Site search Web search Search this site or the web powered by FreeFind

Better Business Bureau does nothing to resolve issue

Chronology of Court Case Against TD Ameritrade

FINRA Complaint against TD Ameritrade for violating Maryland's Code requiring consent for recording conversations.

Chronology of FINRA Arbitration Case Against TD Ameritrade

Click here to add this page to your favorites folder!
Click here to link to us.

Laurent J. LaBrie v. TDAmeritrade
FINRA Claim 11-03725

FOR A SHORT SUMMARY OF THIS CASE, CLICK HERE

Introduction: Preparing this document, I spend over a thousand dollars in attorney's fees to defend my right to take a clearing company (TD Ameritrade Clearing) to arbitration.

You would think that this is an inherent right without a need to justify it, since all our account agreements force us to do this instead of taking brokers to court. They had gotten the Maryland District Court to throw out my case by enforcing the arbitration clause. file:///home/me/copy_of_website/memorandum_110325.html

Yet, when I took them to the arbitration they forced me into, TDA asked the arbitrator to deny me the ability to arbitrate!


FINRA Claim 11-03725

CLAIMANT'S REPLY TO RESPONDENTS' OPPOSITION TO CLAIMANT'S MOTION TO AMEND STATEMENT OF CLAIM

Claimant, Laurent J. La Brie ("Claimant"), by undersigned counsel, pursuant to FINRA Code of Arbitration for Customer Disputes, Rules 12503 and 12309, files this Claimant's Reply to Respondent's Opposition to Claimant's Motion to Amend his Statement of Claim.

Background

Following the filing of his Statement of Claim, Claimant took discovery from Respondents. Respondents' discovery revealed that, on December 4, 2008, the Options Clearing Corporation ("OCC"), a self-regulatory organization whose function is to clear trades of options and puts for its member broker/dealers, had issued a mandate to its members to advise their customers of a dividend by UDR, Inc. This same OCC Memo advised its members that the option quotation symbol for "UDR" was changed to "UQW". Claimant held a Put to sell shares of UDR, Inc. to a third party at a specified price in his investment account maintained by Respondents. OCC required its member broker/dealers to explain to their customers how this dividend would affect the exercise of options or puts that they had purchased in their investment accounts. OCC required that its member broker/dealers determine from their customers whether they wanted to receive the dividend in a lump sum cash payout, or in shares that would be distributed when the option or put was exercised.1 If they desired to receive the dividend in shares, it was going to affect the total amount of shares the customer would receive when they exercised their options or puts.

In discovery, Respondents produced tape recordings to Claimant that showed that not only did Respondents not inform Claimant of the dividend, but, in response to a direct question from Claimant, Respondents misrepresented to Claimant that changes in the way UDR's stock was being quoted were due to factors other than the declared dividend.2 In fact, the changes in UDR's stock quotation were due to the declared dividend, not the trading volume of the stock, as (mis)represented by Respondents to Claimant.

The production of these tape recordings raised questions and Claimant requested additional information. However, Respondents refused to produce certain relevant documentation relevant to the handling of Claimant's Put, saying this documentation belonged to TD Clearing, Inc. Who was TD Clearing, Inc.? Claimant discovered that TD Clearing, Inc. was a member of the OCC responsible for clearing all puts and options held by investors in their investment accounts maintained by Respondents. When pressed, Respondents admitted that TD Clearing, Inc. was a business affiliate that was under common management and control with Respondents. Respondents disclosed that TD Clearing, Inc. was the business affiliate it set up for the purpose of executing trades of securities, including puts and options, for Respondents' customers. Respondents disclosed that TD Clearing, Inc., not them, was the broker/dealer member of the OCC. Respondents advised that TD Clearing, Inc. acted as their agent in clearing trades of their customers.

Based on this discovery, Claimant moved to amend its Statement of Claim to add TD Clearing, Inc. as a Respondent.3 Respondents have opposed this motion stating that Claimant's claim is based in contract and, because there is no privity of contract between TD Clearing, Inc. and Claimant, that Claimant has no standing to add TD Clearing, Inc. as a Respondent. Respondents also argue that Claimant has no justification to amend his claim, as discovery has not produced any new information that would merit an amendment. Discussion

Respondents' Opposition to Claimant's motion to amend its claim is misplaced. Claimant's claims against Respondents are not as narrow as Respondents have stated. Claimant is claiming that Respondents have committed both a breach of contract and a breach of duty. Below, Claimant discusses the breach of duty, as well as the fact that discovery has yielded new information that has clarified Claimant's Claim, therefore, necessitating an amendment to the Claim. Claimant's claim, as amended, is now more clear, which will facilitate resolution of this arbitration.

I. Breach of Duty

Per Item 4 of FINRA's prohibited conduct, as a broker-dealer, TD Ameritrade, Inc. (hereinafter, "TDA"), owes a duty to its customers to keep them informed of developments in their investment accounts. Item 4 of FINRA's prohibited conduct prohibits brokers from, "[m]isrepresenting or failing to disclose material facts concerning an investment. Examples of information that may be considered material and that should be accurately presented to investors include the risks of investing in a particular security; the charges or fees involved; company financial information; and technical or analytical information, such as bond ratings." FINRA Code does not allow this responsibility to be contracted away in cases where the investment is held in a self-directed account.4 Nor does FINRA allow its members to effectively avoid this duty by forming two separate legal entities, one that receives information and a separate one that deals with customers. As broker dealers under common ownership and management serving a common customer base, these two corporations had a duty to ultimately see that material customer information found its way to the common customer.

