| Introduction | Securities
Arbitrations | Trials and
Appeals | Enforcement and
Disciplinary Actions | Reported
During their individual legal careers leading up to the formation
of Beam & Astarita, LLC, the individual attorneys at the
firm have represented thousands of individuals and entities
in a wide variety of matters. Although we are a litigation
firm, ultimately representing our clients in courtrooms across
the country, much of our work is done outside of the courtroom,
in an advisory role.
However, it is our trial work which often results in important,
or interesting decisions, which have gained national attention,
in the press and in the legal community. While the matters
contained in this document are only a small portion of the
litigation matters which we have handled, they do demonstrate
the scope and variety of those matters.
Mark J. Astarita, Esq. has represented parties in hundreds
of arbitrations before the National Association of Securities
Dealers, the New York Stock Exchange, and the American Arbitration
Association, at hearings held in most major cities across
Summaries of a few of the more significant matters, follow:
- In the last nine years alone, from 2000 to today, Mr.
Astarita has represented parties in over 100 arbitrations,
involving claims of fraud, churning and unsuitability, as
well as brokers and firms in employment disputes. Successful
settlements were obtained in most of the cases, with the
remainder going to hearing in Illinois, Florida, Louisiana,
North Carolina, Virginia, Massachusetts, Illinois, New York,
Pennsylvania, Georgia, Minnesota and Nebraska.
- Mr. Astarita has represented dozens of brokers in cases
against their former brokerage firms arising from breach
of contract, harassment, and in defense of the firms' claims
for repayment of forgivable promissory notes. Employee forgivable
loan cases are notoriously difficult to defend, as the promissory
note is often considered to be an absolute obligation that
must be repaid. However, Mr. Astarita was able to successfully
prosecute counterclaims on behalf of the brokers, resulting
in significant awards in favor of the broker on the counterclaims,
which served to substantially reduce the amount owed on
the promissory notes. In August 2009, Mr. Astarita obtained
an award of attorneys fees for a broker who he was defending
in a promissory note enforcement case, an extremely unusual,
but well deserved, award. In September 2008, Mr. Astarita
obtained an award for 100% of an investment adviser's unpaid
compensation, as well as attorneys fees incurred in prosecuting
- In March 2007 Mr. Astarita was able to obtain a favorable
settlement for a retail broker who was denied compensation
for the introduction of an institutional client to his firm.
Despite his efforts to secure the client, the firm refused
to pay him. An arbitration claim was filed, discovery taken
and the broker compensated without the need for a hearing.
- In July 2006 Mr. Astarita defended a major wire house
in a customer case where the customer, a software engineer
and designer, claimed that a technology based portfolio
was unsuitable for his needs. Incredibly, during cross examination
the customer claimed that he did not open his confirmation
slips, or his account statements, during the years that
his account was opened, and relied solely on discussions
that he had with the broker, which were less than once a
year. After cross examination, the matter settled on terms
that were favorable to the firm.
- While most EFL cases settle prior to hearing, in July
2006, Mr. Astarita successfully represented two wirehouse
brokers in a complex promissory note case, in Denver, which
involved multiple state court actions, allegations of forgery,
sexual harassment, and fraud. The brokers were awarded damages
on their claims, which reduced the amount they were obligated
to pay by more than 50% of the outstanding amount of the
- In early 2006 Mr. Astarita's representation of another
wirehouse broker led to a repayment of less than 1/3 of
the outstanding loan amount, and in 2004 after a hearing
in Tampa, another wirehouse broker paid back less than 1/2
of his outstanding note obligations .
- In August 2004 Mr. Astarita's investor clients received
an award against a major brokerage firm based on claims
of unsuitability, based on a recommended trading strategy
of writing naked puts. Mr. Astarita was able to recover
not only 100% of their out of pocket losses, but all of
their costs, attorneys fees and $900,000 in punitive damages
against the broker and the firm.
- In February 2004 Mr. Astarita successfully represented
a customer against a major brokerage firm for claims of
unsuitability, abusive margin and churning arising from
the broker's recommendations of Internet and technology
stocks for the customer's portfolio which were not suitable
for her investment goals.
- During an arbitration hearing held in Minnesota during
2003, a customer claimed that his account had been mishandled
five years earlier. While the complaint was not unusual,
the customer did not sue his broker. During cross-examination,
the customer admitted that he had no complaints about his
broker, but that he still believed his account was mishandled.
The arbitration panel dismissed all of his claims, and ordered
the customer to pay half of the forum fees and costs.
- In a 2003 case heard in Philadelphia, a customer of a
brokerage firm claimed damages for unauthorized and unsuitable
trading, and also claimed that he was unaware of the status
of his account during the years 2000 and 2001. He claimed
that the broker lied to him about the profits in his account,
and that during those two years, he never opened his statements,
or his confirmation slips, and that he never read a newspaper,
nor listened to the news on the television or radio and
was unaware of the dramatic decline in the markets during
those two years. After 10 days of hearings, although the
arbitrators entered a small award in favor of the claimant,
it was a fraction of his losses and his settlement demands.
