The SIPA

The Blog Of The Securities Industry Professional Association
Ads

The Truth Is In The Pudding

NASD ( FINRA) lied to its members

The SIPA has recently released court documents from two separate cases regarding the lawsuit against FINRA for the hasty and misleading merger of NYSE and NASD regulation in 2006. Now that the figures are finally released I would like to take a moment and remind everyone that members of the original dissident group known as the Financial Industry Association (FIA) were called liars because they claimed that the merger could pay to members much more then the mere $35,000 that the NASD was offering in exchange for giving up their voting rights. In fact, the former head of NASD even said in a podcast to all members that “It just isn’t true what members of the FIA are saying”.

The former head of NASD (and FINRA) claimed that she just wanted to set the facts strait and that “It just wasn’t possible to pay more then $35,000 because the IRS has strictly forbidden us from paying more”. Once the lawsuits were filed, FINRA went to great lengths to block the figures that the IRS said could be paid to members as part of a consolidation. In addition to lying about having an IRS opinion letter at the time of the vote, FINRA lied about the amount. Rather then bore you with more ranting, I will simply post the actual court records that finally open the blinds and let the truth shine in. All I can say is that many of the same trade organizations that blindly followed NASD and castigated groups like the FIA and The SIPA should be ashamed that they too took part in perhaps a fraud. Remember this next year when Small Firms Board seats are available and these same trade groups try to get you to vote for them. A wolf in any other clothing…is still a wolf. Without further delay, here is the actual amounts and the courts own words.

2 GREENFIELD & GOODMAN LLC

3 Attorneys for Plaintiffs

3 BY: RICHARD D. GREENFIELD

5 GIBSON, DUNN & CRUTCHER LLP

5 Attorneys for Defendants

6 BY: DOUGLAS R. COX

6 SCOTT MARTIN

8 MILBANK, TWEED, HADLEY & MCCLOY LLP

8 Attorneys for Defendants

9 BY: DOUGLAS W. HENKIN

10 RICHARDS LAYTON & FINGER

11 Attorneys for Defendants

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

1 (Case called)

2 THE COURT: These two cases are before the Court on

3 motions to dismiss. The cases were originally before my late

4 colleague Judge Kram and were then referred to me on her

5 untimely demise.

6 There is also pending before the Court, though not on

7 for today’s argument, various applications from various media

8 companies to unseal some documents that were previously sealed

9 by Judge Kram. The Court will hear argument on that group of

10 motions on January 14th at 4:00 p.m. I will notify the media

11 representatives of that by order issued later today.

12 On the motions to dismiss, before we get to the

13 argument in chief, there is, notwithstanding very substantial

14 briefing on these motions, one thing I’m still unclear about,

15 and it’s probably just my fault for not understanding the

16 plaintiffs’ allegations: What do the plaintiffs say are their

17 damages?

18 MR. CUNEO: Would you like me to go to the podium,

19 sir?

20 THE COURT: Yes.

21 MR. CUNEO: This case seeks money damages only.

22 THE COURT: How much?

23 MR. CUNEO: Under Delaware law.

24 THE COURT: How much?

25 MR. CUNEO: In an amount yet to be determined.

1 THE COURT: How would one determine it? How would you

2 determine it?

3 MR. CUNEO: I think after discovery there are a

4 variety of techniques that could be used to determine them.

5 The gravamen of the complaint that’s currently before your

6 Honor, the chief problem, so to speak, deals with a proxy.

7 THE COURT: I understand that.

8 MR. CUNEO: There is a measurable and substantial

9 difference between what the NASD told its members the IRS had

10 approved and what the IRS actually approved.

11 THE COURT: How much is it?

12 MR. CUNEO: The technical amount is under seal. Would

13 you like me to state it in court?

14 THE COURT: Yes.

15 MR. CUNEO: It varies. The range varies from

16 something like 35,000 additional to 76,000 additional under the

17 IRS opinion.

18 THE COURT: All right. How would you establish that

19 you would have received that?

20 MR. CUNEO: I think there are a variety of ways that

21 would be done later on. That is only one of our damage

22 theories.

23 THE COURT: I want to hear the others in a minute.

24 But just on this damage theory.

25 MR. CUNEO: There is a Delaware case on this topic.

SOUTHERN DISTRICT REPORTERS, P.C.

(212) 805-0300

Post Metadata

Date
December 21st, 2009

Author
jbusacca




Comments are closed.