{"id":5320,"date":"2012-08-06T00:00:00","date_gmt":"2012-08-06T05:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2012\/08\/ubs_citigroup_finra_arbitratio"},"modified":"2022-03-10T16:35:17","modified_gmt":"2022-03-10T22:35:17","slug":"ubs-citigroup-finra-arbitratio","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/ubs-citigroup-finra-arbitratio\/","title":{"rendered":"UBS, Citigroup FINRA Arbitration with Nonprofit Over ARS Cannot Be Halted, Said District Court"},"content":{"rendered":"

The U.S. District Court for the Eastern District of Virginia said that Citigroup (C)<\/a> and UBS (UBS)<\/a>cannot preliminarily enjoin Financial Industry Regulatory Authority arbitration over an auction-rate securities offering that did not succeed. The case is UBS Financial Services Inc. v. Carilion Clinic<\/em>. Carilion is a nonprofit health care and the two financial services firms had provided it with services, including underwriting, for an issuance of auction rate securities that ended up failing.<\/p>\n

Per Judge John Gibney, Jr., in 2005, the nonprofit had looked to Citigroup and UBS for help in raising raise $308.465 million to renovate and grow its medical facilities. The two financial firms allegedly recommended that Carilion issue $72.24 million of bonds as variable demand rate obligations. The nonprofit then issued the rest of the funds\u2014$234 million\u2014as ARS, which are at the center of the case.<\/p>\n

After the ARS market failed in 2008, the interest rates on Carillion\u2019s ARS went up, forcing the nonprofit to refinance its debt so it wouldn\u2019t have to contend with even higher rates. The auctions then started failing. <\/p>\n

Carilion contends that it didn\u2019t know that UBS and Citigroup had been helping to hold up the ARS market prior to its collapse (which they then stopped doing) and said it wouldn\u2019t have issued the securities if they had known that this was the case. The nonprofit filed FINRA arbitration proceedings against the two financial firms and said it could submit the dispute as a \u201ccustomer\u201d of both even though arbitration isn\u2019t a provision of their written agreements. <\/p>\n

Citigroup and UBS sought to bar the arbitration with their motion for a preliminary injunction. The district court, however, rejected their contention that the nonprofit is not a customer of theirs (if this had been determined to be true, then Carilion would not be able to arbitrate against them in front of FINRA). It said that the nonprofit was a \u201ccustomer,\u201d to both UBS and Citigroup, seeing as both firms provided it with numerous financial services and were paid accordingly. <\/p>\n

The court also turned down the financial firms\u2019 argument that Carilion had waived its right to arbitration when it consented to a mandatory forum selection clause that requires for disputes to go through the litigation in front of the U.S. District Court for the Southern District of New York. It pointed out that the \u201cforum selection clause\u201d could only be found in the agreements with one of the parties and that language used, as it relates to arbitration, is ambiguous and would not be interpreted as a waiver of Carillion\u2019s arbitration rights. <\/p>\n

Carilion can therefore go ahead and have FINRA preside over its arbitration dispute. <\/p>\n

UBS Financial Services Inc. v. Carilion Clinic<\/a>, Reuters, July 30, 2012 <\/p>\n

\nMore Blog Posts:<\/strong>
\nTexas Securities Fraud: BNY Mellon Capital Markets LLC Settles Allegations of Rigged Bond Bidding for $1.3M<\/a>, Stockbroker Fraud Blog, January 24, 2012 <\/p>\n

Securities Claims Accusing Merrill Lynch of Concealing Its Auction-Rate Securities Practices Are Dismissed by Appeals Court<\/a>, Stockbroker Fraud Blog, November 20, 2012 <\/p>\n

The 11th Circuit Revives SEC Fraud Lawsuit Against Morgan Keegan Over Auction-Rate Securities, Institutional Investor Securities Blog, May 8, 2012 <\/p>\n<\/p>\n

\n\u2003\n<\/p>\n

Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The U.S. District Court for the Eastern District of Virginia said that Citigroup (C) and UBS (UBS)cannot preliminarily enjoin Financial Industry Regulatory Authority arbitration over an auction-rate securities offering that did not succeed. The case is UBS Financial Services Inc. v. Carilion Clinic. Carilion is a nonprofit health care and the two financial services firms […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3865,3820,3755],"tags":[],"class_list":["post-5320","post","type-post","status-publish","format-standard","hentry","category-auction-rate-securities","category-citigroup","category-ubs"],"yoast_head":"\nUBS, Citigroup FINRA Arbitration with Nonprofit Over ARS Cannot Be Halted, Said District Court — Investor Lawyers Blog — August 6, 2012<\/title>\n<meta name=\"description\" content=\"The U.S. District Court for the Eastern District of Virginia said that Citigroup (C) and UBS (UBS)cannot preliminarily enjoin Financial Industry — August 6, 2012\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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