principal transactions,' for which the customers were charged markups and markdowns, rather than as agency transactions, for which the customers would have been charged commissions.
While the Finra enforcement division wanted to impose "substantial fines for both excessive trading and churning and order Mr. Beyn to pay restitution to six affected customers totaling more than $2 million," Finra did not impose fines or require Mr. Beyn to pay restitution because he is in the midst of filing for bankruptcy.
The panel also did not impose monetary sanctions against Mr. Taddonio, because he also has filed for bankruptcy. While Mr. Porges has not filed for bankruptcy and could be subject to monetary sanctions, Finra said that because it cannot impose monetary sanctions on Mr. Taddonio, and considering what it felt was Mr. Porges' somewhat lesser responsibility for failure to supervise, it decided not to impose monetary sanctions against Mr. Porges.
