Antczak v. TD Ameritrade Clearing, Inc.
| Decision Date | 21 May 2018 |
| Docket Number | CIVIL ACTION NO. 17-4947 |
| Court | U.S. District Court — Eastern District of Pennsylvania |
| Parties | MARIANNE ANTCZAK, on behalf of herself and other similarly situated persons v. TD AMERITRADE CLEARING, INC., TD AMERITRADE, INC., TD AMERITRADE INVESTMENT MANAGEMENT, LLC, ULTIMATE FINANCIAL INVESTMENTS, LLC and BRIDGET A. FERNANDEZ, individually and professionally |
Plaintiff Marianne Antczak claims that she suffered losses resulting from unsuitable investments in high risk, volatile securities. She seeks to hold liable not only her registered investment advisor, but also the custodian and the clearing house for those securities, TD Ameritrade and its affiliated corporations. Moving to strike the class action allegations, the TD Ameritrade defendants argue that the case is inappropriate for class action treatment and the claims are subject to arbitration before the Financial Industry Regulatory Authority (FINRA). Alternatively, they move to dismiss the complaint under Rule 12(b)(6), contending the class claims are precluded.
Antczak fails to state a claim for violations of federal securities laws. Her state law class action claims are precluded by the Securities Litigation Uniform Standards Act of 1998 (SLUSA). Her remaining individual state law claims are subject to FINRA arbitration. Thus, we shall grant the motion to dismiss.
Marianne Antczak engaged Ultimate Financial Investments, LLC (UFI) and its principal, Bridget Fernandez, an independent registered investment advisor, to manage her investments. UFI and Fernandez did not perform custodial or clearing services. They were provided by the TD Ameritrade defendants. TD Ameritrade is a broker-dealer providing custodial services to independent registered investment advisors and their clients through its institutional division, and to individual investors through its retail division.1 TD Ameritrade relies on TD Ameritrade Clearing, Inc. (TDAC) to provide clearing services.2 TD Ameritrade Investment Management, LLC (TDAIM) offers advisory services to TD Ameritrade's retail clients.3
In April 2012, UFI and TD Ameritrade entered into an Advisor Services Agreement in which TD Ameritrade agreed to provide brokerage services to UFI and its clients on TD Ameritrade's institutional platform.4 Under the agreement, TD Ameritrade, identified as the account "custodian" and "broker/dealer," agreed to provide trade confirmations and account statements to UFI's clients reflecting each transaction carriedout by UFI. TD Ameritrade specifically circumscribed its responsibility, stating it "does not make investment recommendations or decisions."5 It deferred to UFI as "the investment advisor" who "understands [UFI's] Clients' financial needs and investment objectives, and will only place orders suitable for its Clients."6 The agreement directed TD Ameritrade to deduct fees that UFI charges its clients from their accounts and credit the fees to UFI's master account.7 From April 2012 until April 2014, UFI operated on the TD Ameritrade institutional platform and processed its trades via TDAC.8
On July 2, 2012, Antczak entered into two institutional account agreements with TD Ameritrade, naming UFI as her advisor and authorized "agent and attorney-in-fact."9 The agreements gave UFI discretion to trade "stocks, bonds, and any other securities and/or contracts related to the same" in Antczak's TD Ameritrade institutional accounts. The parties agreed that "TD Ameritrade has no duty or responsibility to monitor trading in [her] accounts by [her] Agent or to notify [her] prior to accepting [her Agent's] Instructions."10
TD Ameritrade's agreement states that "[a]ny investment decision that [Antczak] make[s] or investment strategy that [she] utilize[s] . . . is based on [her] own investmentdecisions or those of [her] Advisor and is at [her] own risk."11 The agreement further articulates that unless TD Ameritrade provides "individualized" recommendations, Antczak or her "Advisor are responsible for determining the suitability of any trade, investment, investment strategy and risk associated with [her] investments."12 Antczak also agreed to indemnify and hold TD Ameritrade harmless from all losses and claims in connection with her authorization to rely on UFI's instructions.13
