Practice Areas

Broker-Dealer Litigation & Enforcement Defense

Howard Rice's Broker-Dealer Litigation & Enforcement Defense Group encompasses almost every litigation and regulatory matter affecting the securities industry. To illustrate, we defend customer allegations of churning, unsuitability, unauthorized trading, failure to supervise and related state and federal claims as they affect both full-service and discount brokers.  Our cases have involved client investments in equities, bonds, options, limited partnerships and a variety of derivative products.

Our experience also includes defense of claims by former employees of our clients, including defamation, wrongful termination, retaliatory termination, sexual harassment and discrimination. We have repeatedly obtained court orders requiring that these employment matters be arbitrated, and we've enjoyed success in the resulting defense of these claims before arbitration tribunals. Also in the employment arena, we are regularly retained to counsel and represent clients in the area of broker recruitment. Finally, we offer significant experience in the special issues raised by claims against clearing brokers. In all of these areas we have not only tried cases but, where appropriate, have also  pursued settlement through alternative dispute resolution.

As important, our experience in regulatory proceedings is equally broad. For example, we regularly defend SEC, NASD and NYSE investigations and related proceedings involving assertions of insider trading, market manipulation, underwriting and IPO practices, and failure to supervise.

Areas of Focus

  • Defense of customer cases
  • Defense of employee claims
  • Broker recruitment litigation and counseling
  • Defense of clearing brokers
  • SEC, NASD and NYSE regulatory proceedings

Representative Engagements

  • We are currently representing Thomas Weisel Partners in a variety of arbitration matters arising from the recent freeze in the auction rate securities markets, including defense of customer claims and pursuit of offensive claims against certain underwriters.
  • Morgan Stanley retained our firm to defend a senior vice president and branch manager against formal SEC proceedings alleging a failure to supervise. After a two-week trial and lengthy post-trial briefing, our client was cleared of all charges. The resulting opinion by the federal administrative law judge received national attention.
  • Morgan Stanley hired us to defend two of its brokers in an NASD arbitration alleging that the brokers committed fraud, negligence and other wrongful conduct. All of the claims arose from Morgan Stanley's recommendation to an elderly couple of a cashless European-style option collar as a means of hedging more than $100 million in low-basis stock from a high-tech company obtained via merger. The claimants sought more than $60 million in damages. After a one-week arbitration before an NASD panel, the brokers' motion for a non-suit was granted by the panel and all claims were dismissed.
  • Morgan Stanley engaged us to defend it and a former broker in a consolidated arbitration by four employees of a technology company who exercised stock options to acquire their employer's stock and held their positions when the company's fortunes suffered a serious reversal. Despite “failure to hedge” and/or diversify arguments, all four claims were rejected by a panel of NASD arbitrators after a two-week hearing.
  • We represented UBS Financial Services in an arbitration alleging more than $20 million in losses in a trust account held for wealthy Mexican clients. After more than two weeks in arbitration, the arbitrators granted our motion to dismiss and assessed $500,000 in sanctions against the claimants. The award and the sanctions were confirmed by the Superior Court.
  • We represented Charles Schwab in an arbitration alleging that Schwab should have prevented the trustee of an irrevocable trust from engaging in very heavy trading. The successor trustees sought $10 million in damages. After a four-day hearing, the arbitration panel dismissed all claims against Schwab and assessed the hearing costs against the claimant.

Representative Clients

  • Charles Schwab & Co., Inc.
  • Citigroup Global Markets
  • Morgan Stanley
  • Prudential Equity Group
  • Wells Fargo Securities, N.A. 

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