Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Retirement Planning > Social Security

Scottrade Wants Independent Officer in Galvin Fiduciary Case

Your article was successfully shared with the contacts you provided.

While the scheduling order for the Massachusetts state administrative hearing in the case against Scottrade for violating the U.S. Labor Department’s fiduciary rule has been set for 2019, Scottrade attorneys have requested that an independent officer hear the case.

Nathaniel Gorton, the U.S. district judge for the U.S. District Court for the District of Massachusetts, who was presiding over the case brought by Secretary of State William Galvin against Scottrade, remanded the case back to a state administrative proceeding — as Galvin requested — last August.

Gorton stated in his Aug. 16 ruling that the Employee Retirement Income Security Act “does not completely pre-empt either claim in the administrative complaint and neither claim ‘arises under’ ERISA. This court lacks subject matter jurisdiction and plaintiff’s motion to remand will be allowed.”

During a Dec. 28, 2018, pre-hearing conference, Scottrade attorneys requested that an independent hearing officer be appointed to hear the case instead of attorney Laurie Flynn, who will act as the presiding officer appointed by the Director of the Massachusetts Securities Division — a Galvin appointee.

Citing news articles, Scottrade attorney Christian Bartholomew stated during the pre-hearing that Galvin has “prejudged” the case against Scottrade.

Galvin “has said there is a violation, and there just simply can’t be any question that those kinds of comments at a minimum create an appearance of partiality that unfortunately reflects upon the entire MSD and Your Honor,” Bartholomew stated to Flynn during the pre-hearing.

Flynn has yet to render a decision on whether to grant Scottrade’s request for an independent hearing officer.

The Massachusetts Securities Division, headed by Galvin, charged Scottrade with violating the impartial conduct standards laid out in the Labor Department’s now-defunct fiduciary rule.

The 2019 scheduling order has the case proceeding at least until May. By Feb. 27, the attorneys must file any motion for decision on the filings.

The schedule then proceeds as follows:

  • March 27: Attorneys must file any response to any motion for decision on the pleadings.
  • April 10: Attorneys must file any reply briefs in support of any party’s motion on decision on the pleadings.
  • May 1: A pre-hearing conference to address any motions for decision on the pleadings is to be held.

Galvin and Scottrade had been battling last year over whether the case should be heard in federal court. Galvin sought to have it heard in state administrative proceeding, and won the request last August.

Galvin told ThinkAdvisor in previous comments 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 Galvin should be sent back to the state administrative process.

Galvin charged the broker-dealer with “dishonest and unethical activity and failure to supervise” for conducting sales contests that violated Labor’s impartial conduct standards.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.