The litigation team at Sadis are experienced securities fraud lawyers who have recovered hundreds of millions of dollars of investment losses for their clients. Our lawyers, almost all of whom were trained at large prestigious New York securities law firms, have represented clients in connection with some of the largest and most complex securities fraud cases in history. We put this experience and knowledge to work for our clients and generally handle all of our securities fraud cases on a full contingency basis.
The lawyers at Sadis are industry leaders with respect to litigating issues involving hedge funds, private equity funds and similar financial services structures. We regularly utilize our deep bench of financial services to assist our litigators in analyzing wrongdoing in these types of investments, such as inflating asset values, improper fees and expenses, suspensions and redemption issues, cross border insolvency issues and simple fraud.
FINRA Claims and RIA Claims
We regularly represent investors and traders in FINRA proceedings involving significant losses in brokerage accounts and have obtained several multi-million dollar FINRA awards. Our FINRA cases usually involve sophisticated trading strategies and financial instruments, as many of our clients in these cases are professional traders or former portfolio managers.
Similarly, we represent clients with claims against Registered Investment Advisers. These are typically investment advisers who are affiliated with independently owned investment businesses and are now employees of a brokerage firm. RIA's tend to own their own businesses and generally have less robust compliance operations than the Wirehouses (Morgan Stanley, Bank of America Merrill Lynch, Wells Fargo and UBS).
Representative cases include:
$2,421,663.01 award on behalf of professional trader against Interactive Brokers, LLC. Cerisano, Jr. v. Interactive Brokers, LLC, FINRA Case No. 13-03526.
$1,881,500.00 award on behalf of pooled investment vehicle against Interactive Brokers, LLC. FPP CIS Opportunities Fund, L.P. v. Interactive Brokers, LLC. FINRA Case No. 20-02623.
$975,000.00 award on behalf of commodities traders against Interactive Brokers, LLC. Elegant Commodities DMCC, Fortune Commodities DMCC v. Interactive Brokers LLC. FINRA Case No. 17-02914.
Blue Sky Laws
Each state has securities laws designed to protect investors in that state. It is important that your securities lawyer analyzes the state securities laws that apply to your case. At Sadis, we have experience with the state securities laws in almost every state and always perform an analysis of those laws before filing a claim.
Types of Claims
Unsuitable Investments - FINRA Rule 2111 requires that a broker have reasonable grounds for recommending any investment, investing strategy, trade, or portfolio structure to a customer. In order to determine if an investment is suitable for the customer, the broker must take into account the customer's investment goals, risk tolerance, age, liquidity needs, other investments, as well as other information reasonably available to the broker. It is the broker's obligation to perform reasonable due diligence and ensure the investment is suitable for the customer.
Consistent with these obligations, on June 5, 2019, the SEC adopted "Regulation Best Interest", which established a new standard of conduct under the Securities Exchange Act of 1934 ("Exchange Act" ) for broker-dealers and natural persons who are associated persons of a broker-dealer when making a recommendation of any securities transaction or investment strategy involving securities (including account recommendations) to a retail customer.
Disclosure Obligation: provide certain required disclosure before or at the time of the recommendation, about the recommendation and the relationship between the broker and the retail customer;
Care Obligation: exercise reasonable diligence, care, and skill in making the recommendation;
Conflict of Interest Obligation: establish, maintain, and enforce written policies and procedures reasonably designed to address conflicts of interest; and
Compliance Obligation: establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Regulation Best Interest
When making such a recommendation to a retail customer, a broker must act in the best interest of the retail customer at the time the recommendation is made, without placing its financial or other interest ahead of the retail customer's interests. This general obligation is satisfied only if the order complies with four specified component obligations:
Overconcentration - a form of an unsuitable investment. In its 2018 report of examination findings, FINRA found that some "firms maintained customer accounts that were concentrated in complex structured notes or sector-specific investments, as well as illiquid securities, such as non-traded real estate investment trust (REITs), which are unsuitable for customers and resulted in significant customer losses. Some registered representatives recommended structured notes or sector-specific investment strategies to customers who may not have had the sophistication to understand their features and without considering the customer's individual financial situation and needs, investment experience, risk tolerance, time horizon, investment objectives, liquidity needs and other investment profile factors. Some recommendations involved illiquid securities with limited price transparency, which made it difficult for investors to know the true value of their investment and led them to believe that their investments would not fluctuate in value. In some instances, firms did not have procedures or systems reasonably designed to identify and supervise the concentration of such products in customers' accounts."
Breach of Fiduciary Duty- In 2019, the SEC enacted regulation Best Interest. The rule requires brokers to act in the best interest of their clients when recommending an investment. This means that (i) there must be full disclosure of any conflicts of interest the broker or its firm may have in connection with the investment; and (ii) the broker must exercise reasonable diligence, care, and skill in making the recommendation. An example of a breach of fiduciary duty is selling a customer a product with a higher commission when an identical product is available at a lower commission.
Churning - is a term for when a broker excessively trades your account in order to earn more commissions. There is rarely a situation that justifies a broker trading in and out of the investments in your portfolio on a monthly, weekly, or daily basis. Any trading patterns such as this in your portfolio should be investigated immediately.
Failure To Supervise- Broker Dealers are required by FINRA to supervise their brokers and make sure that the brokers operate consistent with FINRA rules. FINRA requires Broker Dealers to put in place various reporting requirements and compliance personnel to ensure that the brokers are complying with their obligations to their customers. When branch managers and compliance personnel fail to identify and take action with regard to improper broker conduct that should have been identified, there is a failure to supervise.
If you have experienced any type of improper conduct by your broker and have suffered losses as a result of that conduct, we can help you recover those losses. Contact Douglas Hirsch or Sam Lieberman.
