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The New York Court of Appeals handed a significant consumer victory to investors and current Attorney General Eric T. Schneiderman in its December 20, 2011 ruling in Assured Guaranty (UK) Ltd., v. JP Morgan Investment Management, Inc. The Court’s decision decided the frequently litigated question of whether New York’s Martin Act (General Business Law Art. 23A, Sections 352-359 (2011) preempts securities-related, non-fraud common law causes of action.
Mr. Schneiderman maintained that permitting private actions would not undercut his enforcement powers, as argued by the defendant, but on the contrary would assist him in preventing securities-related fraud. The Court of Appeals agreed.
Under the 6-0 opinion by Judge Victoria A. Graffeo, the Court said law and public policy support its conclusion that “an injured investor may bring a common-law claim (for fraud or otherwise) that is not entirely dependent on the Martin Act for its viability. Mere overlap between the common law and the Martin Act is not enough to extinguish common-law remedies.”
A U.S. Bankruptcy Court judge in Manhattan, New York ruled today that James Giddens, the trustee appointed to liquidate MF Global Inc. following the firm’s October 2011 bankruptcy, may distribute an additional $2.2 billion to the firm’s former customers. While a small victory for customers, who will receive these funds over the firm’s other creditors, nearly $1.2 billion of investor funds still remains totally unaccounted for. While an SEC investigation is ongoing, it has been reported these funds may have been totally lost as a result of commingling of assets or other misconduct on the part of the firm.
Jon Corzine, former MF Global CEO and U.S. senator for the State of New Jersey, testified earlier this week that he “did not know” what happened to the missing $1.2 billion. Corzine, who appeared stumped when asked details about the firm’s transactions, was the first former U.S. senator to be subpoenaed to testify before Congress in the past 100 years.
MF Global traded heavily in European government bonds, a bet largely blamed for the firm’s demise, and reported a nearly $192 million quarterly loss in October 2011. After credit rating agencies downgraded the firm’s credit ratings to “junk,” Corzine began trying to find a buyer for the defunct firm. But the fact the firm was missing nearly $1.2 billion in customer funds quickly halted Corzine’s attempts to sell. Though just one of many firms that have failed as a result of the global financial crisis, MF Global is the largest securities firm to fail since Lehman Brothers collapsed in September 2008.
If you have lost investments as a result of broker misconduct or commingling of funds, contact our firm’s managing partner, Erwin Shustak, at (619) 696-9500 or shustak@shufirm.com. Our firm routinely handles investment fraud cases involving commingling of funds and broker misconduct.