Brokerage Arbitration Dispute Goes to Court
A Yorba Linda couple who allege that Salomon Smith Barney lost $100,000 of their retirement money by making risky technology investments will ask a state court judge today to hear their case, which has been sidetracked by the ongoing dispute over how securities complaints are handled in California.
Oscar and Mercedes Bugarini are among more than 650 disgruntled investors left in the lurch by the failure of the New York Stock Exchange and NASD to provide arbitration panels to hear complaints filed against brokers by California investors.
Their fraud and breach-of-contract suit seeks to nullify Salomon’s requirement -- standard for the brokerage industry -- that arbitrators appointed by the NYSE or NASD hear disputes instead of courts. Attorneys for Salomon declined to comment on the case, scheduled to be taken up today by Orange County Superior Court Judge Thomas N. Thrasher.
NASD, formerly the National Assn. of Securities Dealers, and the NYSE have balked at appointing arbitration panels in California since July, when tough state regulations took effect requiring arbitrators to disclose potential conflicts of interest. In the latest twist, a lawsuit filed by the NYSE and NASD that contended the state should be bound by national disclosure rules was tossed out by a federal judge in San Francisco, who ruled Tuesday that the state Judicial Council can’t be sued in federal court.
In statements Wednesday, the NYSE and NASD said they were considering their options, which appeared to be giving in to the state, undertaking a lengthy federal appeal or challenging the state rules in a California court.
But the Bugarinis, who are in their 60s and contend that Salomon didn’t invest their money conservatively as they had asked, aren’t willing to wait. They also won’t accept the alternative suggested by the NYSE and NASD: to waive their rights under state law and have the case decided by an arbitration panel under the national disclosure rules.
If Thrasher agrees to hear the case, it “could open the floodgates” for lawsuits by other stymied investors, said the Bugarinis’ attorney, Douglas Ames of Huntington Beach.
