No Third Party Discovery In Arbitration - 2nd Cir.

Every so often in arbitrations the issue arises when a party wants to subpoena a non-party for documents, and they want to do it before the hearing. In other words, they want to obtain discovery from a non-party to the arbitration.

The problem is, you cannot do it under the Federal Arbitration Act, although judging from the arguments that go on during some arbitrations about it, you would never know that there really was an answer to the question.

Oversimplifying the issue - there are only two types of subpoenas - deposition and trial. Attorneys and arbitrators obtain their authority to issue subpoenas (if at all) from the statutes that govern the proceeding they are in. If you are doing a trial in New York State court, the statute that governs the issuance of subpoenas is the New York Civil Practice Law and Rules. In arbitration it is either the Federal Arbitration Act, or the state's arbitration code.

Under the Federal Arbitration Act, the ONLY time a subpoena can be issued is governed by Section 7 of the Act:

The arbitrators selected either as prescribed in this title or otherwise, or a majority of them, may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record,document, or paper which may be deemed material as evidence in the case

That's it, the only time an arbitrator can issue a subpoena is for the hearing, ie, a trial subpoena.

Now, that argument is contrary to one of the purposes of arbitration - expediency. If a non-party cannot be compelled to produce documents before the hearing, the first time anyone is going to see the documents is at the hearing, and that will, in some cases, cause a party to request an adjournment, to give the attorneys time to digest and review the documents that have just been produced.

And arguments and motions ensue. The United States Court of Appeals just handed down a decision that confirms this position, ruling that under the Federal Arbitration Act, there is no prehearing discovery from third parties.

In Life Receivables Trust v. Syndicate 102 at Lloyd's of London, the court addressed the issue, posing the question:

Does section 7 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 7, authorize arbitrators to compel pre-hearing document discovery from entities not parties to the arbitration proceeding?

And the Court's answer:

The Eighth Circuit has held that it does, see In re Arbitration Between Sec. Life Ins. Co. of Am., 228 17 F.3d 865, 870-71 (8th Cir. 2000); the Third Circuit has determined that it does not, see Hay Group, Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 407 (3d Cir. 2004); and the Fourth Circuit has concluded that it may – where there is a special need for the documents, see Comsat Corp. v. Nat’l Sci. Found., 190 F.3d 269, 275 (4th Cir. 1999). Like the Third Circuit, we hold that section 7 does not enable arbitrators to issue pre-hearing document subpoenas to entities not parties to the arbitration proceeding

Now there is a clear split in the Circuits, and I suppose that one day there will be a Supreme Court decision on the issue, but in the interim, wouldn't it make a whole lot more sense for Congress to amend Section 7 and give arbitrators and attorneys the authority to issue subpoenas at any point in the hearing process?

Of course, FINRA doesn't think so, since it decided that attorneys can never issue subpoenas, despite the law of the jurisdiction where the arbitration is being held, but that is another story.

Mark Cuban and the SEC Improper Trading Investigation

I blogged about the SEC investigation of suspicious trading by its employees. An unusual story, and something that you would excpect a securities attorney to be interested in, and to be blogging about.

But Mark Cuban is blogging about it too! Yes, the billionaire Maverick owner and defendant in an insider trading case is blogging about the investigation.

After complimenting the SEC for "casting such a critical eye at itself" he made a point of repeating, and highlighting, the allegation that the staff engaged in a retaliatory investigation of a company after it publicly complained about naked short selling.

That would get an SEC defendant's attention, and it did.

The SEC « blog maverick

SEC Employees Investigated for Suspicious Trading

The Securities and Exchange Commission is examining whether two of itsemployees broke agency rules or tapped nonpublic information whilemaking a high volume of trades.

SEC Inspector General David Kotz said his office has reviewed morethan two years of brokerage records to see if the investments wereapproved, properly reported and held for required amounts of time. Theprobe described in Kotz's semi-annual report to Congress, postedyesterday on the SEC's Web site, also examines whether trades werebased on confidential information from casework, co-workers or agencyresources.