Antczak also signed an agreement with UFI, which, in her own words, "gave . . . Fernandez complete discretion to trade in [her] UFI accounts."14 After signing these agreements, Antczak transferred approximately $660,000 to her accounts on TD Ameritrade's institutional platform.15
On April 15, 2014, TD Ameritrade withdrew $1,009 from Antczak's account and credited it to UFI's account, for services covering the period from April 1, 2014, through June 30, 2014.16 Antczak had expressly authorized and instructed TD Ameritrade to deduct this fee from her account and to credit it to UFI's account.17 She also agreedthat "TD Ameritrade shall rely on [UFI's] invoices and have no responsibility for the calculation or verification of fees."18
On April 17, 2014, TD Ameritrade sent Antczak a letter informing her that it had terminated its relationship with UFI. The letter explained that she had thirty days to transfer her institutional accounts to another brokerage or her accounts would automatically be transferred to TD Ameritrade's retail platform.19 The letter further explained that if her accounts were transferred to the retail platform, they would be self-directed and "any cash management services or option approval you had on your advisor-managed account [on the institutional platform] will cease."20 In other words, TD Ameritrade informed Antczak that registered investment advisors, including Fernandez, were not permitted to operate within an account held on TD Ameritrade's retail platform.
On May 8, 2014, after Antczak signed a Retail Client Agreement, her accounts were transferred to TD Ameritrade's retail platform.21 Antczak agreed that her accounts were now self-directed and TD Ameritrade had no responsibility for any trading or investment decisions.22 Nevertheless, despite having been notified that UFI was not authorized to have access to its retail platforms, Antczak authorized Fernandez to beher "agent[] and attorney[]-in-fact for the purchase and sale of securities" in her accounts on the retail platform.23 The authorization forms noted Fernandez was unemployed and made no mention of UFI.24 Neither Antczak nor Fernandez checked the boxes identifying Fernandez as "licensed or employed by a registered broker/dealer" or that she was, or was "employed by, a federal or state registered Investment Advisor."25 Remarkably, in her complaint, Antczak admits that she "decided to remain with Ms. Fernandez having discretion to trade in her accounts on TD Ameritrade's retail platform even though such an arrangement was not permitted by TD Ameritrade."26
Antczak contends that TD Ameritrade was aware that Fernandez was trading in her clients' retail accounts, including Antczak's. It sent a letter removing Fernandez's trading authority to her other clients, but according to Antczak, not to her.27 The letter, dated February 2, 2015, explained that advisors are not permitted to manage accounts on the retail platform because those accounts are self-directed. Specifically, TD Ameritrade informed Fernandez's other clients that:
Antczak also claims that sometime after May, 2015, TD Ameritrade attempted to "supplant" Fernandez with its own TDAIM investment consultant, but she "decided to remain with Ms. Fernandez having discretion to trade in her accounts."29 Throughout 2015 and into 2016, Fernandez continued to make unsuitable trades within Antczak's accounts.30
From July 2012 through 2016, Fernandez, operating through UFI, over-concentrated Antczak's accounts in unsuitable exchange-traded funds (ETFs). By the end of 2016, she alleges that her accounts lost "96% of the money and securities [she] initially moved over to TD Ameritrade [in] July of 2012."31 She attributes these losses to the TD Ameritrade defendants' failure to monitor her accounts and to report Fernandez's unsuitable trading to regulators. She contends that TD Ameritrade haddirect knowledge of Fernandez's "securities laws violations" and did nothing to prevent it.32
In addition to her claim against the TD Ameritrade defendants for violations of § 10(b) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. § 78j(b), and SEC Rule 10b-5, Antczak brings state-law class action claims against the TD Ameritrade defendants for breach of contract, breach of fiduciary duty, negligence, conversion, and civil conspiracy.
A Rule 12(b)(6) motion tests the sufficiency of the allegations contained in the complaint. In order to survive a Rule 12(b)(6) motion, "a complaint must contain sufficient factual matter,...
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