Broker-Dealer Litigation - Greenberg Traurig LLP

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and permanently barred Goto from association. Following that proceeding, Goto filed for bankruptcy. The federal district court granted the Commission’s motion. i. <strong>Broker</strong>/<strong>Dealer</strong> Registration Violations In re Beachy, Release No. 614100, 2011 SEC LEXIS 970 (Mar. 18, 2011). Q.1.i The Commission accepted an offer of settlement from Beachy, a former registered representative of a registered broker-dealer. In an earlier proceeding brought by the Commission, a federal district court entered a final judgment by consent against Beachy, permanently enjoining him from future violations of the broker-dealer registration and antifraud provisions of the federal securities laws. The Commission’s complaint alleged that Beachy sold investment contracts to investors in at least 29 states using a fictitious name, made false statements to investors, distributed false account statements, knowingly and intentionally hid his losses and sold unregistered securities. The Commission barred Beachy from association and prohibited Beachy from participating in an offering of penny stock. In re Nicholson, Release No. 64396, 2011 SEC LEXIS 1573 (May 4, 2011). Q.1.i The Commission accepted an offer of settlement from Nicholson, the president and owner of a registered broker-dealer and owner of a separate entity that acted as the general partner for various issuers of limited partnership interests. In a related civil action brought by the Commission in federal court, the court entered a judgment by consent against Nicholson, permanently enjoining him from violating the antifraud and registration provisions of the federal securities laws. The Commission’s complaint alleged that, in connection with the sale of limited partnership interests, Nicholson misused and misappropriated investor funds, failed to disclose material information regarding the use of investor proceeds, sold unregistered securities and operated an unregistered broker-dealer. The Commission barred Nicholson from association. In re LeBouef, Release No. 65216, 2011 SEC LEXIS 3013 (Aug. 29, 2011). The Commission accepted an offer of settlement from LeBouef, a former registered representative with a registered broker-dealer. In a related criminal action in federal district court, LeBoeuf pleaded guilty to one count of mail fraud and was sentenced to a prison for thirty months followed by three years of supervised release, and ordered to pay $492,365 in restitution. In a related civil action brought by the Commission, a federal district court entered a final judgment by consent against LeBouef enjoining him from future violations of the antifraud provisions of the federal securities laws. The Commission’s complaint alleged that, in connection with six oil and gas offerings, LeBouef acted as an unregistered broker-dealer when he actively solicited investors and raised over $500,000 from nine investors after his license had lapsed, misused and misappropriated investor funds, and made various misrepresentations. The Q.1.i 436
Commission barred LeBouef from association and from participating in any offering of a penny stock. j. Miscellaneous / MSSR Municipal Bond Offerings In re Ellis, Release No. 64220, 2011 SEC LEXIS 1199 (Apr. 7, 2011). Q.1.j The Commission accepted an offer of settlement from Ellis, CCO of a former registered broker-dealer (the “Firm”). The Commission’s complaint alleged that Ellis willfully aided and abetted and caused the Firm’s violations of Rule 30(a) of Regulation S-P (the “Safeguard Rule”) under the Securities Exchange Act of 1934 by failing to direct the Firm to revise or supplement its written supervisory procedures for safeguarding customer information after being notified of the theft of three laptop computers and a registered representative’s computer password. The Commission’s complaint further alleged the Firm’s supervisory procedures were inadequate and failed to instruct the Firm’s registered representatives and supervisors how to comply with the Safeguard Rule. The Commission censured Ellis and ordered him to pay a $15,000 civil penalty and to cease and desist from committing or causing any violations and any future violations of Rule 30(a) of Regulation S-P. Q.1.j In re Kraus, Release No. 64221, 2011 SEC LEXIS 1200 (Apr. 7, 2011), In re Levine, Release No. 64222, 2011 SEC LEXIS 1201 (Apr. 7, 2011). The Commission accepted offers of settlement from Kraus, President, CFO and Director of Supervision of a former registered broker-dealer (the “Firm”) and Levine, National Sales Manager of the Firm. The Commission’s complaint alleged that at the time the Firm was winding down its business, Kraus authorized the transfer of 16,000 accounts to Levine and any broker-dealer with whom he became affiliated. In connection with this transfer, Levine downloaded nonpublic customer information for the accounts onto a portable thumb drive. After joining the new broker-dealer, Levine mailed a letter that Kraus had reviewed and approved to the account holders advising them of the transfer and of their right to opt out of the transfer, but failing to provide procedures on how to exercise that right, contact information or the identity of the new broker-dealer. Thereafter, Levine supplied the receiving broker-dealer with the nonpublic customer information. The Commission’s complaint alleged that Kraus and Levine willfully aided and abetted and caused the Firm’s violations of Rules 7(a) and 10(a) of Regulation S-P under the Securities Exchange Act of 1934 by failing to provide the customers with proper notice, a reasonable opportunity to opt out of the transfer, a reasonable means to exercise their opt out right and sufficient time within which to opt out before disclosing their personal nonpublic information to Levine and the receiving broker. The Commission’s complaint also alleged that Kraus and Levine willfully aided and abetted and caused the broker-dealer’s violations of Rule 30(a) of Regulation S-P by knowingly placing customer information at substantial risk of unauthorized access and misuse. The Commission censured Kraus and Levine and ordered them to cease and desist from committing or causing any violations and any future violations of Rules 437
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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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impeachment upon proof of changed c
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N.4.c Aviles v. Charles Schwab & Co
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S.Ct. 1784 (2010). Prior to Merck,
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market sector downturn rendered the
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defendants had misrepresented the n
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allegations did not reference parti
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were disclosed by the timely filing
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improper attempt to file the Third
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O.3 In re Evergreen Ultra Short Opp
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would primarily focus on establishi
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the power of a sovereign.” It was
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the admission by the investment man
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permit exercise of personal jurisdi
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anyway because the connection to ba
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5. Discovery O.5 Mori v. Saito, 802
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O.5 Davis v. Duncan Energy Partners
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censure, a civil money penalty of $
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anch office, which did not have any
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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
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Page 405 and 406: The hearing panel found respondents
Page 407 and 408: firm also consented to findings tha
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: suspension concerning his complianc
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
Page 457 and 458: R. Broker-Dealer Employment Litigat
Page 459 and 460: discovery responses was also meritl
Page 461 and 462: R. Frankel v. McDonough, 2011 WL 50
Page 463 and 464: must not have ruled on that defense
Page 465 and 466: FINRA award was entitled to full fa
Page 467 and 468: Lorbietzki v. Merrill Lynch, Pierce
Page 469 and 470: failed to show that it was prejudic
Page 471 and 472: Antelis v. Freeman, 2011 WL 6009609
Page 473 and 474: Berman v. Morgan Keegan & Co., 2011
Page 475 and 476: Citigroup Smith Barney v. Henderson
Page 477 and 478: Department of Enforcement v. Hedge
Page 479 and 480: FINRA Department of Enforcement v.
Page 481 and 482: Grecco v. Local.Com Corp., 806 F. S
Page 483 and 484: IAC/InterActiveCorp v. O’Brien, 2
Page 485 and 486: In re Cell Therapeutics, Inc. Class
Page 487 and 488: In re Franklin Bank Corp. Sec. Liti
Page 489 and 490: In re Kim, Release No. 64862, 2011
Page 491 and 492: In re Mutascio, Release No. 65351,
Page 493 and 494: 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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