Since its inception, Sullwold & Hughes has specialized in representing investment professionals in litigation with their customers, competitors and employees. Our investment litigation practice is almost entirely on the defense side. Occasionally, we have taken referrals of cases on behalf of investors.
 

Clients

Our clients in investment litigation can be divided broadly into two categories: broker-dealers (and their employees) and investment advisers:

Broker-dealers. The firm's clients span the spectrum of broker-dealers, including national wirehouses, regional firms, and smaller local firms. We have developed special expertise in representing firms that offer online discount trading as well as firms whose registered representatives are independent contractors. We also have substantial experience representing broker-dealers affiliated with banks. Our understanding of our clients' varied business models enables us to ask the most pertinent questions in preparing the case -- and to make the most persuasive arguments in presenting it.

Investment advisers. The firm also represents investment advisers in litigation with their customers and business partners. Our clients have included bank portfolio managers as well as independent registered advisers. We appreciate the distinctions between investment advisers and retail brokers in both legal rules and industry standards, and we craft our defense to reflect the nature of the client's business.
 

Cases

Our investment litigation practice encompasses federal and state court actions, arbitration proceedings, and regulatory and enforcement actions:

Federal and state court actions. Since 1987, the vast majority of cases involving disputes between brokerage firms and their customers have been adjudicated by arbitration panels appointed by self-regulatory organizations, primarily the entity now known as the Financial Industry Regulatory Authority. Our experience in this area is extensive and is described in the next section.

The firm often has been called up to enforce arbitration clauses in customer contracts. In particular, we have succeeded in persuading courts to deny class or "private attorney general" status to cases brought by customers and to refer their individual claims to arbitration. One such case involved allegations that an online discount firm conspired with an investment website to obtain commission kickbacks; another involved the claim that a national brokerage firm routinely failed to process requests for wire transfers of customer funds.

Where the dispute is not subject to arbitration, we litigate these cases in federal or state court. We know both the substantive law applicable to securities disputes and the procedural rules, including the local rules, enforced by federal and state judges. We have obtained orders dismissing or granting summary judgment in securities cases; we have also taken such cases to trial before a judge or jury. The factual issues involved range from the straightforward to the complex. We have litigated in court actions by a customer alleging churning and by an employee alleging defamation. We also have prosecuted and defended actions challenging novel products, such as callable certificates of deposit and fixed-income derivative securities. And we have litigated cases attacking a firm's business practices, such as the method of computation of interest in a leap year.

In addition, the firm has substantial experience with cases involving the recruiting by one brokerage firm of another's registered representatives in which it is alleged the departing broker misappropriated trade secrets and/or violated a restrictive employment covenant. Often, these cases begin with the request for temporary injunctive relief from a federal or state judge, and we have both successfully sought, and successfully opposed, such requests on behalf of brokerage firms and their employees. We also have handled the subsequent arbitration on the merits required by securities industry rules.

Arbitration proceedings. Since 1999, the firm has tried more than 50 securities arbitrations to award before panels appointed by self-regulatory organizations and the American Arbitration Association. We are familiar with the rules and procedures applicable to securities arbitrations. As the result of of our experience, we also know the kind of arguments that arbitrators tend to favor -- or disfavor.

The cases successfully defended by the firm run the gamut of customer claims, including allegations that:

• A broker made unsuitable recommendations, engaged in excessive trading, or misrepresented or failed to disclose material facts.
• An investment manager or broker with discretionary authority failed to diversify the customer's portfolio or otherwise to invest the customer's funds in a prudent manner.
• A brokerage firm failed to execute the customer's orders in a timely manner or provided incomplete or inaccurate information to the customer about the transactions in, or status of, his or her account.

In many of these cases, the firm also represented an individual broker and/or branch manager. In addition to customer cases, the firm has also successfully defended arbitration proceedings in which an individual broker alleged wrongful termination, defamation, and underpayment of compensation.

As contributors to securities industry publications such as the Securities Arbitration Commentator and participants at securities industry conferences, we stay current on the "hot" areas favored by the "public investor" bar and have won cases involving proprietary mutual funds, variable annuities, online trading, and alleged over-concentration in technology stocks. For a listing of our arbitration track record in cases with publicly available awards, please click on Arbitration Scorecard.

Regulatory and enforcement actions. The firm has represented respondents in investigations and enforcement and disciplinary actions brought by the Securities & Exchange Commission and FINRA's predecessors, the National Association of Securities Dealers and the New York Stock Exchange. We have defended cases involving allegations that a brokerage firm and/or its managers violated securities industry rules by failing to supervise "rogue" brokers; failing to adopt and enforce anti-money laundering ("AML") procedures, and failing to maintain complete and accurate books and records. We also have defended individual brokers against allegations that they violated securities industry rules by "selling away" from the firm and by conducting an unlawful public offering of unregistered securities. We are well-acquainted with the sanctions guidelines, formal and informal, used by the regulators. We also know how to write a Wells submission and how to negotiate with staff.