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Category Archives: Securities Litigation

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What Does The “E” in Email Mean?

Posted in Broker-Dealer Regulation, Cyber-Security, Financial Industry Trends, FINRA Compliance, FINRA CRD, FINRA Enforcement, Securities Litigation

Recent history shows that FINRA is going after brokers who alter client’s records.  This, unfortunately, reminded me of my own bad experience as a young lawyer when defending a broker. That broker had great “contemporaneous” notes of his communications with the client that made the case very defendable.  My opponent questioned the authenticity of these… Continue Reading

Is the SEC that good? SEC Wins Every Administrative Case

Posted in Dodd-Frank, SEC Enforcement, Securities Litigation

In what is sure to add more “fuel to the fire,” it was recently reported that the SEC has won every case brought in its administrative courts over the last year.  The SEC has not been so successful with its federal court cases, winning 61% of those cases over that same period. Of course, regular blog readers know that the… Continue Reading


Posted in Securities Fraud, Securities Litigation

The U.S. Court of Appeals for the Sixth Circuit affirmed a dismissal of investors’ securities claims in the wake of a bank liquidation, but left the door open to a possible “silent fraud” claim under Michigan law.  See Dailey v. Medlock, http://www.bloomberglas.com/public/document/Thomas_Dailey_et_al_v_Lisa_Medlock_et_al_2014_BL_9430_6th_Cir_Jan. A claim for silent fraud under Michigan law requires a plaintiff to establish… Continue Reading

Data breaches and third-party vendors; what do you need to know.

Posted in FINRA Compliance, SEC Compliance, Securities Fraud, Securities Litigation, Uncategorized

I recently blogged about the pervasive nature of data breaches and the particular risks presented to this industry.  Many firms may think that they are secure because they used a vendor to build a secure environment, but history tells us that is not the case.  Cyber-attacks do not always come from a direct hit, but… Continue Reading


Posted in Securities Fraud, Securities Litigation

A divided U.S. Court of Appeals for the Second Circuit affirmed the dismissal of securities law antifraud claims against a “trusted” investor in the pump-and-dump scheme perpetrated by two defunct broker-dealers, A.R. Baron & Co. and Bear Stearns Cos. Inc.  See Fezzani v. Bear Stearns & Co. Inc., 2d Cir. No. 09-4414-cv, 5/7/13,  http://op.bna.com/srlr.nsf/r?Open= jkoo-97hryk. … Continue Reading

Former AP of Defunct Firm May Enforce FINRA Arbitration Pact

Posted in Arbitration, Securities Litigation

The California Court of Appeals reversed a lower court’s refusal to compel a dissatisfied investor to arbitrate its dispute with a former associated person of a now defunct FINRA member firm.  See Ronay Family Limited Partnership v. Tweed, Cal. App., D062195, 5/23/13. A FINRA rule rendering a claim against a former member ineligible for arbitration… Continue Reading


Posted in Corporate Governance, Hedge and Private Equity Funds, Securities Litigation

Former shareholders may pursue narrowed claims against some large private equity firms who allegedly conspired with one another minimizing competition for target companies.  See Dahl v. Bain Capital Partners LLC, D. Mass., 07-12388, 3/13/13), http://www.bloomberglaw.com/public/document/Klein_et_a_v_Bain_Capital_Partners_LLC_et_at_Docket_No_107cv1238. The plaintiffs previously held shares in various public companies that were, ultimately, acquired by private equity firms.  The complaint alleged… Continue Reading


Posted in Arbitration, Securities Litigation

The Tennessee Supreme Court ruled that it has subject matter jurisdiction to review a trial court’s order vacating an arbitration award while remanding the dispute to a new arbitration panel without expressly declining to confirm the award.  See Morgan Keegan & Co., Inc. v. Smythe, Tenn. Sup. Ct., No. W2010-01339-SC-R11-CV, (4/25/13); http://op.bna.com/srlr.nsf/r?Open=jkoo-979qp7. The Court interpreted… Continue Reading


Posted in Hedge and Private Equity Funds, Securities Litigation

The U.S. District Court for the District of New Jersey ruled that New Jersey fraud and misrepresentation claims by a venture capital firm over an unsuccessful investment in a telecom concern could proceed. See Edelson V LP v. Encore Networks Inc., D.N.J., Civ. No. 2:11-5802(KM), 5/9/13.  www.blomberglaw.com/public/document/EDELSON_V-LP-v_ENCORE -NETWORKS-INC-et_al_Docket_No_211cv05802_DNJ. The plaintiff made an investment in a… Continue Reading

Did You Know That FINRA Arbitrations Just Got More Expensive

Posted in Arbitration, Intra-Industry Arbitrations, Public Customer Arbitrations, Securities Litigation

Both the industry and customers liked FINRA arbitration because it was a relatively cost effective dispute resolution forum.  With FINRA Notice to Members 13-21 and effectively doing away with having an industry person on the panel, FINRA has just made arbitration more expensive for everyone. Without any industry presence on the panel, both customers and… Continue Reading

So Do You Really Want To Arbitrate Customer Claims

Posted in Arbitration, Broker-Dealer Regulation, Compliance and Supervision, FINRA Compliance, FINRA Enforcement, Public Customer Arbitrations, Securities Litigation