SEC Investigates Two of Its Own After Suspicious Volume of Trades

Treasury is Understaffed

Why isn't this a surprise. Another government agency that is underfunded and understaffed

Rescue Plan Strained by Lack of Staff - WSJ.com

OKC man sentenced for insider trading

An Oklahoma City man charged with securities fraud for insider trading has been sentenced by an Ohio federal court to a year in a Texas federal prison and fined $180,000 and settled an SEC case on the same facts, agreeing to forfeit $509,080 in profits from the trade.

His "insider connection"? He was a sales representative under manufacturer’s representative agreements selling products and services to customers. As part of that agreeement, the company expressly prohibited him from disclosing or using for his own benefit, the company's confidential information.

September 13, 2005, he and other sales representatives received from their sales manager two emails with attached financial reports concerning the company's business, showing a decline in revenue and sales that had not yet been publicly disclosed. On the 15th he began purchasing puts, on the 21st the company released an earnings warning, the stock went down 16% that day, and he had a profit of over $500,000.

The SEC complaint is here, the press release of the resolution is here, and the local newspaper story is here.

Hat tip to Bruce Carlton at the Securities Docket

SEC Misconduct in Cuban Case?

The case gets curiouser and curiouser. First we have Mr. Cuban screaming from the rooftops about prosecutorial misconduct. Then we find out that the entire case revolves around one telephone conversation between Cuban and Mamma.com's CEO that occurred 4 years ago, that each side has a reason to misremember. Then we find out that a trial attorney in the SEC's Texas office has been sending unsolicited nasty emails to Mr. Cuban regarding Mr. Cuban's political views, and questioning his patriotism.

And along the way we have issues of whether Cuban had any duty not to trade (he didn't, and hence the phone call allegations), and whether the SEC can even approach its burden of proof.

But wait! There's more! Act now, and you can receive more allegations of SEC misconduct from Mr. Cuban's attorney.

Cuban’s lawyer Best told Corporate Crime Reporter that “there are other allegations of misconduct – by SEC enforcement staff other than Jeffrey Norris.”

“When we make public these allegations, I am sure their will be an Inspector General investigation,” Best said.

Does Best mean that he will be making allegations of misconduct against SEC enforcement staff in Washington?

“All in due time,” Best wrote back. “No more info for now.”

The article also puts forth the view that the SEC has taken a hit to its reputation from recent damning reports out of the SEC Inspector General’s office, as well as its failures during recent years, and contribution to the current financial crisis, including Senator McCain's threat to fire Chairman Cox. The SEC clearly screwed up in its oversight function in the subprime mess, and the presidential campaign highlighted the SEC's involvement. If there is misconduct in connection with any case, and in particular one as newsworthy (whatever that means these days) as the Cuban case, the SEC is in for a rocky time.

The SEC Trial Attorney's emails to Cuban are pretty bad, and the fact that he is sending them during work hours, from his SEC email account, makes the content of those emails worse. However, one view of those emails is that they are the product of an overly fanatic basketball fan who also happens to be a wingnut. He will be punished in some way, for using the email account for personal matters, and that will be the end of it.

But if there is true misconduct, misconduct that will bring in the US Inspector General, this is really going to be an interesting case.

The SEC's Emails to Cuban

When I was writing my earlier posts on the insider trading case against Mark Cuban, I intentionally ignored the side story - the story involving an SEC Enforcement Attorney sending nasty emails to Cuban, at one point calling Cuban unpatriotic - “[e]ither you are really an anti-American ideologue or your allegiance to making money is significantly greater than your dedication to your country."

The reason I left the story alone is that it is really only a distraction from the insider trading issues. There is little chance that the rantings of an SEC trial attorney in Fort Worth Texas are going to have any impact on the decision to bring an insider trading case. And that is true even when the attorney threatens to bring Chairman Cox into the mix, which this attorney did.

