Broker-Dealer Litigation - Greenberg Traurig LLP

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4. SRO Rules............................................................................................................329 N. Arbitration........................................................................................................................330 1. Scope....................................................................................................................330 2. Eligibility/Limitations..........................................................................................337 3. Jurisdiction/Estoppel............................................................................................339 4. Motions to Vacate or to Enjoin............................................................................346 a. Punitive Damages ....................................................................................346 b. Attorneys’ Fees ........................................................................................346 c. Other ........................................................................................................348 O. Practice and Procedure.....................................................................................................350 1. Rule 9(b) of the Fed. R. Civ. P. ...........................................................................350 2. Rule 11 of the Fed. R. Civ. P. ..............................................................................360 3. Rule 23 of the Fed. R. Civ. P. ..............................................................................362 4. Venue, Pendent Jurisdiction Removal and Other Issues .....................................366 5. Discovery .............................................................................................................375 P. Failure to Supervise .........................................................................................................378 1. SEC Enforcement Actions ...................................................................................378 2. FINRA Enforcement Actions ..............................................................................392 3. NYSE Enforcement Actions................................................................................398 Q. SEC Litigation Affecting Broker-Dealers .......................................................................401 1. Direct SEC Proceedings.......................................................................................401 a. Sales Practice Violations..........................................................................401 b. Unfair/Fraudulent Markups or Commissions ..........................................403 c. Other Fraudulent Practices.......................................................................404 (i) (ii) Misappropriation..........................................................................404 Misrepresentation.........................................................................409 iii
(iii) Falsification of Documents..........................................................414 (iv) Failure to Maintain Accurate Books and Records .......................414 d. Mutual Fund Trading and Disclosure Violations.....................................414 e. Trading Practice Violations .....................................................................416 (i) Insider Trading.............................................................................416 (ii) Market Manipulation ...................................................................420 (iii) Securities Offering Violations .....................................................423 (iv) Trading Rules Violations .............................................................426 f. Failure to Supervise .................................................................................429 g. Failure to Honor Arbitration Award/Failure to Pay Fines and Costs/Failure to Comply with Sanctions Imposed...................................435 h. Procedural Issues .....................................................................................435 (i) Jurisdiction and Time Bars ..........................................................435 (ii) (iii) Standard of Review......................................................................435 Due Process..................................................................................435 (iv) Prior Disciplinary Histories .........................................................435 (v) (vi) Selective Prosecution...................................................................435 Sanctions......................................................................................435 i. Broker/Dealer Registration Violations ....................................................436 j. Miscellaneous / MSSR Municipal Bond Offerings .................................437 k. Regulation S-P .........................................................................................438 2. SEC Review of SRO Proceedings .......................................................................439 a. Sales Practice Violations..........................................................................439 b. Unfair/Fraudulent Markups or Commissions ..........................................440 c. Other Fraudulent Practices.......................................................................440 (i) Misrepresentation.........................................................................440 iv
Page 1 and 2: Broker-Dealer Litigation 2011 Annua
Page 3 and 4: Rocky Pozza Miller, Canfield, Paddo
Page 5: 3. Safe Harbor/Bespeaks Caution Def
Page 9 and 10: SECURITIES LITIGATION A. Definition
