Securities Broker Dealers & Investment Banks

We have also represented national and regional brokerage firms and investment banking firms in litigation of securities and common claims; arbitrations; and SEC, NYSE, and NASD investigations, administrative proceedings, and enforcement actions.  We have also represented securities firms in litigation arising from tax shelter advice and transactions.

Major banks, securities firms, and insurance companies are subject to the Bank Secrecy statute, currency transaction reporting requirements, and money-laundering regulations. We have several attorneys with regulatory and compliance knowledge and experience regarding the Patriot Act, Bank Secrecy Statute, and the various know-your-customer (KYC) and other money-laundering regulations. They can assist clients in planning an AML program, and advising regarding compliance issues. We have experience in handling internal and governmental investigations, and when necessary trying money-laundering civil penalty actions, administrative proceedings, and criminal actions that may arise.

Steptoe’s Tax Group is actively involved in advising securities firms on complex domestic and international US tax issues. For example, our Tax Group has developed an advantageous structure for a foreign pension fund’s sponsorship and capitalization of US real-estate-related investment funds. We also represent a large closely held foreign investment fund with respect to complex restructuring of US partnership investments.

Steptoe’s ERISA Group has represented major banks, brokerage houses, investment banks and insurance companies in counseling on ERISA issues. Many of these representations have related to fiduciary issues, including prohibited transaction exemption questions under ERISA, especially in connection with financial products. 

Representative Matters

Litigation Matters

Steptoe has represented:

  • A national brokerage firm in a charitable gift annuity investment fraud, which led to $50 million in investor losses.  The founder maintained a maze of brokerage and bank accounts.  The firm, one of its brokers, and an office manager were sued by a class, an SEC receiver and an individual plaintiff for securities fraud, negligence, breach of fiduciary duty, and aiding and abetting breach of fiduciary duty and conversion.  The plaintiffs claimed that the brokerage firm failed to require the charity to keep investor funds segregated, failed to monitor the charity’s activities, and failed to report suspicious activity to regulatory authorities. We defeated class certification and settled the Receiver action. An individual case remains pending.
  • Eleven broker-dealers in a putative national class action seeking to compel the payment of interest on free credit balances and to enjoin account transfer practices that have been approved by the SEC.  Plaintiffs' counsel claimed that class damages exceeded $1 billion.  The matter was dismissed on forum non conveniens grounds.
  • A national brokerage firm in two related actions arising from trading in stock index options.  We also represented the broker in CBOE disciplinary proceedings.
  • A regional brokerage firm in five actions brought by over 100 investors in oil and gas limited partnerships sponsored by the same general partner. The investors alleged violations of state and federal securities laws, racketeering, and common-law claims based on alleged misstatements in prospectuses.
  • A national brokerage firm in an action against the founders of a failed local brokerage and one of its customers. The national firm, a clearing broker, alleged that the local firm breached its contractual responsibilities and that its officers and directors were negligent in failing to conduct financial due diligence on a margin account customer.  After losses in several positions, the unmet margin calls led back to capital deficiency and closure of the defendant firm.  The action led to a significant payment by the defendant firm and payments by its officers and directors and the margin customer.

Securities Arbitrations

We have represented:

  • The broker-dealer subsidiary of a Florida real estate development company in an NASD arbitration concerning the sale of limited partnerships to retail investors on suitability and other grounds. 
  • A national broker dealer in an NASD arbitration concerning whether the broker-dealer inappropriately charged the claimant excessive fees and caused the claimant to incur tax liabilities after the broker-dealer converted her account to a managed account.
  • A national broker dealer in an NASD arbitration concerning whether the broker dealer inappropriately churned the claimant's accounts and inappropriately invested her funds in high-risk technology stocks. 
  • A national broker dealer in an NYSE arbitration concerning whether the broker dealer inappropriately allowed the claimant's ex-husband to take withdrawals from the claimant's retirement account when the claimant's ex-husband forged the claimant's signature on the withdrawal request forms.
  • A national broker dealer in an NYSE arbitration in which the issue was whether the broker dealer inappropriately concentrated the claimants' funds in unsuitable technology and telecommunications investments, and breached its duty to the client by allowing him to trade in options and on margin.  There was also an issue as to whether each claimant's claims could be joined in the same Statement of Claim, and whether they met the NYSE's pleading standard.  
  • A national broker dealer in an NASD arbitration in which the client had a very large position in an Irish pharmaceutical company and alleged that the investment banking division of the firm had assisted the pharmaceutical company in creating special purpose subsidiaries that eventually caused restatements and an SEC investigation that caused the stock price to fall precipitously.