According to FINRA, Andrew Benjamin Edenbaum was fined $10,000 and suspended for three months on March 21, 2022, for participating in a private securities transaction without providing prior written notice to his member firm.

Edenbaum participated in the sale of a $150,000 variable annuity to an individual who was not a firm customer, after the individual was referred to him for investment advice. The transaction was conducted through another broker-dealer with which Edenbaum was not associated. During this period, Edenbaum did not have the insurance license required to sell variable annuities.

Despite lacking the proper license, Edenbaum participated by obtaining a variable annuity application from a registered representative of the other broker-dealer, helping the investor complete it, advising the investor about allocation among various indices, delivering the application to the other representative, providing wiring instructions, and identifying himself as the person to contact with questions. Edenbaum did not receive compensation for his participation.

This case illustrates multiple problems. First, Edenbaum engaged in a private securities transaction without firm approval, depriving his firm of the opportunity to supervise the transaction and ensure it was suitable for the investor. Second, he participated in selling a variable annuity without holding the required insurance license, which exists to ensure that individuals selling these complex products have appropriate knowledge and qualifications.

By involving himself extensively in the transaction - from completing applications to providing investment advice to serving as the investor's point of contact - Edenbaum effectively acted as the investor's representative for this transaction despite lacking proper licensing and firm authorization.

The absence of compensation does not excuse the violations. The requirement to disclose private securities transactions and obtain proper licensing protects investors regardless of whether representatives receive payment.

This case demonstrates that registered representatives cannot evade licensing requirements or firm supervision by working through other broker-dealers or claiming to provide assistance without compensation. Investors should verify that anyone providing investment advice holds appropriate licenses and that transactions are properly supervised.