Broker-Dealer Litigation - Greenberg Traurig LLP

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message retention, registration of representatives, and soft dollar arrangements, the procedures were not enforced. The panel noted that the respondents “made no effort” to implement an electronic mail or message retention system, despite its procedures and warnings from the CCO. The firm also had a written requirement that it hold an annual compliance meeting, but the firm merely sent a PowerPoint presentation for employees to read, in lieu of a live meeting. Finally, regulatory requirements and the firm’s own procedures required its representatives to be properly registered, but the firm allowed unlicensed marketers to do business. For the supervisory violations, together with the numerous other violations, the hearing panel expelled the firm from FINRA membership and barred the CEO from associating with any FINRA member firm in any capacity, and ordered them to pay hearing costs. 3. NYSE Enforcement Actions P.3 In re KCCI, Ltd., NYSE Hearing Panel Decision 11-NYSE-8; 2011 NYSE Disc. Action LEXIS 8 (Nov. 1, 2011). In a settled disciplinary proceeding, consented to by respondent without admitting or denying the allegations, respondent was found to have violated NYSE Rule 342 in that the firm failed to reasonably supervise and implement adequate controls designed to achieve compliance with NYSE Rules and policies pertaining to conducting “upstairs” operations from its booth premises on the NYSE Floor. In addition, the firm was found to have violated NYSE Rule 70.40, governing its so-called “Blue Line” operations, by conducting “upstairs” operations in its booth premises on the floor of the exchange without obtaining requisite approval from NYSE Regulation, adopting and implementing written procedures and guidelines governing the conduct and supervision of such business, and/or obtaining approval of its written procedures and guidelines from NYSE Regulation, as required. The NYSE noted that the firm’s overall written supervisory procedures did not have separate, “stand-alone” procedures for the Blue Line business as required by Rule 70.40 and Information Memo 07-77. The firm resolved these violations by consenting to a censure and a $10,000 fine. Matter of Blue Point Securities, Inc., NYSE Hearing Panel Decision 11-NYSE-7; 2011 NYSE Disc. Action LEXIS 7 (Sept. 27, 2011). In a settled disciplinary proceeding, consented to by respondent without admitting or denying the allegations, respondent was found to have violated NYSE Rule 342 by failing to reasonably supervise and implement adequate controls, including a reasonable system of followup and review, designed to achieve compliance with NYSE Rule 123C regarding the entry and cancellation of market-on-close (“MOC”) and limit-on-close (“LOC”) orders. In addition, the firm consented to findings that it violated Section 12(k)(4) of the Exchange Act, in connection with violation of an SEC Emergency Order prohibiting short sales in certain financial institutions during the financial crisis, in that the firm executed 212 short sale orders in such stocks. The P.3 398
firm also consented to findings that it violated NYSE Rule 123C itself, based on both entry of orders in situations where a market imbalance was not found to exist, and cancellation of orders after the cut-off time for cancellations. In resolution of all violations, the firm consented to a censure, a $22,500 fine, and an undertaking to enhance its procedures and controls governing the entry, cancellation, and supervision of MOC and LOC orders. Matter of Credit Suisse Securities (USA) LLC, NYSE Hearing Panel Decision 11-NYSE-5; 2011 NYSE Disc. Action LEXIS 5 (Sept. 14, 2011). In a settled disciplinary proceeding, consented to by respondent without admitting or denying the allegations, respondent was found to have violated NYSE Rule 342 by failing to reasonably supervise and implement adequate controls for compliance with NYSE rules regarding entry and cancellation of Market-on-Close (“MOC”) and Limit-on-Close (“LOC”) orders. Specifically, while the NYSE acknowledged that the firm had policies and procedures reasonably designed to ensure compliance with NYSE rules relating to entry, modification or cancellation of MOC and LOC orders, including reasonable policies and procedures for conducting a follow-up and review, the firm failed to prevent the entry or cancelation of MOC and LOC orders after certain mandated cut-off times due to technical issues within the firm’s order entry systems. Respondent was also found to have violated NYSE Rule 123C in connection with the entry and cancelation of such orders in 94 transactions. As a resolution of both the failure to supervise and the order handling charges, the firm consented to a censure and a $50,000 fine. In re Lombardi & Co., Inc., NYSE Hearing Panel Decision 2011-4; 2011 NYSE Disc. Action LEXIS 4 (May 25, 2011). In a settled disciplinary proceeding, consented to by respondent without admitting or denying the allegations, respondent was found to have violated NYSE Rule 342 in two respects. In certain areas, it failed to follow its supervisory procedures, and in other areas it failed to maintain adequate written supervisory procedures in other areas. Specifically, the firm’s failure to follow its procedures was connected to violations in the areas of registration and licensing, notification of NYSE of terminations of employment and return of identification badges, evidencing supervisory review of employees trading, and maintaining adequate books and records of employees’ forms U-4. In addition, NYSE found that the firm lacked adequate procedures dealing with review and resolution of “d/k’ed” trades, reporting and/or identification of manual trades or crosses, monitoring and preventing publishing quotations that lock or cross markets, preventing acceptance of sub-penny orders, and maintenance of a separate error account for errors of executions on other market centers. As a result, the firm consented to a censure and a $12,500 fine. P.3 P.3 399
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Broker-Dealer Litigation 2011 Annua
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Rocky Pozza Miller, Canfield, Paddo
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3. Safe Harbor/Bespeaks Caution Def
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(iii) Falsification of Documents...