Now the WSJ has the emails, or at least what it claims are the emails, between Cuban and the attorney. And lo and behold, this attorney is using his SEC email account to berate and chastise a private citizen! Now the threat to bring this to the attention of Chairman Cox takes on a slightly different twist. An SEC attorney, using his official SEC.gov email account sends threatening emails to the officer of a public company (which of course, is under the jurisdiction of the SEC) and then that officer is accused of insider trading, on what appears to be a flimsy factual complaint, of questionable legal merit.

Even more incredible, is that the SEC Attorney copied Chairman Cox on some of the early emails! Which might explain why the Chairman recused himself from the decision to bring the case against Cuban.

And while we are at it, can someone explain to me why an SEC Trial Attorney, who is obviously a rabid Mavericks fan, is spending his time at work drafting lengthy emails to the Mavericks owner, accusing him of being unpatriotic? At a minimum, it has got to be an unauthorized use of the computer and email account.

And when Chairman Cox learned, first hand, that this sort of conduct was going on, what did he do about it?



Law Blog - WSJ.com : A Maverick Exchange: The Emails Between Mark Cuban and Jeffrey Norris: "A Maverick Exchange: The Emails Between Mark Cuban and Jeffrey Norris"

Cuban's Duty of Trust?

A bit more information on the Mark Cuban insider trading case. As I discussed here and here, one important part of the SEC's case is that Mr. Cuban breached a duty to keep the information confidential; a duty of trust. In their complaint they attempt to create that duty by alleging that mamma.com's CEO prefaced their conversation by saying that he had confidential information to give Mr. Cuban, and Mr. Cuban agreed to keep it confidential.

It's an oddly worded allegation, as discuss here, but that is the allegation, and without it, the SEC's case is dismissed. And, according to Stephen Best, on of Mr. Cuban's attorneys, it's not true.

Mr. Best has a post at Mr. Cuban's blog, posting a piece of the transcript of "an interview" with the CEO:

1) Q- We spoke earlier about you were telling Mr. Cuban in words or substance : “I have confidential information for you”.

A- Right.

2) Q- Do you recall anything Mr. Cuban said in response or reply to that statement by you ?

A- No, I do not.

Case over.

Of course, one answer in one deposition does not make or break a case (and I am assuming this if from a deposition, since it is a very rare occurance to have a transcript of an "interview" with an adverse witness). But the question asked by Mr, Cuban's lawyers, and which jumps out from this "interview" is "Does the SEC have a different transcript?"

They better hope they do.




SEC P2 « blog maverick

Cuban Case and Confidentiality

There is another interesting aspect to the Cuban insider trading case that I didn't address in detail in my earlier post on the Mark Cuban insider trading case.

I discussed materiality, touched on "non-public" and damages. The last problem for the SEC is whether Cuban had any duty not to trade. Not everyone who has inside information is prohibited from trading. In order for someone to be liable for insider trading, they must have obtained the information in some fraudulent way, or in the breach of a fiduciary duty. Either they have the information because they were an "insider" or because they obtained it illicity from someone else.

I won't go into the details, and as always, Profession Bainbridge from the UCLA School of Law does a great job explaining the legal concepts in his post post, "Insider Trading Charges Against Mark Cuban".

So, in addition to proving that the information was material, and non-public, since Cuban is not an "insider", the SEC will have to prove that Mark Cuban breached a duty to someone in obtaining the information.

That is the reason why, as I noted, the SEC constantly repeats the allegation that the information was given to him AFTER he was told it was confidential, or AFTER he agreed that he would treat it as confidential. The SEC is alleging that there was some sort of agreement between Cuban and the CEO, and that Cuban breached the agreement by trading on the information.

The question becomes, can the CEO of a public company voluntarily provide material, non-public information to someone, and prevent that someone from trading? Is so, it is a great way to keep your largest shareholder from selling his stock - call him up and give him some inside information. He can't sell!

