Court tosses long-running suit against Finra

A federal appeals court last Tuesday agreed that a lawsuit brought by a brokerage firm over the 2007 merger of NASD and the regulatory arm of the New York Stock Exchange should be thrown out

A federal appeals court last Tuesday agreed that a lawsuit brought by a brokerage firm over the 2007 merger of NASD and the regulatory arm of the New York Stock Exchange should be thrown out.

That union created the Financial Industry Regulatory Authority Inc., the self-regulatory organization for broker-dealers.

The 2nd U.S. Circuit Court of Appeals affirmed a lower court’s decision that dismissed a class action filed by Standard Investment Chartered Inc. against NASD, Finra and its executives.

The suit’s targets included then-NASD chief Mary Schapiro, who is now chairman of the Securities and Exchange Commission.

The lawsuit alleged that Finra executives misled brokerage firm members by claiming that $35,000 was the most that could be paid to member firms upon completion of the merger. U.S. District Court Judge Jed Rakoff originally ruled that the defendants had “absolute immunity” from lawsuits.

The three-judge appeals panel agreed.

“There is no question that an SRO and its officers are entitled to absolute immunity from private damages suits in connection with the discharge of their regulatory responsibilities,” the judges wrote in upholding Mr. Rakoff’s ruling.

A Finra spokesman said that the organization is “pleased with the decision.”

The case against NASD was filed in May 2007. A similar case was filed by Benchmark Financial Services Inc. in December 2008.

The Benchmark case is still pending in federal court, according to Jonathan Cuneo, an attorney representing Standard Investment and Benchmark. He said that he is studying the appeals court’s decision.

E-mail Liz Skinner at [email protected].