Securities Fraud Attorney Blog

Articles Posted in For Securities Arbitration Attorneys

In a move intended to emphasize that FINRA’s ultimate mandate is to protect investors, the SRO’s National Adjudicatory Council last week issued newly-revised Sanction Guidelines including tougher ranges of recommended punishments to be meted out against member firms or brokers who commit fraud or make unsuitable recommendations to customers.

Since 1993, FINRA has maintained and published “Sanction Guidelines” setting forth common securities rule violations and the range of disciplinary actions FINRA can issue for such violations, including monetary fines as well as suspensions, bars from the industry and other sanctions.

Specifically, the revised Guidelines, announced in Regulatory Notice 15-15 available on FINRA’s website at, contain revisions to the Sanctions relating to two specific areas: (i) fraud, misrepresentations or material omissions of fact; and (ii) suitability and the making of unsuitable recommendations to investing customers. According to the Notice, the ramped-up sanctions are meant to reinforce that fraudulent conduct is unacceptable, and that FINRA adjudicators on the Regulatory side should consider strong sanctions for such conduct, including barring or expelling repeat offenders, particularly where aggravating factors outweigh mitigating ones. With regard to unsuitability, the heightened punishments include an increase in the high-end range of suspensions from one year to two, as well as recommending bars, suspensions or expulsions for the most egregious recidivists.

Although the Sanction Guidelines aren’t directly applicable to claims made by investors in FINRA arbitration proceedings, it’s reassuring to see that the Regulatory side at FINRA is taking these steps to increase sanctions specifically for bad acts directed at the investing public.

New York Super Lawyers, a publication of The New York Times Magazine, has named Ross B. Intelisano as one of New York’s top Securities Litigation attorneys in their 2010 publication. The list of Super Lawyers recognizes lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement in their respective fields. Super Lawyers’ selection process is a vigorous multi-phase rating process based on peer nominations and evaluations, combined with third-party research. Their selection process has been recognized by bar associations and courts across the country.

Ross Intelisano is the only attorney on the 2010 New York Super Lawyers top Securities Litigation list who primarily represents institutional and individual investors in securities arbitration.

Below is a profile of Ross Intelisano from the Spring 2010 edition of the Brooklyn Law School Magazine BLSLaw Notes.

The Magazine of Brooklyn Law School | Spring 2010
Alumni Update Ross Intelisano ’94: Fighting Fraud from Bear Stearns to Bernie Madoff and Beyond

In 2006, Ross Intelisano made a prediction. A seasoned securities arbitration lawyer with a reputation as one of the leading authorities on securities fraud and Ponzi schemes, Intelisano looked into the future and saw a financial crisis of unimaginable proportion. He put his vision on paper and published an article in Bloomberg Law Reports entitled “Hedge Fund Fraud – The Future of Securities Arbitration?” in which he predicted, one year prior to the Bear Stearns High Grade Funds implosion, that broker-dealers would roll out proprietary hedge funds that were bound to unleash havoc on the financial system. Unfortunately for the market, and for the countless number of investors hurt by Bear Stearns, Intelisano was right.

In 2007, as predicted, Bear Stearns’ High Grade hedge funds crashed, with $1.6 billion in losses. Intelisano was there to pick up the pieces, taking on Bear Stearns on behalf of Racetrac, a multi-billion dollar private company that had lost $5 million in Stearns’ High Grade Structured Credit Strategies Hedge Fund. In December 2009, after a 16-day arbitration in Atlanta, Intelisano won a $3.4 million arbitration award on their behalf. The award was groundbreaking for two reasons: It was the first verdict in any forum relating to the High Grade Funds, and it was rendered after portfolio managers Ralph Cioffi and Matthew Tannin were acquitted in a federal criminal trial.

While the Racetrac arbitration was an historic case, it was not the first time Intelisano had been on the pioneering end of an arbitration. He has long been a crusader for defrauded investors.

After graduating from the Law School in 1994, Intelisano joined Pressman & Associates, a one-man shop where he began to practice securities and employment law. Three years later, he was recruited by Eppenstein & Eppenstein, a premier securities arbitration firm, where he served as co-trial counsel on Engel et. al. v. Refco, the legendary commodities fraud case. The 100-day arbitration, on behalf of 13 individuals and family-run businesses, generated a $43 million judgment in 2001. It remains the largest collected arbitration award ever rendered on behalf of retail investors against a brokerage firm.