That of course, is not the law, and without an agreement by Cuban to keep the information non-public, the case is a non-starter. Professor Bainbridge goes a step further, and argues that even if Cuban agreed to keep it confidential, his trading would not violate the insider trading laws. But the Professor also says that this theory has not been tested in the courts.

Which means that SEC vs. Cuban might turn out to be a very significant case.

PS - to all of those posting all over the web about Cuban going to jail - he is not going to jail based on this case, this is a civil case, the SEC does not have the authority to put anyone in jail. That could happen in the future, but there is nothing in this case to suggest that there would be a criminal prosecution. Heck, it's not even clear that there is a viable civil case here.

SEC Accused of "Gross Abuse of Prosecutorial Discretion"

That sounds serious, but given the context and timing of the allegation, maybe not. The accusation comes from Mark Cuban, the billionaire owner of the Dallas Mavericks, in response to an SEC complaint charging him with insider trading.

Cuban was the founder of Broadcast.com, which he sold to Yahoo! for some 6 billion dollars back in the Internet stock heyday.

The underlying allegations occurred in 2004 (does the SEC know that it is 2008? Where they heck have they been for 4 years? They get 4 years to investigate, Cuban will get 30 days to respond. Great system we have).

The complaint alleges that Cuban had a 6% stake in search engine Mamma.com, and was approached by the CEO of Mamma to purchase additional shares in a PIPE offering. According to the complaint, which goes to great pains to repeatedly allege that Cuban was told the information was confidential, Cuban became angry during the conversation, because, according to the SEC, PIPEs dilute existing shareholders and told the CEO, "Well now I am screwed. I can't sell." A very convenient allegation.

That allegation is convenient because it is designed by the SEC to show intent - that Cuban knew that he had material nonpublic inside information that he could not use to trade. They attempt to bolster that allegation by quoting an email from the CEO to the Board of Directors of Mamma, which says that Cuban threatened to sell, after the announcement of the PIPE. In fact, that allegation is gratuitously inserted in the complaint in 4 separate places. Perhaps the staff doth protest too much?

The complaint alleges that Cuban had a second conversation with Mamma's investment banker about the PIPE, and he called his broker, ordering a sale of all of his shares. The broker sold 10,000 shares afterhours at $13.50 and sold the rest of his shares the next morning at $13.29. The announcement of the PIPE was made after the close, and on the next day the stock opened at $11.89.

The complaint also alleges that Cuban has publicly stated that he sold because he did not want to be diluted in the PIPE, and that the Cuban didn't tell Mamma that he was selling, implying that he had an obligation to do so. He did not.

This all sounds very damning, and the Internet is abuzz with stories about the case, with most reporters and bloggers having Cuban convicted, fined, penniless and in jail. (Cuban cannot go to jail over this complaint, it is a civil complaint. The SEC cannot put anyone in jail). That is one of the endearing qualities of the Internet. Everyone has an opinion, everyone can express it, regardless of intellect, or the facts. One reporter said it looked like a Martha Stewart case, which demonstrates sheer lack of understanding, since Martha was a defendant in a criminal case, for obstruction of justice, not insider trading.

This is going to be a tough case for the SEC, as it relies solely on the testimony of the CEO of Mamma, and is going to be a classic "he said, she said" type of case, which is not good for the party with the burden of proof, in this instance, the SEC. An important aspect of the case is what information was given to Cuban in those two telephone calls.

And everyone is excited about the CEO's comments that Cuban knows he can't trade. Well, those allegations are not only convenient for the SEC, they are convenient for the CEO. Obviously, I don't know what happened here, but there is another senario - there is something called tipee liability, which places responsibility for insider trading on the person who disclosed the information. While it doesn't sound like it would apply, it might, and if it did, the CEO has potential liability. If that were to be true, then he has to claim that this tortured conversation about confidentiality, lest he be charged with tipping Cuban, a charge which could lead to him being removed from the Board, and filed millions of dollars. So, there is a bit of incentive there. Again, I am ruminating here, none of this has been alleged anywhere.

