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Tuesday, July 23, 2024 | Back issues
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Securities Dealer Claims May Leave Bank Liable

(CN) - Regions Bank cannot dismiss claims that it violated Florida law by helping an unregistered dealer sell $250 million worth of securities to 14,000 investors, a federal judge ruled.

The Securities and Exchange Commission charged Regions Bank in September 2009 with aiding and abetting in the sale of securities by an unregistered dealer, U.S. Pension Trust Corp (USPT). The bank had served as a trustee for U.S. Pension Trust and an affiliate, which had sold multisecurity investment plans to more than 14,000 people residing primarily in South America. By executing a trust agreement with Regions acting as their trustee, the USPT investors could invest their money in U.S. mutual funds.

A judge found in 2010 that USPT had unlawfully engaged in the sale of securities as an unregistered dealer. Court filings show that the firm then had to disgorge $62 million and pay $50 million in civil penalties.

Regions settled the SEC charges against it on the same day they were filed, but the investors sued in 2011, claiming that the bank had violated a Florida law that requires securities sellers to be registered with the state.

Laura Yelitza Cifuentes and Merle de las Mercedes Silva Castro filed an amended class action complaint in February 2012 as the heirs of one of the original class members. The federal court in Miami allowed them to replace the original plaintiffs, concluding they had inherited the claims under Columbia's Intestacy Law.

U.S. District Judge Federico Moreno refused to dismiss the case in June 2012.

The judge rejected claims that that the two-year statute of limitations had elapsed and that the plaintiffs lacked standing to bring the claims.

Earlier this year, the plaintiffs amended the complaint one more time, adding Gerardo Carvajal as a plaintiff.

Addressing a more recent motion to dismiss, Moreno ruled on Oct. 10 that Carvajal also had standing to sue. The complaint sufficiently alleges that USPT sold securities to more than 14,000 individuals, including the plaintiffs and the class, and that Carvajal is one of the plaintiffs, Moreno found.

Regions failed to show that it did not qualify as a "person making the sale" under Florida's statute regulating the sale of securities, the judge said.

Regions served as the trustee for each investor who invested in USPT's plans from October 2001 through October 2010, the ruling states.

The plaintiffs also alleged that Regions actively promoted and solicited investments, and was involved in the marketing of the investment plans, according to the order.

Moreno refused to revisit Regions' arguments regarding the statute of limitations, federal jurisdiction and the other plaintiffs' standing, which he had already addressed in the June 2012 ruling.

Regions Bank refused to comment on the decision or the case.

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