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SECURITIES LITIGATION A. Definition
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Purvis v. Arizona Corp. Comm’n, N
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allegation of fraud. The complaint
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Silverstrand Investments v. AMAG Ph
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complaint lacked named plaintiffs w
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egarding loan-to-value ratios repor
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appraisers’ alleged acceptance of
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that statutes of repose are not sus
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Pension Trust Fund for Operating En
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Securities Exchange Act of 1934. Th
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authorities versus those reported i
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In re Oppenheimer Rochester Funds G
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claims as to the appraisal standard
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under Section 12 and declined to ex
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however, the court found that the s
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that a mutual fund’s share price
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allege a material misrepresentation
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over common questions, given the nu
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lending practices; and its solvenci
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partnership and worked to obtain in
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Section 12(a)(2) required the court
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initially inflated the company’s
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B.2 Self v. Chase Bank, N.A., 2011
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“associated with,” or “acted
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Gibbons v. Nat’l Real Estate Inve
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avoid ambiguous, potentially mislea
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B.3 SEC v. Kelly, 2011 WL 44331161
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B.3 SEC v. Woodruff, 778 F. Supp. 2
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C. Liabilities under the Securities
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easonable juror could conclude that
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Claimants requested compensatory da
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C.1.d Ashland Inc. v. Morgan Stanle
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C.1.d AnchorBank, FSB v. Hofer, 649
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experiencing large operating losses
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C.1.d Resnik v. Woertz, 744 F. Supp
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substantial likelihood that disclos
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C.1.d In re Evergreen Ultra Short O
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In re Merrill Lynch Auction Rate Se
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fiduciary duty and negligent misrep
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corporation’s earnings forecasts
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C.1.e In re Bank of America Corp. S
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f. Affirmative Defenses Wilson v. M
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that the complaint failed to allege
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immaterial; or (3) made without act
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of the Private Securities Litigatio
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held that the statute of limitation
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C.1.f In re Novatel Wireless Securi
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parent company liable for statement
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C.1.g SEC v. Tecumseh Holdings Corp
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C.1.g Fishman v. Morgan Keegan & Co
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C.2 Litwin v. Oceanfreight, Inc., 2
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Hysong v. Encore Energy Partners LP
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and created an uncertainty that KBR
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consented to the entry of a final j
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3. Section 15(c) C.3 SEC v. Ficeto,
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SEC v. Stifel, Nicolaus & Co., Inc.
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settled with the SEC prior to the c
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equity interests in real estate ass
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noted that the SEC had “merely re
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ing such court actions (the “1990
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D. Liabilities under the Securities
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its’ liquidity problems and plans
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few of defendant’s employees were
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D.1 Dronsejko v. Thornton, 632 F.3d
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In re Smith & Wesson Holding Corp.
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particularized as materially mislea
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D.1 Stephenson v. Pricewaterhouseco
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D.1 Russo v. Bruce, 777 F. Supp. 2d
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D.1 Jacquemyns v. Spartan Mullen Et
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granted the defendants’ motion to
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D.1 Egan v. Tradingscreen, Inc., 20
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City of Roseville Employees’ Reti
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D.1 Solow v. Citigroup, Inc., 2011
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Local 731 I.B. of T. Excavators and
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D.1 Love v. Alfacell Corp., 2011 WL
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disregarded and resulted in omissio
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dismiss finding that plaintiff’s
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from a decline of defendant’s sto
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plaintiffs failed to (i) create str
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D.1 In re St. Jude Med., Inc. Sec.
