Broker-Dealer Litigation - Greenberg Traurig LLP

advanced, non-public knowledge that underwriters would leave the ARS market and cause its
collapse.
Anwar v. Fairfield Greenwich Ltd., 2011 WL 5282684 (S.D.N.Y. Nov. 2, 2011).
Plaintiffs opened accounts with a broker-dealer firm that was later acquired by defendant.
Defendant recommended that plaintiffs invest in a feeder fund that in turn invested in Bernard L
Madoff Investor Securities, a now well-known Ponzi scheme. Plaintiffs filed suit against
defendant claiming fraud under the Florida securities statutes. The court found that the elements
for a cause of action for fraud under the Florida securities statutes are identical to those under
Section 10(b) of the Securities Exchange Act of 1934, except that the scienter requirement under
Florida law is satisfied by a showing of negligence. The court held that plaintiffs’ state fraud
claim, under the Florida securities statutes, should be dismissed for a number of reasons. First,
plaintiffs did not allege where misstatements were made or when all misstatements occurred;
second, plaintiffs failed to show what defendant obtained from the fraud; and third, plaintiffs
failed to show that defendant acted with the requisite state of mind, which requires conscious
misbehavior or recklessness. Additionally, plaintiffs did not show the buyer-seller privity
required by the Florida securities statutes.
Fulton Bank v. UBS Securities, 2011 WL 5386376 (E.D. Pa. Nov. 7, 2011)
Fulton Bank (“Fulton”) brought an action against UBS Securities (“UBS”) for violation
of sections 1-401 and 1-403 of the Pennsylvania Securities Act. Fulton held institutional
investment accounts with two broker-dealers, PNC and NatCity. Using these accounts, Fulton
purchased Auction Rate Securities (“ARS”) at an auction managed by UBS. In its complaint,
Fulton stated that UBS was Fulton’s broker-dealer and improperly misled Fulton by placing
support bids that artificially inflated the value of ARS. Fulton also alleged that had it known
about the instability of the ARS market, or been told that UBS supported the auctions despite
insufficient investor demand, it would not have continued investing in ARS. The court granted
UBS’ motion to dismiss and barred Fulton’s claim under section 1-401 because the facts as
alleged failed to satisfy any element of the offense. The court also found that UBS had not
conducted any market manipulation in violation section 1-402. In order to violate section 1-402,
a party must employ “intentional and willful conduct designed to deceive or defraud investors by
controlling or artificially affecting the price of securities.” Here, the court did not find any
conduct which satisfied the elements of section 1-402.
Fishman v. Morgan Keegan & Co., 2011 WL 4853367 (E.D. La. Oct. 13, 2011).
Defendant, a registered securities broker-dealer, was a major participant in the market for
Auction Rate Securities (“ARS”). In 2005, at the direction of plaintiffs, an institutional customer
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