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Roche and Irons Obtain NASD Win

As reported in the Securities Arbitration Commentator (SAC), Michael B. Roche and Ernest W. Irons recently secured an important victory on behalf of SRZ's client, PEB Financial Group, Inc., during an arbitration proceeding before the National Association of Securities Dealers (NASD). The client, a boutique broker dealer selling 403(b) products to educational institutions and nonprofit organizations, enjoyed a non-compete agreement with a registered representative who nonetheless “transferred his licenses” to another financial group and who “proceeded to transfer client accounts and assets.”

Such activity, SRZ argued, is unlawful, alleging on PEB's behalf breach of fiduciary duty, breach of contract, conversion of property, unfair competition and violation of the Illinois Trade Secrets Act.

“We successfully established our case with the independent contractor, who elected to settle with our client,” says Mike Roche, who heads our Business Litigation practice group. “To continue to protect our client's interests, we then pursued the financial group that profited from the actions of this individual.”

“Not surprisingly,” says Ernie Irons, a securities and commodities litigator for 30 years, “the company claimed no responsibility, arguing that its particular relationship with independent contractors acting as broker dealers precluded it from any responsibility to our client.”

Ultimately, NASD disagreed, finding on behalf of PEB and determining, as reported in SAC, “Independent broker dealers may still be liable for damages when an independent contractor registered representative moves clients and assets from another firm.” During the proceedings SRZ conceded that no respondent enjoyed respondeat superior liability; even so, NASD awarded PEB $175,000, based in part and according to SAC, “on one or more alternative theories of tortious interference with contract, unfair competition and/or violation of the Illinois Trade Secrets Act.”

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