Two Wall Street brokerages must arbitrate a healthcare organization's claim stemming from $234 million in auction rate securities in a dispute over who is considered a "customer" for purposes of securities arbitration, a federal appeals court panel has ruled.
Brokerage units of UBS AG and Citigroup Inc failed to convince the U.S. 4th Circuit Court of Appeals that Carilion Clinic, based in Roanoke, Virginia, was not a "customer" to either firm under the Financial Industry Regulatory Authority's (FINRA) securities arbitration rules, according to an opinion on Wednesday.
The court ruled that Carilion bought "commodities or services" from a FINRA member that were regulated by industry rules.
The case stems from Carilion's decision to issue more than $234 million in auction rate securities in 2005 - a move based on advice from UBS and Citi, according to the opinion. The two firms also performed other roles for Carilion related to the securities, including purchasing them and reselling
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