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Bernstein Shur Business and Commerical Litigation Newsletter #51


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Bernstein Shur Business and Commerical Litigation Newsletter #51

Daniel J. Murphy, Paul McDonald

We are pleased to present the 51st edition of the Bernstein Shur Business and Commercial Litigation Newsletter. This month, we highlight recent cases that address disputes involving the sale of “unsuitable” securities, tracking of retail customers through smartphones, and other news that will have an impact on business and litigation. We hope you enjoy the newsletter.

In the News:

An affiliate of the Royal Bank of Canada has agreed to pay a penalty of $1.4 million assessed by FINRA for selling securities without determining whether they were “suitable” for investors. RBC Capital Markets, LLC reportedly sold high-yield “reverse-exchangeable” securities that bore interest, but did not guarantee the repayment of principal, which was linked to the performance of unrelated assets, such as a portfolio of stocks. Under FINRA rules, financial advisors may recommend only “suitable” securities and investments strategies to clients. In addition, FINRA’s rules also require that an advisor must “know the customer” and “know the security.” In practice, advisors must exercise reasonable diligence in reconciling a client’s risk profile and investment goals against the proposed transaction or strategy. These duties are distinct from the heightened fiduciary duties owed by registered investment advisors that exercise discretion or control over customer assets. From 2008 to 2013, the RBC unit handled more than 100,000 transactions involving reverse-exchange securities, affecting some 5,000 accounts. Under the settlement with FINRA, RBC Capital Markets, LLC will not admit or deny wrongdoing, but has agreed to pay penalties and $434,000 in restitution to affected customers. 

Read more about this development here.

The Federal Trade Commission has entered into a consent decree with a consumer tracking company that monitors retail customer movements through smartphones.The company, Nomi Technologies, has developed technology that allows retailers to track the physical movements of customers while visiting stores. Since 2013, Nomi’s technology and in-store sensors have ben used to track customers inside and outside of stores. Through this technology, retailers have obtained data on both the duration and frequency of customers’ visits from nine million smartphones in 2013 alone. Although Nomi’s privacy policy states that customers may opt out of its services, the FTC complained that the company violated its own policy and that customers were not fully informed that Nomi’s tracking technology was being used by retailers. The FTC also noted that this enforcement action was the first of its kind against a retail-tracking company. 

Read the court’s opinion here, and the FTC’S press release here.

Amazon.com has filed suit against four websites that allegedly sold fake positive reviews for products and vendors using its online platform. Online reviews and star ratings are an important driver of sales on Amazon.com. The individual defendants allegedly sold online reviews to vendors of Amazon.com at a price of approximately $20 per review, while also using or referencing Amazon.com in its advertisements. As a result, Amazon has asserted claims against the review-sellers based on trademark infringement and consumer protection laws. Amazon.com also has asserted claims based on the federal anti-cybersquatting statutes, based on the use of domain names such as “buyamazonreviews.com.” Under the Anti-cybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d)(1), a person may be liable if he is shown to have a bad faith intent to profit from the use of a registered trademark and then registers, traffics in, or uses a website domain name that is confusingly similar to that mark.

Read more about this development here.