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D.1 Scala v. Citicorp Inc., 2011 WL
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granted defendants’ motion to dis
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improperly recognized revenue on sa
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D.1 Henning v. Orient Paper, Inc.,
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plaintiffs alleged that defendants
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in various contracts of the company
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D.1 In re Crocs, Inc. Securities Li
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Phila. Fin. Mgmt. of S.F., LLC v. D
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Waterford Twp. Police & Fire Ret. S
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Group met the requirements of Fed.
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appointed a lead plaintiff. The cou
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IBEW Local 90 Pension Fund v. Deuts
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D.2 Vandevelde v. China Natural Gas
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typicality.” Accordingly, the cou
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D.2 Sparano v. Lief, 2011 WL 830109
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argument was irrelevant because the
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issue, and therefore qualified for
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was not available. Moreover, the co
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misstatements were shielded from li
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D.3 Hopson v. MetroPCS Commc’ns,
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D.3 In re St. Jude Med., Inc. Sec.
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D.3 Curry v. Hansen Med., Inc., 201
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D.3 In re Coinstar Sec. Litig., 201
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Plumbers and Pipefitters Local Unio
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E. Backus v. Conn. Cmty. Bank, N.A.
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Securities Litigation Uniform Stand
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willfully ignored numerous red flag
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material facts “relating to” th
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E. Northstar Fin. Advisors, Inc. v.
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precluded or removable under SLUSA.
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circumvent SLUSA, the Court of Appe
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of defendant purchased ARS bonds fr
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2. Consumer Protection and Other St
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F.3 Borsellino v. Putnam, 2011 WL 6
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F.4 Haase v. GunnAllen Fin., Inc.,
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that the complaint failed to allege
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eing directed to return improperly
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H.1 U.S. v. Reyes, 660 F.3d 454 (9t
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to dismiss the complaint pursuant t
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Act of 1934 alleging it made false
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and Rule 10b-5 of the Securities Ex
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exert control over the content of c
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H.2 In re Sanofi-Aventis Sec. Litig
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Camofi Master LDC v. Riptide Worldw
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solvency. The district court held t
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(1) the investment corporations’
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held that, in taking plaintiffs’
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Rule 10b-5 claims were pleaded with
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to judgment as a matter of law beca
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H.2 Rafton v. Rydex Series Funds, 2
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those reasons, the court granted th
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Genesee County Employees Ret. Sys.
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Fernea v. Merrill Lynch, Pierce, Fe
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3. Aiding & Abetting H.3 Janus Capi
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of trades by defendants did not amo
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violation of securities laws. To st
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H.3 Merkin v. Gabriel Capital, L.P.
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allegedly illegal fundraising at de
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to any of the claims except the “
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mere suspicion that the broker-deal
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H.4 U.S. v. Speer, 419 F. App’x 5
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equirements of Federal Rule of Civi
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compliance officer testified as a r
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In re Torrey Pines Sec. Inc., Relea
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In re Torrey Pines Sec. Inc., Relea
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or nationally-recognized statistica
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activity, including activity in the
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timely and complete information upd
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J. RICO J. MLSMK Inv. Co. v. JP Mor
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J. In re Refco Inc. Sec. Litig., 20
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Beaman v. Barth, 2011 Bankr. LEXIS
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General Retirement System of City o
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K. Damages and Other Relief in Priv
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K.2 U.S. v. Gushlak, 2011 WL 315917
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K.2 Elipas v. Jedynak, 2011 WL 1706
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are wanton and reckless when done i
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settlement agreement constituted an
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The court held that the trustee was
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L. Contribution, Indemnification L.