Another interesting twist is that Mamma was the subject of an informal SEC investigation during this time, since March 2004. According to the company itself, the SEC was investigating the trading in the company's stock, its acquisition activity and its reporting activity. Not a good omen for the company.

Assuming the Staff can prove the conversations, they have to prove that the information was material and non-public. Cuban's defense will certainly focus on these two elements. The SEC is going to have a tough time with the materiality argument. While the SEC claims that the PIPE was going to drive the price of the stock down, that is not a foregone conclusion, and the facts could lead to a different conclusion.

The effect of a PIPE on the price of a stock depends on the structure of the PIPE. According to some studies, PIPES have a positive impact on the price of the stock, again, depending on the structure of the offering. In this case, it appears that the PIPE was for common stock and warrants, and the warrants were exercisable at nearly $16 a share, which would drive the price of the stock UP, not down. I am doing this based on SEC filings by the company, and have not seen the PIPE offering memorandum, so this could be off.

A review of the underlying trading in Mamma supports this thesis, and belies the SEC's allegation that the stock was going to go down and Cuban knew it.

If you just read the SEC complaint, you would think that the decline from $13.50 to $11.00 in Mamma was significant or unusual. Take a look at a chart of Mamma during this time frame, there is something going on in the stock, and it has nothing to do with Mark Cuban. On May 12, 2004 the stock closed at $10.43 and traded 2 million shares. The very next day, its volume jumps to 22 million shares, and goes up 30%, closing at $13.21. Someone knew something. It then drops back down to 11.

Then it gets interesting. On June 25 it closes at $11.92, with less than half a million shares trading. Mark Cuban owns more shares that the the entire day's trading volume. The SEC alleges that the PIPE was being processed, but not disclosed, at this time. We know from the complaint that the CEO of Mamma is on the phones on the 28th, trying to get buyers for the PIPE. On the 28th, before Cuban sells a single share, the stock jumps from $11.92 to $13.75!

With that price movement, the Staff is alleging that he was trying to avoid a loss? Every objective indicator says that the stock is going UP, not down. The stock has just moved from $11.00 to $13.00 in two days, the company has sold warrants exercisable at $15.82, and is raising $16 million dollars. There is nothing there to suggest that the PIPE is going to decrease the share value.

The SEC is going to be hard pressed to say that Cuban sold his shares to avoid the resulting loss. Cuban is a maverick (no capital letter) and does what he wants. A fair reading of those allegations is that he sold his stock because he was pissed off, felt he was being mistreated, and was not going to be pushed around by some CEO of some rinky-dink second rate, silly-named search engine. So, he sold his stock, undoubtedly trying to sell all of it in one shot, all 8 million dollars of it.

It looks like he tries to sell it after hours, only gets off 10,000 shares, and then he dumps his 590,000 shares the next morning. Cuban, who is a savvy investor, dumps his entire holdings the next day. His sales alone will push the stock price down, he is selling more than the entire daily volume in the stock on some days. If you want to impute knowledge to Mark Cuban, he knows that putting in an order to sell 600,000 shares of a stock that trades less than a million shares a day, is going to depress the price of the stock. And he doesn't care!

This is not a man looking to avoid a loss. This is a billionaire making a point - don't bully me, don't push me around, and don't try to dilute me. I am out of here.

That is hardly insider trading. That is an aggressive business man, making a point.

And you gotta love him. He response to the SEC's press release?

I am disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.

The SEC Insider Trading complaint is online at the Commission's website.

Mark Cuban's response is at his blog, under the post "The SEC."

It will be interesting to watch.

Securities Arbitration :: The Law Planet Blog

Marc Dobin at The Law Planet comments on a FINRA Arbitration award where the panel not only denied the claims, it also assessed all forum fees against the claimant....and her attorneys.