In the hearing, the Arbitrator held on a motion to compel discovery brought by Claimant, Respondents stated that TDA has established a separate entity, TD Clearing, Inc., which is a member of the OCC. If this is true, then the OCC provided important information of UDR dividends to TD Clearing, Inc. which materially affected Claimant's investments. As TDA's agent for processing trades of puts, options and other securities, TD Clearing had a duty to disseminate this information to TDA. In turn, TDA had a legal duty, established by FINRA regulation and the mandates of the OCC, to relay this information to its customers in a straightforward, honest way. If Respondents are now saying that they did not fail in their duty because TD Clearing, Inc. did not disseminate the information to them, and TD Clearing, Inc. is, in fact, a separate entity, then it should be added as a Respondent to the Claims.5

TDA's efforts to point its finger at TD Clearing, Inc. appear to be misguided. TDA has produced a call log it kept which it says demonstrates that it tried to call Respondent to clear up the confusion caused by its earlier advice to him, and advise of the material developments that occurred with regard to his UDR puts that he held in his investment account, namely the declared dividend. This would suggest that TDA was fully aware of the information that the OCC had required that TD Clearing, Inc. provide to investment customers. At the least, TD Clearing, Inc. should be joined so that it can defend itself against TDA's charge that TD Clearing, Inc. was the one that failed in its duty to relay information that both FINRA and the OCC had mandated must be provided to investment customers, such as Claimant. Claimant contends that both TDA and TD Clearing, Inc. had a duty, by virtue of their principal/agency relationship, FINRA regulations and OCC requirements, to inform the Claimant of material developments in UDR that would affect the exercise of puts purchased by Claimant in his investment account.6 They failed in this duty, and then used that failure as justification for not fulfilling TDA's contractual commitment to automatically exercise Claimant's Put if the closing price was $.01 in the money on the day of expiration.

II. Discovery Has Provided New Information Necessitating An Amendment to the Claim.

Respondents claim that TDA's relationship with TDA Clearing, Inc. was known or easily discoverable by Claimant prior to filing the original Statement of Claim.

Response: Until the Discovery hearing, there was no indication to the Claimant that TD Clearing was anything more than a division of TDA. The two share very similar names, have the same physical address registered with FINRA, do not maintain records of financial transactions between them, and use the same legal staff. These are evidence that the two entities are managed as one legal entity instead of two.

WHEREFORE, Claimant respectfully requests that the Arbitrator grant Claimant's motion to amend his Statement of Claim and add TD Ameritrade Clearing, Inc. as a Respondent in this matter.

Respectfully Submitted:

/s/
_______________________
Andrew L. Jiranek, Esq.
Attorney for Claimant, Laurent LaBrie

Footnotes:

1. OCC's December 4, 2008 memo expressly provided that "[s]ettlement of UQW exercise activity will be delayed until the new electing special dividend consideration is determined [from the customer.]"

2. The call occurred on 12/5/08, the day after OCC issued its memo to its members, and Respondents told Claimant that the fact that his Puts were showing in his account as valueless was due to the lack of trading volume in the UDR stock. This advice was false and misleading and lulled Claimant into a false sense of security with regard to his Put and its automatic exercise feature.

3. Claimant's Amended Statement of Claim also added and deleted allegations based on facts it had learned in discovery.

4. Claimant contends that Respondents had both a duty not to mislead and misrepresent material facts and a duty to disclose. Respondents claim that Respondents can contract away their duty to disclose material facts to Claimant. Claimant disputes Respondents' reading of Claimant's contract with Respondents. Even if Respondents did not have a contractual duty of disclose the developments in UDR's stock, they clearly had a duty not to mislead Claimant into thinking there was nothing unusual with regard to his Put right of UDR stock.

5. Claimant notes thatTDA and TD Clearing, Inc. are represented by the same in-house counsel for TDA.

6. The OCC's 1/16/2009 memo to its Members, including TD Clearing, Inc., specifically provides, in all caps, that "MEMBERS SHOULD ADVISE THEIR CUSTOMERS TO TAKE THE FOLLOWING CONSIDERATIONS INTO ACCOUNT IN DECIDING TO EXERCISE, OR NOT TO EXERCISE, THESE OPTIONS." TDA and TD Clearing, Inc. failed to fulfill this directive.

Certificate of Service

I hereby certify that I served the foregoing Reply was served on Hollie Mason, legal counsel for TD AmeriTrade, at her e-mail address which she has been using in corresponding with the Arbitrator and counsel for Claimant in this case.

/s/
_______________________
Andrew L. Jiranek, Esq.

Better Business Bureau does nothing to resolve issue

Chronology of Court Case Against TD Ameritrade

FINRA Complaint against TD Ameritrade for violating Maryland's Code requiring consent for recording conversations.

Chronology of FINRA Arbitration Case Against TD Ameritrade







Contact us at:
 

© 2009-2014