FINRA Wants Amerivet Securities Inc.’s Lawsuit Seeking to Inspect the SRO’s Records Dismissed

The Financial Industry Regulatory Authority wants the District of Columbia Court of Appeals to reverse the D.C. Superior Court’s decision to not dismiss Amerivet Securities Inc.’s lawsuit against the SRO. The broker-dealer wants to inspect FINRA’s records and books.

Amerivet Securities filed its complaint in August 2009 under the Delaware General Corporation Law’s Section 220, which lets a shareholder examine a company’s records and books for “any proper purpose.” The broker-dealer says it needs to inspect FINRA’s books and documents in order to expose the corporate wrongdoing related to the SRO’s 2008 investment losses and and allegedly inflated executive pay practices.

When our securities fraud attorneys covered this case more than a year ago, we noted that Amerivet had accused FINRA of failing to supervise and regulate a number of its larger member firms, including Lehman Brothers, Merrill Lynch, Bernard L. Madoff Investment Securities Inc., Bear Stearns and Co, and Stanford Financial Group. The broker-dealer also claimed that FINRA recklessly pursued high-risk investment strategies that were not appropriate for preserving capital. (Read our previous Stockbroker Fraud Blog post to find out more.) Last month, Judge John Mott ruled in favor of Amerivet and noted that pursuant to Section 220, the broker-dealer had asserted a proper purpose for wanting to make its inspection.

In its motion to dismiss, FINRA argued that it should get complete immunity from legal challenge. Also, FINRA said that because the Amerivet can’t maintain a derivative lawsuit against the SRO, the broker-dealer lacks a proper purpose to inspect the books it wants to see. When the court decided not to dismiss the case, however, it noted that although FINRA is immune from private lawsuits asking for damages related to regulator activity, this complaint isn’t looking for recovery. Rather, it wants to be able to examine FINRA’s records.

Related Web Resources:

Delaware General Corporation Law

Brokerage Firm Amerivet Securities Inc. Sues FINRA for Alleged Misconduct, Stockbroker Fraud Blog, August 26, 2009