In 2003, he joined forces with Eppenstein colleague John G. Rich to form Rich & Intelisano where he continued to try landmark cases, most notably working on behalf of investors who lost over $25 million in the $300 million Bayou hedge fund Ponzi scheme run by convicted fraudster Sam Israel. In Bayou, Intelisano once again did the unprecedented, filing a group arbitration case not against Israel, but against the registered investment advisor who had recommended Bayou to investors, for failure to perform adequate due diligence. The case, which was settled in mediation, was the first time in the world of secu¬rities arbitration that anyone had implicated an investment advisor in a Ponzi scheme.

And then came Bernie Madoff and a Ponzi scheme so large that it dwarfed anything the securities world had ever seen ($18 billion is the latest estimate). Intelisano’s phone started ringing. “I spent hours consoling investors, listening to all of these tragic stories of middle class people who had lost every dime they had saved over a lifetime,” he recalled. “I knew they would never get it back. It was the lowest point of my career as a lawyer.”

While he knew he would not be able to help investors sue Madoff (their restitution is being handled by a court-appointed trustee), he brought back the “investment advisor theory” he advanced in Bayou, and is currently representing a group of 12 victims in claims against investment advisors to Madoff feeder funds. The hearings begin in June.

With the Madoff cases ahead of him, and the victories in Racetrac and Bayou behind him, Intelisano has become one of the country’s most well respected experts in the world of hedge fund fraud. He has appeared on The Today Show, Anderson Cooper 360, Dateline NBC, PBS’s Frontline, Closing Bell with Maria Bartiromo, and is regularly quoted in The New York Times and The Wall Street Journal.

Looking into the future, Intelisano believes the horizon remains clouded over with the potential for serious fraud. “Over-the-counter derivatives, credit default swaps, oil futures, all of these products that the government is worried about regulating are very complex and are improperly being sold to retail and institutional investors. Firms aren’t watching the shop. No one is.”

Prediction noted.

62 • BLSLawNotes

One of the most important aspects of securities arbitration proceedings is choosing your arbitrators. It is more art than science. Securities arbitration attorneys ought to spend a ton of time researching and vetting potential panel members. This includes not only reviewing prior awards but assessing value to said awards.

It is essential that attorneys review all of the arbitrators’ prior awards, not just the ones from the NASD. NYSE and AAA awards are available from the Securities Arbitration Commentator. NYSE awards are available on the NYSE website and on Westlaw.

Attorneys should not just review the awards from securities cases. Employment awards may be important too. For example, whether an arbitrator has awarded punitive damages in an employment case would be important to know.

Pro se cases should be disregarded unless there is big award given to a pro se claimant which is very rare.

Counsel must also study the attorneys involved in each arbitration award. You can’t just look at the awards. For example, there are some claimants’ attorneys who are known for bringing a high volume of weaker cases. A zero award for an attorney like that doesn’t tell me much; but if it’s a zero on a case brought by someone with a strong reputation, that would interest me.

Finally, call attorneys who have appeared before the arbitrators to get their first hand commentary on arbitrators. Awards often don’t tell the whole story on their face. There is nothing more helpful than hearing the war story from a trial attorney.

We are often asked what materials an attorney should bring to a large and complex, customer versus brokerage firm, securities arbitration hearing besides evidentiary documents. Below is a list of five things every practitioner should not be without:

1. Exhibit Binders and Tabs
You’d be surprised how many attorneys come to arbitration proceedings without bringing binders and tabs for the arbitrators to hold exhibits. It’s a mistake. Arbitrators appreciate the organized presentation of exhibits. Bring one for opposing counsel and a witness binder as well.

2. Discovery Binder
There are often discovery disputes during arbitration hearings. Make sure you have a binder with all of the document requests, document responses, motions to compel and their responses, orders by the Panel and indices of what documents have been produced by both sides.

3. Securities Arbitration Desk Reference

Professors Seth Lipner and Joe Long have put together an essential reference book which all attorneys should bring to the hearing. The Securities Arbitration Desk Reference has the arbitration statutes, SRO arbitration and conduct rules, the Blue Sky Laws, the Securities Acts and insightful commentary by two experienced securities arbitration professionals.

4. Federal Rules of Evidence
Along with the Reference by Professors Lipner and Long, attorneys should bring a copy of the Federal Rules of Evidence. One never knows how stringent a panel will follow the rules of evidence in a securities arbitration. It’s good to know you have the FRE with you.

5. Calendar

Unfortunately, large and complex securities arbitration hearings often take longer than the amount of days scheduled. Therefore, always remember to have your calendar with you to potentially schedule more hearing dates. Hopefully, tips one through four will help you avoid needing tip five.