Judge Remands Scottrade Fiduciary Case Back to State Agency

Galvin told ThinkAdvisor in a Thursday comment that he’s ”pleased to see that Scottrade will be remanded back to Massachusetts for violations of state securities laws.”

Attorneys representing Scottrade and the Massachusetts Securities Division went before Judge Gorton on Aug. 7 to air their views on whether the case brought by Massachusetts’ top securities regulator, Galvin, should be sent back to the state.

Here’s a smattering of Gorton’s comments in issuing his 26-page ruling:

•       “A court could resolve both claims without any analysis of the DOL Fiduciary Rule. It is true that Scottrade adopted its Impartial Conduct policy in response to the Fiduciary Rule but this Court need not interpret the Fiduciary Rule nor rule on its validity to determine whether Scottrade violated that policy.”
•        “Scottrade insists that the administrative complaint is an ERISA action in ‘state law clothing’ and that the federal courts are the proper forum for ERISA claims. As this Court has already observed, the claims in this action can be resolved without reference to federal law.”
•       “Removal may be appropriate where ERISA expressly preempts a state law claim. Here, however, the Court has determined that plaintiff’s claims for violations of the Massachusetts Securities Act are not preempted.”
•       The Massachusetts Enforcement Section “regularly brings actions … when companies fail to comply with their internal policies. The same is true where companies fail to supervise their employees reasonably.”
•     “Because court can determine whether Scottrade violated its own policies or reasonably supervised its employees without assessing the DOL Fiduciary Rule, no federal issue is ‘necessarily raised.’ …Accordingly, federal ingredient jurisdiction is not present in this case.”