Appeals Court Upholds Lower Court Ruling on Finra Damage Suits

An appeals court ruled that the Financial Industry Regulatory Authority and present and former officers including Securities and Exchange Commission chairman Mary Schapiro are immune from lawsuits in connection with the creation of the brokerage industry regulatory body.

The Second Circuit Court of Appeals let stand a district court ruling related to the consolidation in 2007 of the National Association of Securities Dealers Inc. with the regulatory arm of the New York Stock Exchange to form Finra, according to a decision filed yesterday in Manhattan.

Standard Investment Chartered Inc. had appealed the lower- court ruling, charging that officers of the NASD, of which it was a member, had made misstatements related to a proxy solicitation in 2006. NASD was amending its bylaws at the time to make them conform with the New York Stock Exchange’s. Standard claimed that the defendants misrepresented on the proxy solicitation that a payment of no more than $35,000 could be given to each member.

“We are pleased with the decision,” Nancy Condon, a spokeswoman for Finra, said in an e-mail.

George Hill, chief executive of Costa Mesa, California- based Standard Investment, didn’t immediately respond to messages seeking comment.

The district court dismissed the lawsuit last March, ruling that the defendants as “quasi-governmental organizations” and their officers were entitled to immunity relating to the proxy.

Defendants in the suit included the NASD, the NYSE, Finra, Schapiro, Richard Brueckner, chairman of Pershing LLC, and Howard Schloss, a senior vice president at Finra. Schapiro was CEO of the NASD in 2006 when it combined with the NYSE’s regulatory body.

The case is Standard Investment Chartered Inc. v. NASD, 10- 945, U.S. Court of Appeals for the Second Circuit Manhattan).

To contact the reporter on this story: Don Jeffrey in New York at

To contact the editor responsible for this story: John Pickering at

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