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Goldman Sachs, Citigroup Contracts Block Arbitration

The United States Court of Appeals for the second circuit ruled this week that a forum-selection clause in Goldman Sachs and Citigroup contracts preempts their responsibility under FINRA rules to arbitrate disputes with a customer. The Appellate Court had consolidated two separate cases brought by Golden Empire Schools Financing Authority and North Carolina Eastern Municipal Power Agency against Goldman Sachs and Citigroup respectively. The plaintiffs in both cases assert that the firms fraudulently induced them to issue millions of auction rate securities in the years prior to the 2008 financial crisis, during which the auction rate securities market imploded. But as the Second Circuit ruled, the plaintiffs cannot compel arbitration against the financial firms because their broker-dealer contracts included forum selection clauses requiring all disputes to be brought in federal court. The ruling brings to light a circuit split on the issue. The 4th Circuit reached the opposite conclusion last year in UBS Financial Services v. Carilion Clinic, but a [...]

By |September 5th, 2014|Press Releases & News|
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FINRA Panel Orders Morgan Stanley To Pay $4.5M

Morgan Stanley & Co. lost a FINRA arbitration dispute last week to Banco Nacional de Mexico SA. A FINRA panel ordered Morgan Stanley to pay the Mexican bank, commonly referred to as Banamex, $4.5 million, finding Morgan Stanley liable for negligence and negligent supervision. The case was filed by the bank against Morgan Stanley in 2012. The statement of claim alleged fraud and negligence among other allegations and asked the FINRA panel to order Morgan Stanley to pay over $5.2 million. The dispute centered on whether Morgan Stanley allowed funds in a family's trust account to be used to repay third-party loans without its authorization. The trust was established in 2007 with proceeds from the sale of property that a group of adult siblings and their mother had inherited. Banamex was the trustee to the family's trust account and hired a broker at Morgan Stanley to manage the accounts that same year. The trust accounts were held at a banking [...]

By |August 18th, 2014|Press Releases & News|
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Former UBS Broker Allegedly Defrauded Elderly In Ponzi Scheme

The SEC charged Donna Tucker, a former UBS Wealth Management Americas broker, with allegedly defrauding a number of elderly customers by running a Ponzi scheme for five years. One of the elderly couples was blind. According to the SEC, Tucker misappropriated over $730,000 from her clients from January 2008 to April 2013 while working at UBS. Tucker then allegedly used the money to pay for vacations, three cars, clothing and a country club membership, all while lying to her clients regarding the status of their funds. The SEC's complaint states that Tucker made unauthorized trades and other financial transactions, made misrepresentations to her customers regarding their investment accounts, and falsified brokerage banking and other documents. She allegedly stole almost $350,000 from the blind couple by persuading them to do their banking online and receive electronic statements, knowing that they would be unable to retrieve their statements online. Tucker acquired $730,000 from the clients by forging checks, falsifying brokerage statements, and [...]

By |August 4th, 2014|Press Releases & News|
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FINRA Charges NY Broker-Dealer With Churning

On Monday, FINRA charged a New York broker-dealer, as well as a number of current and past registered representatives, with churning customer accounts and other illicit actions the resulted in significant losses to retirees and other investors. According to FINRA enforcement attorneys, Newport Coast Securities Inc. and five of its current and past brokers knowingly engaged in a "manipulative, deceptive and fraudulent scheme" to churn the accounts of about twenty-four customers in order to receive higher commissions. Newport Coast and three of its brokers are accused of making unsuitable sales of complicated securities to elders and other investors. Two of Newport Coast's former supervisors are alleged to have ignored a number of warning signs regarding trading activity that led to the near disappearance of many people's retirement savings. These included large numbers of riskless trades where commissions exceeded 3 percent, high levels of margining and concentration in accounts, and large losses in nearly all of the accounts. FINRA believes Newport [...]

By |July 30th, 2014|Press Releases & News|
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