Case dismissed under FINRA six-year eligibility rule.

A Washington, D.C. arbitration panel dismissed the claimant’s claim against the respondents in their entirety, with prejudice, because the only “occurrence or event (that could be deemed to give) rise to the act or dispute, claim or controversy,” as required by FINRA Rule 12206, occurred more than six years prior to the filing of the arbitration. The causes of action related to the purchase of Inofin promissory notes, an unregistered security, in the claimant’s account. In response to the motion to dismiss, the claimant argued that the panel may find eligibility when the transaction occurred outside the six-year window but the fraud continued to a date within six years of the date the claim was filed. The panel rejected the ongoing fraud argument and found that the only occurrence or event giving rise to the dispute, claim or controversy occurred in 2003 (more than six years prior to the filing of the Statement of Claim), when the promissory notes issued by Inofin were sold to the claimant by the broker. The panel found that the broker was employed by the respondent Morgan Stanley at the time, but acted independently of his then employer by “selling away” the promissory notes to the claimant.

Case Law Alert, 1^st Quarter 2014