Federal appeals court affirms district court in securities fraud case

By John Sammon | Dec 1, 2017

ATLANTA - The U.S. Court of Appeals for the 11th Circuit affirmed Nov. 1 the dismissal of a complaint and denial of a motion to move the case to a Florida state court made by a broker accused of alleged securities fraud.

Antony Turbeville had allegedly recommended certain types of collateral mortgage obligations to elderly buyers whom the report said lacked the sophistication and risk-tolerance to make them suitable purchasers.

A panel of the Financial Industry Regulatory Authority (FINRA), which oversees and regulates securities firms, raised a complaint against Turbeville  a registered representative of a FINRA-affiliated brokerage firm. The panel determined Turbeville had violated FINRA rules and barred him from associating with any firm connected with the authority, also assessing restitution costs against him.

Turbeville appealed the decision with the National Adjudicatory Council (NAC), an appeals board of the FINRA. The panel’s decision was affirmed. Turbeville then appealed the decision with the Securities and Exchange Commission (SEC), but withdrew the appeal, letting the punishments stand.

Officials at FINRA learned Turbeville had filed a defamation suit in a Florida court against the elderly investors who had testified against him during the FINRA panel hearings. Investigators decided there was another cause for discipline against Turbeville in that he had allegedly attempted to retaliate against former customers to influence the outcome of the panel judgement.

On July 3, 2013, FINRA made a preliminary decision to recommend disciplinary action against Turbeville for allegedly filing a false complaint to intimidate witnesses.

Turbeville, who left the securities business, filed a suit against FINRA in a Florida court for defamation, abuse of process, interference and conspiracy. He alleged that the organization had exceeded its authority under its own internal rules during FINRA’s second investigation of his suit (intimidating former customers).      

FINRA removed the case to a federal district court and filed a motion to dismiss the claims.

Turbeville countered by filing a motion to remand (return) the case to a Florida court on the contention the claims were based on Florida laws. The federal court denied Turbeville’s remand motion saying the issue was one of federal law since he was challenging FINRA’s internal  rules and authority under the Federal Exchange Act.

The district court granted FINRA’s motion to dismiss the complaint finding that the organization had immunity from liability in the exercise of its own regulatory functions, and no private right of action for damages against the organization existed.

Turbeville appealed.

The appeals court said Congress did not intend to create a private right of action for plaintiffs seeking to sue self-regulatory organizations (SRO’s) for alleged violations of their own internal rules.

The court added that Turbeville’s action was the attempt of a private right of action against an SRO directed by federal law, while at the same time holding that only a state court could enforce the action.

“We are not persuaded Congress contemplated such a result when it granted SRO’s regulatory authority under the Exchange Act,” the court brief read.

The U.S. 11th Circuit Appeals Court affirmed both the district court’s denial to remand the case to a Florida court and its decision to grant the FINRA motion to dismiss.  


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