Marc notes that the outcome is unusual, and it certainly is. It is rare, no, extremely rare for a panel to assess all costs and forums fees against a customer. But it is unheard of to award those fees against the attorneys.

The odd and unusual are always interesting, but the award raises a serious legal question (aside from "what the heck happened at that arbitration?")"is that award enforceable?"

The reality is that arbitration is a creature of contract - without the agreement of all parties to arbitrate, and their consent to have their dispute arbitrated, there can be no arbitration. The arbitrators lack jurisdiction without such an agreement.

Attorneys to the parties to the arbitration are not parties, have not consented to arbitrate anything, and the arbitrators simply do not have the authority to enter any type of award against the attorneys for the parties.

That is not a snub at the authority of arbitrators. I sometimes wish that the panel had the authority to sanction attorneys, but they simply do not have the authority to do so.

FINRA Arbitrators Take a Bite Out of Claimant's Counsel

Bank of America Signs Protocol?

Rumors are circulating that Bank of American has signed the Broker Recruiting Protocol.

Does anyone have a signature copy? I would love to see a copy - astarita@beamlaw.com

Signing the protocol will be a benefit to the Merrill brokers who are signing the retention bonuses, and a boon to those BoA brokers who have been with the firm.

But how much of a benefit is it? BoA is till pressuring brokers to sign their retention agreements by Friday, the same retention agreement that contains language that directly conflicts with the protocol. Which one controls? The answer is, who knows?

And the smart money is betting that BoA will take the position that the transition bonus, signed after BoA signed the protocol trumps the protocol. Sound far fetched? Not if you have litigated with banks and firms on behalf of brokers it doesn't.

Those transition agreements need to be re-written, if not entirely trashed. And now Merrill brokers are reporting that managers are telling them to sign the transition agreements, and they can still leave without consequences.

Attention all Merrill Brokers - in response to any manager who tells you to sign the agreement and you can still leave - ask him to put it in writing. If he doesn't, he isn't being candid.

The reality is, odds are that if you sign that agreement, you have agreed to the terms, even if you leave before you receive the check.

We Don't Need No Stinkin' Lawyers

Some clients express the sentiment in the title, although not quite in those words. (I do love Bogart movies though). Usually they are wrong, and typically, they realize they were wrong too many years later - when they try to leave their current firm.

Current market conditions are having a significant upheaval in the financial services industry, and many brokers are changing firms, or planning to start their own investment advisory firms. It is obviously a big step, and one that needs to be carefully planned and considered.

Part of that planning and consideration needs to be with a securities attorney. While it might be obvious that you will need an attorney when you leave your firm, for some unknown reason it is not so obvious that you need one when you JOIN a new firm.

Too many financial professionals engage in months of negotiation with a new firm, then resign, without ever having seen their new agreement in writing. For very puzzling reasons, they trustthe new firm's management to produce a document that conforms to the months of discussions. That is not the best way to go about a transition, yet it is done all the time.

Other brokers feel that the agreements are not negotiable or that they are all the same. Those deals are NOT all the same, and the terms of the agreement itself, in addition to the business points, can be negotiated. Termination clauses, assignments, bankruptcy issues, all need to be in the agreement, as well as the oral representations that were made during the negotiations. And yes, you can enforce those oral agreements, but it is much easier if it is all in writing and in one agreement should the firm renege on their deal. Aren't you better off with a termination clause that addresses your particular situation? Do you think the firm put something in that agreement that helps you? They didn't. They wrote the employment documents from their perspective, it is up to you to modify that language, and to add the language that will help you.

There are other factors to be considered. For example, the language used in the agreement varies from firm to firm, and even from deal to deal in the same firm. It makes a difference whether the firm is a signatory to the Broker Recruiting Protocol, and what the enforcement provisions of the note contain. At a minimum, even if you can't change a single word in the agreement, a review by an attorney will insure that you understand the agreement, and the enforceability of its clauses.

