Craig Scott Capital & Execs Accused of Churning Customer Accounts

Craig Scott Capital & Execs Accused of Churning Customer Accounts

Craig Scott Capital & Execs Accused of Churning Customer Accounts 150 150 Robert Rex, Esq.

UPDATE-August 2016-Brent Porges not currently registered. See this for details.

January 28, 2016

Craig Scott Capital (CSC) , its co-founder and President Craig Scott Taddonio and Brent Morgan Porges, a co-founder and chief operating officer were named in FINRA  disciplinary proceeding No. 20150448235-01.

FINRA makes the following allegations in their complaint:

“For nearly three years, from the day the firm opened its doors in January 2012 through at least December 2014 , CSC and its owners — Taddonio and Porges — fostered a culture of aggressive, excessive trading of customer accounts. By encouraging the firm’ s registered representatives to use upcoming earnings announcements as a catalyst for recommending hundreds, and in some cases thousands, of short-term trades in customer accounts, CSC, its owners, and brokers earned more than $5 million dollars in commissions while customers suffered more than $9 million dollars in losses in accounts where the annualized turnover rates were as high as over 200 and the annualized cost-to equity ratios were as high as over 800%.”

One of the victims is an 89 year old retiree whose goal was to make a little money to supplement his retirement income. According to FINRA, his account was heavily churned (over traded to generate commissions). Heavy use of margin borrowing, an entirely unsuitable strategy for this elderly retiree,  was implemented by the broker to increase the amount of investment dollars used to churn the account.

FINRA seeks restitution and a disgorgement of ill gotten gains and other relief.

FINRA cancelled Craig Scott Capital‘s registration on 1/28/2016 for failure to pay outstanding fees.

Craig S. Taddonio is not currently registered. In a May 2015 FINRA arbitration, a customer who alleged that Taddonio failed to supervise the brokers assigned to the customer’s account, was awarded over $328,000 against Taddonio.

Brent Porges is not currently registered. According to FINRA records, Porges has settled two customer complaints and there is currently one arbitration pending in which the customer seeks $900,000 in damages.

Churning/ Excessive Trading

Excessive trading occurs whcn a registered representative  exercises control over a customer’s account and the level of activity in that account is inconsistent with the customer’s investment objectives, financial situation, and needs. Excessive trading violates FINRA’s suitability standards under NASD Conduct Rule 2310 and FINRA Rule 2 11 1.  Excessive trades recommended with requisite scienter such as a reckless disregard for a customer’s interests – is considered churning.

Excessive trading generally is measured by the turnover rate, which is the number of times the value of the account is turned over within a given period of time, and the cost-to-equity ratio, which represents the percentage of return on the customer’s average net equity needed to pay commissions and other account expenses over a given period of time.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

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