Broker-Dealer Litigation - Greenberg Traurig LLP

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Q.2.h In re Picozzi, Release No. 65569, 2011 SEC LEXIS 3609 (Oct. 14, 2011). The Commission considered an appeal by Picozzi, a former associated person of a member firm of PCX Equities, Inc. (“PCX”), the predecessor-in-interest to NYSE Euronext and NYSE Regulation Inc. In 2004, PCX filed a complaint against Picozzi charging him with violation of PCX Rule 10.2(d) for failing to furnish information and testimony requested by PCX. PCX mailed the complaint to Picozzi, but Picozzi failed to respond. PCX issued a Notice of Summary Determination that censured and barred Picozzi, and stated that if Picozzi and his member firm fully cooperated within three months after issuance of the Notice, the bar would be lifted and an appropriate sanction for obstructing the investigation would be imposed. On appeal, Picozzi argued that he did not receive any of the PCX documents until 2010. The Commission overturned PCX’s findings of violation and sanction, noting the lack of evidence surrounding PCX’s attempts to serve Picozzi and PCX’s successor’s statement that it did not oppose Picozzi’s petition. The Commission declined Picozzi’s request that it expunge his CRD record, noting its assumption that FINRA would update the record. i. Failure to Honor Arbitration Award/Failure to Pay Fines and Costs/Failure to Comply with Sanctions Imposed Q.2.i In re FCS Sec., Release No. 64852, 2011 SEC LEXIS 2366 (July 11, 2011); In re FCS Sec., Release No. 65267, 2011 SEC LEXIS 3330 (Sept. 6, 2011). The Commission rejected a request for reconsideration by FCS Securities, a registered broker-dealer (the “Firm”), and Kleinser, its sole proprietor. Applicants sought review of the Commission’s earlier decision sustaining a FINRA decision from 2008 finding violations of Section 17(e) of the Securities Exchange Act of 1934, Rule 17a-5 thereunder, and NASD Rule 2110 by FCS Securities and Kleinser for failure to file audited financial statements. FINRA had fined the Firm and Kleinser $5,000, jointly and severally, and suspended the Firm from membership for four months, with the suspension to convert to an expulsion if the Firm did not file audited annual reports for 2006 and 2007 before the suspension ended. Applicants first appealed to the National Adjudicatory Council, which sustained FINRA’s decision. On appeal to the Commission, the Commission found that the Firm failed to file audited financial reports for fiscal years 2006 and 2007 and failed to show that the exemption contained in Rule 17a- 5(e)(1)(i)(B) under the Securities Exchange Act of 1934 permitted them to file unaudited annual reports for those years. The Commission further rejected the Applicants’ argument that their situation was similar to that described in certain No Action Letters, distinguishing the facts described in those letters and stating that the Commission was not bound by the statements of Commission staff in such letters. In denying Applicants’ subsequent motion for reconsideration, the Commission found that the motion raised arguments that the Commission had already rejected and did not introduce any newly discovered evidence. 444
j. Procedural Issues (i) Evidence No cases decided in 2011. (ii) Due Process No cases decided in 2011. (iii) Jurisdiction and Time Bars Q.2.j(iii) In re Sharemaster, Release No. 65570, 2011 SEC LEXIS 3610 (Oct. 14, 2011). The Commission considered an appeal by Sharemaster, a registered broker-dealer, of a FINRA disciplinary decision. A FINRA hearing panel had found that Sharemaster violated Section 17(e) of the Securities Exchange Act of 1934 and Rule 17a-5 thereunder by filing an annual report with financial statements that were audited by an accounting firm that was not registered with the Public Company Accounting Oversight Board. The hearing panel suspended Sharemaster’s membership pending the filing of the requisite annual report, with the suspension to convert to an expulsion at the end of six months if the report was not filed, and assessed $1,785 in costs. Sharemaster appealed to the Commission, and while the appeal was pending, Sharemaster filed a compliant annual report and the suspension was lifted. Both parties argued that the Commission should resolve this case because, although the suspension was lifted, a violation was found and costs were assessed. The Commission dismissed the appeal for lack of jurisdiction, finding that because the sanction was lifted, there was no final disciplinary sanction to review. (iv) Discovery No cases decided in 2011. (v) Sanctions Q.2.j.(v) In re Houston, Release No. 66014, 2011 SEC LEXIS 4491 (Dec. 20, 2011). The Commission reviewed an appeal by Houston, a former general securities representative with a former NASD member firm, from a NASD disciplinary action. The NASD had found that Houston violated NASD Rules 3030 and 2110 by engaging in outside business activities without providing his member firm with written notice, and violated NASD Rules 8210 and 2110 by failing to appear for an on-the-record interview with NASD staff. The NASD fined Houston $100,000 and suspended him for one year in all capacities, and, for failing to appear for 445
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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
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prejudgment interest. The payment w
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Specifically, the firm’s procedur
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In re Pagliarini, Admin. Proc.File
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firm settled charges that it violat
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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
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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: unavailable, Gizankis and FINRA agr
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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Broker-Dealer Litigation - Greenberg Traurig LLP

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