On the other end of the spectrum, leaving a firm has its own legal issues. Most brokers seem to understand the need to retain counsel when leaving a firm, but they wait too long, and hire the attorney after they leave! Hire the securities attorney while you are negotiating your deal, not after you have finished, agreed and resigned.

I understand that we are an expense. However, the review and negotiation of the new deal, and the advise and planning on leaving your current firm, will be an insignificant cost compared to the benefits that are being received, and you will know that you cut the best deal that you could.

The reality is that the attorney fees for the transition work, on leaving and joining a firm, will undoubtedly be less an a percentage point of the upfront money that is being received. In that context, the attorney is a worthwhile investment.

And for those who want to start a broker-dealer, or an independent relationship with an existing broker-dealer have an obvious need for an attorney. Registered investment advisors need that legal and regulatory help as well.

Joel Beck, a Georgia securities attorney has a blog post which highlights some of tthe other legal issues involved in changing firms.

If you have a question about a transition, give me a call or send an email. I don't charge a fee for an initial phone call or a response to an email - 973-559-5566 or astarita@beamlaw.com and you might get a heads up on an issue you hadn't thought of.

Whoever Wins, Chill A Bit

Great commentary from conservative blogger and University of Tennessee Professor Glenn Reynolds at Forbes.com

You don't have to love the "other guy." You don't have to hold back on fighting against policies you don't like. You don't have to pull punches. But once someone is duly and legally elected president, you do owe some respect to the office and the Constitution. And to your fellow Americans.

I'm not an Obama fan, particularly, but a lot of people I like and respect are. To treat Obama as something evil or subhuman would not only be disrespectful toward Obama, but toward them. Instead, I hope that if Obama is elected, their assessment of his strengths will turn out to be right, and mine will turn out to be wrong. Likewise, those who don't like John McCain or Sarah Palin might reflect that by treating Palin and McCain as obviously evil and stupid, they're disrespecting tens of millions of their fellow Americans who feel otherwise. And treating a presidency held by a guy you don't like as presumptively illegitimate suggests that presidents rule not by election, but by divine right, so that whenever the "other guy" wins, he's automatically a usurper.

We don't have to agree on issues, or on leaders. But if we can't agree that a free and fair election can produce a legitimate president even when it's not the candidate we like, then we've got a very serious problem.

The entire commentary is here:

Whoever Wins, Chill A Bit - Forbes.com

Lehman Note Sales Under Fire

And they are out of the gate. Claimants' attorneys are preparing to file arbitrations against brokers and firms for sales of Lehman structured notes. The cases are being filed against Lehman brokers, as well as the firms that sold the securities. According to press reports UBS sold $1 billion in Lehman notes.

The merits of the claims are uncertain, although it appears that investors are going to claim that they were told that they were "less risky" than stocks. That is probably a true statement, and not actionable. Others are claiming that they were not told that the notes were tied to the credit risk of Lehman Brothers. While one has to wonder what difference that would have made to an investor, assuming it is a true statement, that claim is going to depend on the particular facts of each claim.

Fraud cases are sometimes difficult to prove, and reading between the lines in these press releases it is clear that the main claim is not going to be that there was something wrong with the notes themselves, the claim is going to be that the problem was in the sales pitch and marketing materials. Therefore, the claim is going to be that the broker misrepresented the risks of the investment, putting the blame squarely on the shoulders of the broker, rather than the firm.

Brokers are going to need their own attorneys, and this is particularly true for Lehman brokers, who have been left out in the cold by the firm's bankruptcy.

My firm is representing defending brokers from every major brokerage firm, and provides a free consultation to brokers to discuss possible defenses and claims. Concerned brokers can reach us at 212-509-6544 or by email at info@beamlaw.com. We represent brokers in all 50 states in regulatory and arbitration matters, and have been doing so for over 25 years.