- In a 2000 arbitration, a customer claimed, among other
things, that the purchases made in his account were unsuitable
for him given his income and net worth. During discovery
we learned that the customer had borrowed a sum equal to
his entire net worth from a bank, without telling the brokerage
firm about the loans. The matter settled on the last hearing
day, after the customer's cross-examination.
- In a 1999 arbitration a husband and wife commenced an
arbitration against a broker and his firm, alleging that
the activity in their separate accounts were unsuitable
for them. The husband had a limited power of attorney over
the wife's account, and the firm and broker filed a counterclaim
against the husband for any liability in the wife's account.
After 10 hearing days, the arbitration panel denied all
of the husband's claims against the firm and the broker,
and ordered the husband to pay the firm part of the wife's
- In a 1997 New York Stock Exchange arbitration held in
Boston, Mass., a customer brought proceedings against two
registered representatives and their former brokerage firm,
alleging that three bridge financing deals in which he participated
6 years earlier were fraudulent. The customer sought RICO
damages in excess of $1,000,000, as well as punitive damages.
In addition to arguing that the brokers acted appropriately,
Mr. Astarita also argued that the matter was too old, and
that documents which would establish the brokers' defense
had long ago been lost or destroyed. After three days of
hearings, the panel of arbitrators denied the customer's
claim, in its entirety.
- In 1995 when a customer of a New York broker-dealer commenced
an arbitration, and then refused the firm's offer of 100%
of his claimed damages (the cost of the trip to California
for the hearing was more than the amount of claimed damages),
Mr. Astarita filed a counterclaim in the arbitration against
the customer, for the filing of a malicious and frivolous
claim. A hearing was held, and the brokerage firm was found
not to be liable to the customer, and the brokerage firm
was awarded damages against the customer for the filing
of a specious claim. The award received considerable attention
in the securities industry, and was the focus of the Legal
Corner column in the September, 1995 issue of Registered
- In 1994 at a New York Stock Exchange Arbitration, Mr.
Astarita successfully defended an Exchange Member Firm and
its corporate officers in connection with securities fraud
claims of over 6 million dollars, arising from the merger
of two major retail securities firms. The hearings took
over 2 years to complete and resulted in a full dismissal
of all of the fraud claims.
In 1993 Mr. Astarita successfully represented a major
institutional brokerage firm against two of its Executive
Vice Presidents, in connection with claims for theft of
trade secrets, including proprietary computer software,
unfair competition and other business torts, in a proceeding
at the NYSE.
When a registered representative for a major wirehouse's
Florida office was fired, he believed that his branch
manager was soliciting complaints from the RR's customers,
in order to delay the RR's registration at a new firm,
and thereby enable the firm to retain the RR's customers.
Mr. Astarita filed an arbitration claim against the manager
and the wirehouse and investigated the claim, which resulted
in a settlement shortly before the hearings were to commence.
- During the crash of 1987, a customer ordered the full
liquidation of his account, and then sued the broker and
the brokerage firm for the resulting loss of $1.2 million
dollars. When the firm and broker refused to pay the customer,
the customer threatened to make sure that the broker never
worked again. The customer filed an arbitration before the
NYSE, and wrote letters to regulatory agencies about the
broker, making statements that were not true. As a result,
the broker was fired, and could not find new employment.
At the arbitration, Mr. Astarita filed a counterclaim against
the customer for defamation, business torts, and filing
a malicious complaint. After 10 days of hearings, the customer's
1.2 million dollar claim was denied, in total, and the broker
was awarded $190,000 from the customer, to compensate the
broker for the actions of the customer. The case received
national press and was the first time a broker had successfully
claimed against his customer for a false or malicious complaint.
Significant Litigation Matters
- Securities Industry Technology Corp. and Quick &
Reilly, Inc. v. Fox, et al Index 110511/93, Supreme,
New York - Represented Senior Corporate Executive in defense
of claims by major corporation for breach of contract and
fraud, and prosecuted the Executive's claims against the
Corporation for fraud, breach of contract, invasion of privacy
and conversion, including allegations of theft and conversion
of computer software and integrated computer systems underlying
major online brokerage trading system. Three week jury trial,
to successful verdict.
- Fahnstock & Co., v. Waltman, 935 F.2d 512 (2d
Cir. 1991). Appeal to United States District Court, and
the United States Court of Appeals, of a New York Stock
Exchange Arbitration award in favor of a registered representative
for the malicious filing of a Form U-5 and punitive damages.
- Landau v. Vallen, 723 F. Supp. 218 (SDNY 1989);731
F. Supp. 116 (SDNY 1990), reversed, 895 F.2d 888; (2d Cir.
1990). Major international securities litigation involving
fraud by a New York Stock Exchange Member firm and others.
