Manifest Disregard Means Knowledge of, and Decision to Ignore, the Law
Rosenbaum vs. Imperial Capital, LLC and Rich, 2001 US Dist. LEXIS 17577 (D. Md., 10/29/01)
Rosenbaum was a customer of Imperial, a broker-dealer. Rich, an RR at Imperial handled the account. In September of 1997, Rich solicited the purchase of GMD bonds. Rich was unregistered in the state. Plaintiff also held in his account BNE bonds, which were viewed as worthless. The bonds were sold in December 1997 for a nominal amount to establish tax loss. It was later determined that they had a value, so Imperial sold them for its own account. Plaintiff sought to void the GMD transaction as Rich was unregistered and to have the BNE bonds returned to him.
The NASD Arbitrators granted Claimant an election to exchange the GMD bonds for $27,000 or keep them, but the BNE claim was not sustained (NASD ID #99-01832, Baltimore, 6/5/01).
Mr. Rosenbaum moves to vacate, asserting that the Panel of three Arbitrators manifestly disregarded the law. The Court holds that the record does not show a disregard, which must go beyond legal error; it must be shown that the arbitrators knew the law and chose to ignore it. Defendants also argue manifest disregard of the law, as to the GMD bond award, claiming the Panel ignored the statute of limitations. The Court disagrees. The arbitration panel here was provided the relevant law and arguments supporting both sides. They did what they were supposed to; they interpreted and applied the law.
Copyright 2000-2002 Securities Arbitration Commentator, Inc. P.O. Box 112, Maplewood, NJ 07040; t: 973-761-5880 f: 973-761-1504. Materials denoted with a SAC Reference No. (e.g. SAC Ref. No. 99-01-001) are on hand at SAC and may be obtained by calling the Securities Arbitration Commentator, or by email to firstname.lastname@example.org. The Securities Arbitration Commentator is the leading publication for securities arbitration news and information, and maintains the most complete database of arbitration awards availalble anywhere. For more information regarding their services, visit their website at www.sacarbitration.com
Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.
Return to The Securities Law Home Page
Visit Sallah Astarita & Cox, LLC, former SEC attorneys and brokerage firm attorneys representing investors and financial professionals in securities arbitration, SEC and FINRA investigation and compliance matters or call 212-509-6544