Haub Law Investor Rights Clinic Helped Win U.S. Circuit Court Ruling for Investors

August 25, 2020
Preston Hall

Investors in arbitration gained more protections from rules meant to shield them from abuses by brokers, thanks to a federal circuit court ruling supported by the Investor Rights Clinic at Elisabeth Haub School of Law at Pace University.

The 4th U.S. Circuit Court of Appeals held on August 12 that Financial Industry Regulatory Authority (FINRA) arbitration panels can consider FINRA rules when resolving disputes between investors and brokers.

The 4th Circuit set aside a ruling by a federal district court judge in Richmond, Virginia, who found that FINRA arbitrators had "manifestly disregarded the law" in ordering online broker-dealer Interactive Brokers LLC to pay $1.5 million to three investors whose accounts were wiped out as a result of trades that were barred by a FINRA rule.

The 4th Circuit said the contract between Interactive and investors Rohit Saroop, Preya Saroop and George Sofis "could well be read as incorporating the FINRA rules, making a violation of the rules a breach of the parties' contracts.".

In the 2-1 ruling, Circuit Judges Diana Motz and Steven Agee ordered the lower court to confirm the arbitration award for the investors. Circuit Judge Paul Niemeyer dissented, saying the case should be remanded for a recalculation of damages.

“We are extremely pleased that research and writing that students at our clinic did for an amicus brief on behalf of investors helped bring about an important ruling from the U.S. Circuit Court of Appeals,” said Investor Rights Clinic Director Elissa Germaine.

Investor Rights Clinic student interns Andrew Esoldi, Jin Lee, and Brandon Pierce worked on the amicus or “friend of the court” brief, and received research assistance from reference librarian Professor Gail Whittemore.

The Investor Rights Clinic worked on the amicus brief supporting investors along with the University of Miami School of Law Investor Rights Clinic and the St. John’s University School of Law Securities Arbitration Clinic.

The case is Interactive Brokers v. Rohit Saroop, Preya Saroop and George Sofis, 4th U.S. Circuit Court of Appeals No. 19-1077.

About Elisabeth Haub School of Law

Elisabeth Haub School of Law at Pace University offers J.D. and Masters of Law degrees in both Environmental and International Law, as well as a Doctor of Juridical Science (SJD) in Environmental Law. The school, housed on the University’s campus in White Plains, N.Y., opened its doors in 1976 and has over 8,500 alumni around the world. The school maintains a unique philosophy and approach to legal education that strikes an important balance between practice and theory.

Haub Law launched its Environmental Law Program in 1978, and it has long been ranked among the world’s leading university programs. Pace’s doctoral graduates teach environmental law at universities around the world. Pace’s J.D. alumni are prominent in environmental law firms, agencies and non-profit organizations across the U.S. and abroad. In 2016, the Law School received a transformational gift from the family of Elisabeth Haub, in recognition of its outstanding environmental law programs.

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