Part of this matter involved a case of first impression
in the Second Circuit Court of Appeals, reversing the District
Court and holding that a crime victim may attach a criminal
defendant's bail bond. That decision, which represented
a major change in the law was reported in the Wall Street
Journal and other newspapers. Reported decisions in this
matter also include issues of clearing firm liability for
- Ross v. Bolton, 106 F.R.D. 22 (SDNY 1985); 639
F. Supp. 323 (SDNY 1986). Major securities litigation between
multiple brokerage firms relating to allegations of parking,
wash sales, clearing firm liability and securities fraud.
Multiple reported decisions resulted from this case, one
becoming the leading case on the liability of clearing firms
for the actions of its correspondents. Another addresses
the relationship of the National Association of Securities
Dealers as a quasi governmental agency for purposes of constitutional
- SEC v. Materia, 745 F.2d 197 (2d Cir., 1984); 745
F.2d 197 (2d Cir. 1984). First use of the "misappropriation"
theory of liability under Rule 10b-5 for Insider Trading,
as well as the first case involving the application of Rule
14e-3, fraud in connection with tender offers. The case
was widely reported in the press and is now part of the
course work in securities laws in many law schools. The
matter involved extensive testimony by securities experts
on insider trading, analysis of market conditions, and a
three week Federal Court trial in the Southern District
of New York. The matter was also heard on appeal to the
Enforcement Investigations and Hearings
The firm routinely handles investigations and enforcement
proceedings brought by the National Association of Securities
Dealers, the New York Stock Exchange and the Securities and
Exchange Commission. While the matters are too numerous to
detail, they have ranged from representing targets and witnesses
in some of the more notable insider trading cases of the 1980s;
representation of witnesses at routine investigations into
sales practices, stock manipulation, margin and trading violations,
SOES violations, and markup and markdown violations.
We have represented the subjects of investigation at all
stages of the investigations, as well as after the receipt
of a Wells Notice, through settlement negotiations and where
necessary through a hearing and the appellate process. We
have also represented customers and industry personnel in
a variety of administrative proceedings before the Commodity
Futures Trading Commission, the National Futures Association,
all of the major commodity exchanges, the Securities and Exchange
Commission, the National Association of Securities Dealers
and the New York and American Stock exchanges, in private
and public investigations, disciplinary hearings, reparation
and enforcement hearings.
In recent years we have represented parties in the following
proceedings of interest:
- Internet related investigations require a securities attorney
who understands the technical aspects of the Internet. In
the last year we have represented brokers in two such cases.
In the most recent case, the NASD conducted an investigation
into "URL Guessing" where brokers were able to
locate a public company's press release at its web site,
before it had been formally released on the wires. We represented
one of the subjects of the investigation, and together with
counsel for other parties, we argued that the information,
published on a web site and available to the public, was
not confidential information, and that the individuals did
nothing wrong. Although the NASD had served a Wells Notice,
it subsequently withdrew the notice, closing the investigation
without any further action.
- In another Internet related investigation, a registered
representative maintained a web site with the approval of
his firm, and the NASD (web sites are considered to be advertising
by the NASD). The rep also used an Internet marketing consultant
to optimize his web site for the best search engine results.
The net effect of those efforts was to have the rep's site
be returned in various search engines for a search on phrases
such as "guaranteed investment" and "no
lose investments." Of course, the rep was not offering
those types of investments, and his web site did not contain
any references to such investments. A regulatory review
ensued, and after discussions with our firm, no formal action
was taken against the representative.
- Our representation of a broker who admitted to the conduct
alleged in an NASD investigation resulted in a significant
reduction in his ultimate suspension. The broker had previously
been the subject of an investigation by his firm, which
resulted in a suspension of the broker by the firm. After
the broker resigned from the firm, an NASD investigation
ensued. During the negotiations of a settlement with the
NASD, we were able to obtain a credit on the suspension
for part of the suspension effected by the brokerage firm,
thereby reducing the NASD suspension significantly.
- When a registered representative was accused by his firm
of altering a document signed by a client, the NASD
investigated and the broker hired Beam & Astarita to
represent him in the investigation. After the investigation
and review, no formal action was taken against the broker.
- Represented a group of brokers in an NASD investigation
into the so-called "Proceeds Rule" as part
of the NASD's 5% markup guidelines. The matter involved
a new interpretation of the rule by the NASD which extended
the scope of a proceeds rule. The NASD alleged that purchases
made in an account on the day after a sale were subject
to the proceeds rule. During the investigation, the NASD
indicated that it intended to serve Wells Notices on approximately
a dozen brokers at the firm. After extensive negotiations,
only 4 brokers received Wells Notices, and negotiations
continued. Our position with the NASD was based on legal
and well as factual defenses to the new interpretation.
We made a Wells Submission on behalf of our clients, and
continued to investigate and negotiate with the NASD. After
months of investigation and negotiations, the Wells Notices
were withdrawn, and no further action was taken against
the brokers, with no impact on their CRD records.
- Representation of numerous registered representatives
in investigations relating to churning and suitability of recommendations in customer accounts.
Our firm has successfully represented business entities and
individuals in a wide variety of matters