NY Court quashes attempt by Interactive Brokers’ clients to file amended complaint about improper account administration

Maria Nikolova

Judge George B. Daniels has denied a motion by the plaintiffs to submit an amended complaint against the broker saying that the proposed amendments would be futile.

Heather Hauptman and Timothy Moss, plaintiffs in a case targeting online trading major Interactive Brokers LLC, suffered a heavy blow on Friday, October 19th, as Judge George B. Daniels of the New York Southern District Court denied their motion to file an amended complaint against the broker.

Let’s recall what the case is about. Interactive Brokers’ clients brought a putative class action against their former broker-dealer, alleging that the company breached its contractual obligations by including certain exchange traded notes (ETNs) in their portfolio margin investment accounts.

In July this year, the plaintiffs sought to file an amended complaint claiming they had specified how and when they and Interactive Brokers established contractual agreements via the Portfolio Margin Disclosure Statement and other documents (the “2014 Agreements”) that prohibited Interactive Brokers from applying portfolio margin to ETNs.

Putting it otherwise, the plaintiffs tried to change their strategy by arguing it is not the Customer agreements that are at the heart of their claims. Rather, the broker’s clients alleged that additional promises and commitments by Interactive Brokers were made in 2014 and that these “exceed those imposed by FINRA.” The plaintiffs’ new claims alleged that the parties’ Disclosure Statement was supplemented and amended by the 2014 Agreements that specifically promised and agreed that Interactive Brokers would not include ETNs in its portfolio margin accounts, and thereby Interactive Brokers subsequently breached its agreements when it did so, resulting in substantial losses for the plaintiffs and other putative class members.

FINRA Rule 4210 was said to no longer be the predicate for the plaintiffs’ claims. The plaintiffs’ new claims arise from Interactive Brokers’ decision to implement Article 2175, which specifically agreed to stop trading ETNs in portfolio margin accounts without regard or reliance on FINRA rules or regulations.

The plaintiffs alleged that by providing portfolio margin’s risk-based margining treatment for open positions in ETNs and options on ETNs – such as the VXX – the broker breached its contractual agreements with its customers.

Judge George B. Daniels, however, did not find these arguments convincing and, on Friday, nixed the plaintiffs’ motion to file their amended complaint. The Judge explained that the proposed amendments would be futile.

Interactive Brokers’ customers asserted that their new “breach of contract claims now rest upon the theory that additional promises and commitments by Interactive Brokers made in the 2014 Agreements exceed those obligations imposed by FINRA.” However, the Judge noted, neither the Disclosure Agreement nor the 2014 Agreements indicate that Interactive Brokers agreed to assume obligations beyond those imposed by FINRA. According to the Judge, Interactive Brokers’ provision of the Disclosure Agreement to potential customers simply reflects its compliance with FINRA rules.

Because the 2014 Agreements, at most, reflect Interactive Brokers’ commitment to comply with FINRA’s decision, the 2014 Agreements do not impose any obligations on the broker in excess of those imposed by FINRA, the Judge said in his Order.

Read this next

Digital Assets

BlockDAG Presale Raises $9.9M as Batch 5 Nears Sell-Out Amid Bonk’s Fluctuating Trading Volume & Spell’s Bullish Price

Explore BONK’s trading volume, SPELL’s market shifts, and why BlockDAG’s 10,000 ROI makes it an ideal crypto for savvy investors in 2024.

Digital Assets

Cathie Wood’s sponsored Bitcoin ETF sees historic $200 million inflows

The ARK 21Shares Bitcoin ETF (ARKB), co-sponsored by Cathie Wood’s ARK Invest, registered historic inflows exceeding $200 million on Wednesday, signaling a robust appetite among investors for Bitcoin-centric investments.

Digital Assets

Sam Bankman-Fried might see his 25-year sentence halved

Sam Bankman-Fried, the founder of the failed cryptocurrency exchange FTX, was sentenced to 25 years in federal prison by a Manhattan court on Thursday. This comes after he was convicted of defrauding customers and investors, with Judge Lewis Kaplan highlighting the potential future risks posed by Bankman-Fried.

Technical Analysis

EURJPY Technical Analysis Report 28 March, 2024

EURJPY currency pair under the bearish pressure after the pair reversed down from the major resistance level 164.25, which also stopped the sharp weekly uptrend at the end of last year,

Digital Assets

BlockDAG’s Presale Hits $9.9M, MultiversX & MINA Price Predictions Show Green

Read about BlockDAG’s promising $10 prediction and insights on MultiversX Price Prediction as MINA’s potential unfolds.

Digital Assets

Rockstar Co-Founder and All-star Line Up Join Advisory Board to Take Metacade into Post Beta Orbit

Metacade, the revolutionary Web3 gaming platform, prepares to streak out of beta with a slew of ground-breaking initiatives that will redefine the way blockchain games are developed.

Retail FX

Prop firm The Funded Trader shuts down, claims relaunch in April

Prop trading firm The Funded Trader has ceased all operations, with claims for a relaunch in the near future.

Digital Assets

Ethereum-Based Tokenized Real Estate Platform USP Launches On Republic

How This Californian Startup Is Revolutionizing Real Estate Investment through Ethereum-Based Tokenization.

Digital Assets

Sui Spikes in Weekly DEX Volume, Joins Top 10 of All Blockchains

March DEX volume on Sui stands at over $2.88B – up more than 49% from February – with decentralized exchange Cetus and wholesale liquidity layer DeepBook leading.

<