Page 11 and 12: Purvis v. Arizona Corp. Comm’n, N
Page 13 and 14: allegation of fraud. The complaint
Page 15 and 16: Silverstrand Investments v. AMAG Ph
Page 17 and 18: complaint lacked named plaintiffs w
Page 19 and 20: egarding loan-to-value ratios repor
Page 21 and 22: appraisers’ alleged acceptance of
Page 23 and 24: that statutes of repose are not sus
Page 25 and 26: Pension Trust Fund for Operating En
Page 27 and 28: Securities Exchange Act of 1934. Th
Page 29 and 30: authorities versus those reported i
Page 31 and 32: In re Oppenheimer Rochester Funds G
Page 33 and 34: claims as to the appraisal standard
Page 35 and 36: under Section 12 and declined to ex
Page 37 and 38: however, the court found that the s
Page 39 and 40: that a mutual fund’s share price
Page 41 and 42: allege a material misrepresentation
Page 43 and 44: over common questions, given the nu
Page 45 and 46: lending practices; and its solvenci
Page 47 and 48: partnership and worked to obtain in
Page 49 and 50: Section 12(a)(2) required the court
Page 51 and 52: initially inflated the company’s
Page 53 and 54: B.2 Self v. Chase Bank, N.A., 2011
Page 55 and 56: “associated with,” or “acted
Page 57 and 58:
Gibbons v. Nat’l Real Estate Inve
Page 59 and 60:
avoid ambiguous, potentially mislea
Page 61 and 62:
B.3 SEC v. Kelly, 2011 WL 44331161
Page 63 and 64:
B.3 SEC v. Woodruff, 778 F. Supp. 2
Page 65 and 66:
C. Liabilities under the Securities
Page 67 and 68:
easonable juror could conclude that
Page 69 and 70:
Claimants requested compensatory da
Page 71 and 72:
C.1.d Ashland Inc. v. Morgan Stanle
Page 73 and 74:
C.1.d AnchorBank, FSB v. Hofer, 649
Page 75 and 76:
experiencing large operating losses
Page 77 and 78:
C.1.d Resnik v. Woertz, 744 F. Supp
Page 79 and 80:
substantial likelihood that disclos
Page 81 and 82:
C.1.d In re Evergreen Ultra Short O
Page 83 and 84:
In re Merrill Lynch Auction Rate Se
Page 85 and 86:
fiduciary duty and negligent misrep
Page 87 and 88:
corporation’s earnings forecasts
Page 89 and 90:
C.1.e In re Bank of America Corp. S
Page 91 and 92:
f. Affirmative Defenses Wilson v. M
Page 93 and 94:
that the complaint failed to allege
Page 95 and 96:
immaterial; or (3) made without act
Page 97 and 98:
of the Private Securities Litigatio
Page 99 and 100:
held that the statute of limitation
Page 101 and 102:
C.1.f In re Novatel Wireless Securi
Page 103 and 104:
parent company liable for statement
Page 105 and 106:
C.1.g SEC v. Tecumseh Holdings Corp
Page 107 and 108:
C.1.g Fishman v. Morgan Keegan & Co
Page 109 and 110:
C.2 Litwin v. Oceanfreight, Inc., 2
Page 111 and 112:
Hysong v. Encore Energy Partners LP
Page 113 and 114:
and created an uncertainty that KBR
Page 115 and 116:
consented to the entry of a final j
Page 117 and 118:
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
Page 123 and 124:
equity interests in real estate ass
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noted that the SEC had “merely re
Page 127 and 128:
ing such court actions (the “1990
Page 129 and 130:
D. Liabilities under the Securities
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its’ liquidity problems and plans
Page 133 and 134:
few of defendant’s employees were
Page 135 and 136:
D.1 Dronsejko v. Thornton, 632 F.3d
Page 137 and 138:
In re Smith & Wesson Holding Corp.
Page 139 and 140:
particularized as materially mislea
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D.1 Stephenson v. Pricewaterhouseco
Page 143 and 144:
D.1 Russo v. Bruce, 777 F. Supp. 2d
Page 145 and 146:
D.1 Jacquemyns v. Spartan Mullen Et
Page 147 and 148:
granted the defendants’ motion to
Page 149 and 150:
D.1 Egan v. Tradingscreen, Inc., 20
Page 151 and 152:
City of Roseville Employees’ Reti
Page 153 and 154:
D.1 Solow v. Citigroup, Inc., 2011
Page 155 and 156:
Local 731 I.B. of T. Excavators and
Page 157 and 158:
D.1 Love v. Alfacell Corp., 2011 WL
Page 159 and 160:
disregarded and resulted in omissio
Page 161 and 162:
dismiss finding that plaintiff’s
Page 163 and 164:
from a decline of defendant’s sto
Page 165 and 166:
plaintiffs failed to (i) create str
Page 167 and 168:
D.1 In re St. Jude Med., Inc. Sec.
Page 169 and 170:
D.1 Scala v. Citicorp Inc., 2011 WL
Page 171 and 172:
granted defendants’ motion to dis
Page 173 and 174:
improperly recognized revenue on sa
Page 175 and 176:
D.1 Henning v. Orient Paper, Inc.,
Page 177 and 178:
plaintiffs alleged that defendants
Page 179 and 180:
in various contracts of the company
Page 181 and 182:
D.1 In re Crocs, Inc. Securities Li
Page 183 and 184:
Phila. Fin. Mgmt. of S.F., LLC v. D
Page 185 and 186:
Waterford Twp. Police & Fire Ret. S
Page 187 and 188:
Group met the requirements of Fed.
Page 189 and 190:
appointed a lead plaintiff. The cou
Page 191 and 192:
IBEW Local 90 Pension Fund v. Deuts
Page 193 and 194:
D.2 Vandevelde v. China Natural Gas
Page 195 and 196:
typicality.” Accordingly, the cou
Page 197 and 198:
D.2 Sparano v. Lief, 2011 WL 830109
Page 199 and 200:
argument was irrelevant because the
Page 201 and 202:
issue, and therefore qualified for
Page 203 and 204:
was not available. Moreover, the co
Page 205 and 206:
misstatements were shielded from li
Page 207 and 208:
D.3 Hopson v. MetroPCS Commc’ns,
Page 209 and 210:
D.3 In re St. Jude Med., Inc. Sec.
Page 211 and 212:
D.3 Curry v. Hansen Med., Inc., 201
Page 213 and 214:
D.3 In re Coinstar Sec. Litig., 201
Page 215 and 216:
Plumbers and Pipefitters Local Unio
Page 217 and 218:
E. Backus v. Conn. Cmty. Bank, N.A.
Page 219 and 220:
Securities Litigation Uniform Stand
Page 221 and 222:
willfully ignored numerous red flag
Page 223 and 224:
material facts “relating to” th
Page 225 and 226:
E. Northstar Fin. Advisors, Inc. v.
Page 227 and 228:
precluded or removable under SLUSA.
