For the first time, the U.S. Court of Appeals for the Second Circuit has announced a bright-line rule to determine which investors are entitled to arbitration with the Financial Industry Regulatory Authority.
On Friday the Second Circuit held that the Saudi Abbar family cannot pursue FINRA arbitration over $383 million that it allegedly lost in a risky investment with a Citigroup Inc. affiliate. Writing for a unanimous panel, Judge Dennis Jacobs ruled that an investor must purchase goods or services from a FINRA member or have an account with a FINRA member to be considered a “customer” under FINRA, and therefore have the right to demand arbitration.
