Publications

 VI.   Conclusion

The judiciary remains generally unreceptive toward imposing liability against clearing firms, particularly where their involvement is ministerial. Time and time again, plaintiffs suffer dismissal of their statutory and common law claims, having to yield to the doctrine that no fiduciary duty arises from mere performance of ministerial duties. However, the artful pleader who can demonstrate active wrongdoing over and above questionable performance of ministerial functions may very well survive dismissal. The proposed SRO rules may give the artful pleader some additional ammunition in certain cases. Moreover, industry arbitrations, where legal standards often succumb to equity-driven decisions, produce seemingly inconsistent liability determinations. Pending SRO rule revisions could alter the liability standards on how triers of fact assess the evidence in a given case. For the clearing firms, with respect to each clearing arrangement and the business as a whole, there must be a cost-benefit analysis to determine whether liability and risk potential outweigh profit potential and how to best manage the risk. Undoubtedly, the clearing business is a thriving one that plays a vital role in the securities markets and one which should be preserved and perpetuated.

Publications Menu

• Developments in Indemnification and Advancement Rights
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• The U.S. Patriot Act
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• New CFTC Flexibility for Hedge Fund Managers
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• Rise and Fall of a Rock Star
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• Liability Of Clearing Firms
  • Introduction
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  • The Role of Clearing Firms
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  • Overview of Legal Principles
    • The Prevailing Legal Standard
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    • Recovery Theories and Illustrative Cases
      • Liability Under Section 10(b) and Rule 10b-5
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      • Former Aiding and Abetting Liability
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      • Controlling Person Liability under Section 20(a)
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      • Common Law Claims
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  • The Arbitration Arena
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  • Proposed SRO Rules
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  • Conclusion