Page 229 and 230:
circumvent SLUSA, the Court of Appe
Page 231 and 232:
of defendant purchased ARS bonds fr
Page 233 and 234:
2. Consumer Protection and Other St
Page 235 and 236:
F.3 Borsellino v. Putnam, 2011 WL 6
Page 237 and 238:
F.4 Haase v. GunnAllen Fin., Inc.,
Page 239 and 240:
that the complaint failed to allege
Page 241 and 242:
eing directed to return improperly
Page 243 and 244:
H.1 U.S. v. Reyes, 660 F.3d 454 (9t
Page 245 and 246:
to dismiss the complaint pursuant t
Page 247 and 248:
Act of 1934 alleging it made false
Page 249 and 250:
and Rule 10b-5 of the Securities Ex
Page 251 and 252:
exert control over the content of c
Page 253 and 254:
H.2 In re Sanofi-Aventis Sec. Litig
Page 255 and 256:
Camofi Master LDC v. Riptide Worldw
Page 257 and 258:
solvency. The district court held t
Page 259 and 260:
(1) the investment corporations’
Page 261 and 262:
held that, in taking plaintiffs’
Page 263 and 264:
Rule 10b-5 claims were pleaded with
Page 265 and 266:
to judgment as a matter of law beca
Page 267 and 268:
H.2 Rafton v. Rydex Series Funds, 2
Page 269 and 270:
those reasons, the court granted th
Page 271 and 272:
Genesee County Employees Ret. Sys.
Page 273 and 274:
Fernea v. Merrill Lynch, Pierce, Fe
Page 275 and 276:
3. Aiding & Abetting H.3 Janus Capi
Page 277 and 278:
of trades by defendants did not amo
Page 279 and 280:
violation of securities laws. To st
Page 281 and 282:
H.3 Merkin v. Gabriel Capital, L.P.
Page 283 and 284:
allegedly illegal fundraising at de
Page 285 and 286:
to any of the claims except the “
Page 287 and 288:
mere suspicion that the broker-deal
Page 289 and 290:
H.4 U.S. v. Speer, 419 F. App’x 5
Page 291 and 292:
equirements of Federal Rule of Civi
Page 293 and 294:
compliance officer testified as a r
Page 295 and 296:
In re Torrey Pines Sec. Inc., Relea
Page 297 and 298:
In re Torrey Pines Sec. Inc., Relea
Page 299 and 300:
or nationally-recognized statistica
Page 301 and 302:
activity, including activity in the
Page 303 and 304:
timely and complete information upd
Page 305 and 306:
J. RICO J. MLSMK Inv. Co. v. JP Mor
Page 307 and 308:
J. In re Refco Inc. Sec. Litig., 20
Page 309 and 310:
Beaman v. Barth, 2011 Bankr. LEXIS
Page 311 and 312:
General Retirement System of City o
Page 313 and 314:
K. Damages and Other Relief in Priv
Page 315 and 316:
K.2 U.S. v. Gushlak, 2011 WL 315917
Page 317 and 318:
K.2 Elipas v. Jedynak, 2011 WL 1706
Page 319 and 320:
are wanton and reckless when done i
Page 321 and 322:
settlement agreement constituted an
Page 323 and 324:
The court held that the trustee was
Page 325 and 326:
L. Contribution, Indemnification L.
Page 327 and 328:
L. MBIA Ins. Corp. v. Credit Suisse
Page 329 and 330:
warranted under these circumstances
Page 331 and 332:
1933. In opposition to the motions,
Page 333 and 334:
M.1 SEC v. Wyly, 788 F. Supp. 2d 92
Page 335 and 336:
as barred by the statute of repose
Page 337 and 338:
equitable estoppel did not apply as
Page 339 and 340:
support the FINRA arbitration as pr
Page 341 and 342:
N.1 Citibank, N.A. v. Franco, 2011
Page 343 and 344:
ecause it overlapped with and was p
Page 345 and 346:
2. Eligibility/Limitations N.2 Yuan
Page 347 and 348:
the legislature did not intend the
Page 349 and 350:
Plaintiff in fact derived a direct
Page 351 and 352:
arbitrator the right to determine w
Page 353 and 354:
and ordering of all parties into ar
Page 355 and 356:
impeachment upon proof of changed c
Page 357 and 358:
N.4.c Aviles v. Charles Schwab & Co
Page 359 and 360:
S.Ct. 1784 (2010). Prior to Merck,
Page 361 and 362:
market sector downturn rendered the
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
Page 369 and 370:
improper attempt to file the Third
Page 371 and 372:
O.3 In re Evergreen Ultra Short Opp
Page 373 and 374:
would primarily focus on establishi
Page 375 and 376:
the power of a sovereign.” It was
Page 377 and 378:
the admission by the investment man
Page 379 and 380:
permit exercise of personal jurisdi
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 $
Page 389 and 390:
anch office, which did not have any
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 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 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
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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