Russell Paul Green of Syosset, New York, a stockbroker registered with Cabot Lodge Securities LLC, is the subject of a customer initiated investment related Financial Industry Regulatory Authority (FINRA) securities arbitration claim in which the customers. ostensibly residents of the Commonwealth of Pennsylvania requested $410,000.00 in damages based upon allegations that Green committed common law fraud, violated Pennsylvania Securities Act, Pennsylvania Unfair Trade Practices and Consumer Protection Law, breached his fiduciary duties, violated FINRA Rules 2360 and 2011, failed to supervise, and was negligent in connection with the sale of options and stocks when Green was associated with Cabot Lodge Securities LLC. FINRA Arbitration No. 24-00637 (March 21, 2024).
The law firm filing this claim was apparently unaware that in Pennsylvania, the Pennsylvania Securities Act, unlike Section 10(b) of the Exchange Act, only permits “buyers” to maintain a cause of action under the Act, against “sellers” or the issuers of securities, and not intermediaries, such as brokerage firms or stockbrokers selling the securities of third parties.
Specifically, Section 1-501 of the Act, 70 Pa. Con. Stat. 1-501, with respect to Civil Liabilities, does not provide a private cause of action against a defendant who did not “sell” or “purchase” securities under Sections 1-501(a). As the Third Circuit explained in Biggans v. Bache Halsey Stuart Shields, Inc., 638 F.2d 605, 610 (3rd Cir. 1980):
“Section [1-501] gives a cause of action to defrauded sellers and buyers, it only gives the seller or buyer the right to sue the person purchasing or selling the security. Biggans is suing his broker, not the individuals who purchased the securities that his broker sold for him or those who sold the securities that his broker bought for him. Furthermore, the relief provided by the statute for injured parties, which is limited essentially to rescission, would be unavailing in a suit against a broker for churning.”
638 F.2d at 610; See also, Jairett v. First Montauk Sec. Corp., 153 F. Supp. 2d 562, 577 (E.D. Pa. 2001)(holding that plaintiffs may not bring a claim under Section 1-501 against broker-dealer who was not a seller of securities); Zawid v. Elkins & Co., 1982 Pa. Dist. & Cnty. Dec. LEXIS 43 (October 26, 1982)(“the Pennsylvania Securities Act of 1972 does not afford a private cause of action against a broker”).
In any event, FINRA Public Disclosure shows that Green is referenced in five other customer initiated investment related disputes concerning Green’s conduct while associated with securities broker dealers. A customer initiated investment related NASD securities arbitration claim involving Green’s conduct resulted in the customer being awarded $16,824.49 in compensatory damages because Green was held liable on the customer’s claims which included that Green made misrepresentations, failed to execute orders, made unsuitable recommendations, and engaged in churning of the customer’s account. NASD Arbitration No. 93-02526.
Green is also referenced in a complaint filed on October 24, 2008, in which the customer requested compensation based upon allegations that Green failed to diversify the customer’s bond portfolio when Green was associated with Wunderlich Securities (B. Riley Wealth Management).
On October 31, 2018, a FINRA securities arbitration claim involving Green’s conduct was settled for $250,000.00 in damages based upon allegations that Green made unsuitable recommendations and engaged in excessive trading in options, stocks, and over-the-counter equities during the time that Green was associated with B. Riley Wealth Management. FINRA Arbitration No. 17-02258.
Green was associated with B. Riley Wealth Management in Great Neck, New York from March 2, 2005, to October 2, 2018. He has been associated with Cabot Lodge Securities LLC in Syosset, New York as a stockbroker since September 28, 2018, and has been associated with CL Wealth Management LLC in Syosset, New York as an investment advisor representative since December 6, 2018.