In the 17 plus years of defending broker-dealers in FINRA arbitrations, I and my clients have relied upon the fact that at least one arbitrator would have industry experience.  In my experience, having that presence did not create an unfair advantage for the firm.  Instead, it provided the panel with a knowledgeable resource that would… Continue Reading

Pleading Scienter Seems To Get Harder And Harder

Posted in Securities Litigation

I do not envy any attorney who attempts plead a Section 10b-5 claim.  Courts throughout the country have made pleading scienter extremely difficult, and the benefit of any doubt favors the defendants.  Under the PSLRA, a plaintiff must plead a strong interference of scienter by alleging sufficient facts to show that the defendant had both… Continue Reading

Do You Want To Know One Of The Greatest Risks To Your Practice

Posted in Compliance and Supervision, Public Customer Arbitrations, Registered Representatives, Securities Litigation

In the years that I have defended broker-dealers and investment advisors from customer-initiated complaints, a common theme has emerged.  The bulk of the complaints seem to come from older clients.  Unfortunately, the aging baby boomers may exacerbate this issue. In a recent Investment News article by Mary Beth Franklin, she reported on a recent study reflecting… Continue Reading

Receiver is Unlucky with Clawback Attempt From Charity

Posted in Ponzi Schemes, Securities Litigation

The receiver for a convicted fraudster and his entities will not be able to recover a $2 million donation the fraudster made to a small Minnesota college.  See Kelley v. College of St. Benedict, D. Minn., Civ.;’ No. 12-822 (RHK/LIB), 10/26/12, and http://docs.justia.com/cases/federal/district-courts/minnesota/mndce/0:2012cv00822/125281/34/. The federal district court found that the receiver lacked the ability to bring this action, and… Continue Reading

Law Firm Must Defend Claims It Aided Client’s Securities Violations

Posted in Law Firms and Lawyers, Securities Litigation

A California federal court refused to dismiss negligence and other state law claims against a law firm for allegedly helping its client commit federal securities law violations.  See Donell v. Nixon Peabody, LLP, C.D. Cal., No. CV 12-04084 DDP (JEMx), 9/5/12. In this suit brought by the receiver of a defunct investment firm, the court rejected the… Continue Reading

You May Be Able to Utilize Alternative Service in Securities Actions

Posted in Law Firms and Lawyers, Securities Litigation

In an interesting decision arsing out of a securities fraud action, plaintiffs were allowed to serve a non-American defendant corporation’s chief executive officer – a citizen of Canada – by alternative means.  See In re GLG Life Tech Corp. Securities Litigation, S.D.N.Y., 11 Civ. 09150 (KB) (GWG), 11/9/12. The court indicated such service would provide notice to… Continue Reading

You May Be Able to Dodge the Securities Fraud Bullet if You Are a Corporate Official

Posted in Securities Class Actions, Securities Litigation

The U.S. Court of Appeals for the Third Circuit found that two founders of a metal components business were not liable in a securities fraud lawsuit although both had improperly looted millions of dollars of corporate assets. See Gallup v. Clarion Sintered Metals Inc., 3d Cir., No. 11-4004, 7/26/12, and http://federal-circuits.vlex.com/vid/paul-gallup-clarion-sintered-metals-390620030. Essentially, the investors had… Continue Reading

You May Get Lucky By Not Discussing Merger Talks

Posted in Mergers and Acquisitions, Securities Litigation

Corporate officials, who did not disclose merger talks with a competitor, did not commit securities fraud.  See Filing v. Phipps, 6th Cir., No. 11-4157, 10/23/12, http://federal-circuits.vlex.com/vid/mark-filing-v-william-phipps-403576058.  The court determined that the discussions were at the time not material, thus, not requiring disclosure.  This transaction involved tortured negotiations that did not culminate until 16 months later and well after the… Continue Reading

The Proper Care and Feeding of Experts in Securities Matters

Posted in Law Firms and Lawyers, Securities Litigation

As many regular blog readers know, I have participated as an expert witness before.  It is fascinating to share with our readers other epxert experiences as well.   Nonetheless, a number of issues relating to experts in securities cases have arisen over the last year.  In particular, many cases involve the threshold question as to if it is possible… Continue Reading

Beware of the Rogue Stockbroker

Posted in Broker-Dealer Regulation, Law Firms and Lawyers, Registered Representatives, Securities Litigation

We take a step back and speak directly to attorneys for a change, in particular, those lawyers who may recommend stockbrokers to their clients.  In New York, attorneys are subject to the tort of negligent referral if they were to refer such a stockbroker, who then causes damage to the client.  Consequently, prior to making any such… Continue Reading

You Need To Be Careful When You Depart As A Broker With Confidential Information And Trade Secrets

Posted in Raiding/Moving Firms, Registered Representatives, Securities Litigation

Recently, a Texas appellate court upheld a common law prohibition against a former registered rep who had moved firms. The court indicated that this departing broker had a common law obligation to maintain confidential information from his prior employer.  See Institutional Securities Corporation, et al. v. Vernon J. Hood, III (December 12, 2012), http://judicialview.com/State-Cases/texas/Employment/Institutional-Securities-Corporation-v-Hood/22/568743.  In… Continue Reading