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L. MBIA Ins. Corp. v. Credit Suisse
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warranted under these circumstances
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1933. In opposition to the motions,
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M.1 SEC v. Wyly, 788 F. Supp. 2d 92
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as barred by the statute of repose
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equitable estoppel did not apply as
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support the FINRA arbitration as pr
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N.1 Citibank, N.A. v. Franco, 2011
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ecause it overlapped with and was p
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2. Eligibility/Limitations N.2 Yuan
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the legislature did not intend the
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Plaintiff in fact derived a direct
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arbitrator the right to determine w
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and ordering of all parties into ar
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Page 359 and 360: S.Ct. 1784 (2010). Prior to Merck,
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Page 363 and 364: defendants had misrepresented the n
Page 365 and 366: allegations did not reference parti
Page 367 and 368: were disclosed by the timely filing
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Page 371 and 372: O.3 In re Evergreen Ultra Short Opp
Page 373 and 374: would primarily focus on establishi
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Page 381 and 382: anyway because the connection to ba
Page 383 and 384: 5. Discovery O.5 Mori v. Saito, 802
Page 385 and 386: O.5 Davis v. Duncan Energy Partners
Page 387 and 388: censure, a civil money penalty of $
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Page 391 and 392: In re Application of Kaminski, Admi
Page 393 and 394: prejudgment interest. The payment w
Page 395 and 396: Specifically, the firm’s procedur
Page 397 and 398: In re Pagliarini, Admin. Proc.File
Page 399 and 400: firm settled charges that it violat
Page 401 and 402: capacities. The NAC cited the fact
Page 403 and 404: maintain and enforce a system of su
Page 405: The hearing panel found respondents
Page 409 and 410: In re Keybanc Capital Markets, Inc.
Page 411 and 412: $30,000 civil fine, disgorgement of
Page 413 and 414: The Commission’s complaint allege
Page 415 and 416: Commission, a federal district cour
Page 417 and 418: (ii) Misrepresentation Q.1.c.(ii) I
Page 419 and 420: Q.1.c(ii) In re Chiaese, Release No
Page 421 and 422: The Commission censured the Firm. A
Page 423 and 424: particular, CSIM and CS&Co. markete
Page 425 and 426: Q.1.e.(i) SEC v. Devlin, Litig. Rel
Page 427 and 428: clearance trades without being a re
Page 429 and 430: Q.1.e(ii) In re Huntleigh Sec. Corp
Page 431 and 432: assisted in the Firm’s creation o
Page 433 and 434: Q.1.e(iii) In re Schaefer, Release
Page 435 and 436: and hedge fund accounts, to the det
Page 437 and 438: f. Failure to Supervise Q.1.f In re
Page 439 and 440: Firm policy disallowing wires from
Page 441 and 442: The Commission alleged that Lopez-T
Page 443 and 444: suspension concerning his complianc
Page 445 and 446: Commission barred LeBouef from asso
Page 447 and 448: Direct Edge ECN LLC, doing business
Page 449 and 450: (ii) Falsification of Documents . N
Page 451 and 452: unavailable, Gizankis and FINRA agr
Page 453 and 454: j. Procedural Issues (i) Evidence N
Page 455 and 456: FINRA Rule 2010 by submitting an an
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R. Broker-Dealer Employment Litigat
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discovery responses was also meritl
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R. Frankel v. McDonough, 2011 WL 50
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must not have ruled on that defense
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FINRA award was entitled to full fa
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Lorbietzki v. Merrill Lynch, Pierce
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failed to show that it was prejudic
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Antelis v. Freeman, 2011 WL 6009609
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Berman v. Morgan Keegan & Co., 2011
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Citigroup Smith Barney v. Henderson
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Department of Enforcement v. Hedge
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FINRA Department of Enforcement v.
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Grecco v. Local.Com Corp., 806 F. S
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IAC/InterActiveCorp v. O’Brien, 2
Page 485 and 486:
In re Cell Therapeutics, Inc. Class
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In re Franklin Bank Corp. Sec. Liti
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In re Kim, Release No. 64862, 2011
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In re Mutascio, Release No. 65351,
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In re Shankar, Release No. 64714, 2
Page 495 and 496:
In re Wash. Mut. Mortgage-Backed Se
Page 497 and 498:
KeyBank, N.A. v. Bingo, Coast Guard
Page 499 and 500:
Marini v. Adamo, 2011 WL 4442710 (E
Page 501 and 502:
McCafferty v. A.G. Edwards & Sons,
Page 503 and 504:
Murray v. Citigroup Global Mkts., I
Page 505 and 506:
Picard v. Madoff (In re Bernard L.
Page 507 and 508:
Rafton v. Rydex Series Funds, 2011
Page 509 and 510:
SEC v. Aragon Capital Advisors, LLC
Page 511 and 512:
SEC v. N. Am. Clearing, Inc., Litig
Page 513 and 514:
Solow v. Citigroup, Inc. , 2011 WL
Page 515 and 516:
U.S. Bank N.A. v. Cold Spring Grani
Page 517:
West Va. Laborers Trust Fund v. STE
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