Broker-Dealer Litigation - Greenberg Traurig LLP

emainder of the Section 18 claims, however, noting that the claims were not rendered
implausible by plaintiffs’ voluminous “in-and-out” trading of Comverse stock, or by the fact that
plaintiffs continued to trade in Comverse stock after the release of negative information about the
company. The court held that plaintiffs pleaded fraud with adequate particularity because they
provided enough detail to identify the allegedly fraudulent statements and show why they were
allegedly fraudulent. Further, plaintiffs adequately pleaded loss causation by alleging that they
sold their Comverse shares at a loss after the allegedly fraudulent statements were revealed and
the stock price dropped. Finally, plaintiffs adequately pleaded actual reliance under Section 18
by alleging that they “read and/or listened to and relied upon the defendants’ false and
misleading statements before investing . . . in Comverse shares.”
Int’l Fund Mgmt S.A. v. Citigroup Inc., 2011 U.S. Dist. LEXIS 113660 (S.D.N.Y. Sept. 30,
2011).
Plaintiffs alleged that Citigroup’s 2006 and 2007 Form 10-K filings included
misstatements and omissions in violation of Section 18 of the Securities Exchange Act of 1934
and that “in connection with [their] purchases of Securities after February 23, 2007, Plaintiffs
and/or their investment managers read and relied upon Citi’s [2006 and 2007 Form 10-Ks],
including the false financial statements and other statements alleged herein to be false or
misleading.” The court dismissed the claims for failure to plead actual reliance, holding that the
allegations were merely conclusory because they were “incredibly broad” and lacked supporting
factual matter.
Hines v. Cal. Pub. Utils. Comm., 2011 U.S. Dist. LEXIS 134583 (N.D. Cal. Nov. 21, 2011).
The court granted a motion to dismiss a claim brought under Section 18 of the Securities
Exchange Act of 1934. The court held that the plaintiff failed to state a claim where she (i) did
not identify the allegedly misleading statements, (ii) did not allege that any purportedly
misleading statements were made in a document filed pursuant to the Exchange Act, and (iii) did
not allege that she had relied on any misstatements or omissions when purchasing or selling a
security.
7. Section 19(b)
Fiero v. Financial Ind. Regulatory Auth., Inc., 660 F.3d 569 (2d. Cir. 2011).
A registered broker-dealer and its sole registered representative brought an action seeking
a declaration that FINRA lacks the authority to bring court actions to collect disciplinary fines it
has imposed. The Second Circuit held FINRA lacked authority to bring such court actions.
Although FINRA (then-NASD) had filed a rule change back in 1990 with the SEC to allow it to
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