Judge recommends cutting class suing Global Brokerage f/k/a FXCM Inc
The investor lawsuit targeting Global Brokerage, Inc. f/k/a FXCM Inc. (FXCM), Robert Lande, Dror Niv, and William Ahdout, continues at the New York Southern District Court.
Earlier today, United States Magistrate Judge Barbara Moses issued her recommendations regarding the proposed class in this case.
Let’s recall that the lead plaintiffs in this action are 683 Capital Partners, LP and Shipco Transport Inc. The case stems from the events from February 2017, when FXCM reached settlements with the CFTC and NFA, in a move that led to its exit from the US retail FX market. The price of FXCM’s securities plummeted after the regulatory settlements were announced, thereby damaging investors in FXCM Inc.
The plaintiffs brought this class action suit against FXCM, Dror Niv and William Ahdout, alleging that, from March 15, 2012 until February 6,2017, Defendants committed securities fraud in violation of Sections IO(b) and 20(a) of the Securities Exchange Act of 1934 and Rule l0(b)-5. Specifically, the plaintiffs allege that the defendants were responsible for false or misleading statements with respect to FXCM’s purported agency-trading model and FXCM’s relationship with another company, Effex Capital.
Lead plaintiffs 683 Capital and Shipco, together with named plaintiff E-Global, suing on behalf of themselves and all others similarly situated, allege that defendants violated the federal securities laws by knowingly misleading investors as to the nature of FXCM’s No Dealing Desk (NDD) platform and FXCM’s relationship with the largest market maker for its NDD platform.
Judge Moses had to issue recommendations as to the plaintiffs’ amended motion for class certification, which asks the Court to certify a class defined as follows:
All persons and/or entities that purchased or otherwise acquired publicly traded Global Brokerage, Inc., f/k/a FXCM Inc. (“FXCM”) securities, including FXCM 2.25% Convertible Senior Notes due 2018 and Class A common stock, during the period March 15, 2012 through February 6, 2017, both dates inclusive. Excluded from the Class are: (i) Defendants; (ii) current and former officers, employees, consultants and directors of FXCM and FXCM Holdings, LLC; (iii) siblings, parents, children, spouses, and household members of any person excluded under (i) and (ii); (iv) any entities affiliated with, controlled by, or more than 5% owned by, any person excluded under (i) through (iii); and (v) the legal representatives, heirs, successors or assigns of any person excluded under (i) through (iv).
The Judge recommended that the motion be granted as to FXCM’s Class A common stock (FXCM Stock) and denied as to its 2.25% Convertible Senior Notes due 2018 (FXCM Notes).
The Judge notes that, in their opposition papers, defendants do not challenge numerosity as to the Stock Class, and do not challenge commonality as to either the Stock Class or the Notes Class. However, they argue vigorously that the Notes Class cannot be certified because its members are insufficiently numerous.
This issue is further developed in the parties’ post-hearing letter-briefs, which persuade the Judge that defendants are correct. There are no more than 20 potential members of the Notes Class. Moreover, the purchasers of the FXCM Notes are all qualified institutional buyers (QIBs), and thus were more than capable of suing individually, as did 683 Capital. Certification of the Notes Class is precluded for this reason alone, the Judge concludes.
In fact, as defendants demonstrated in their own post-hearing supplement, 20 of the noteholders identified by plaintiffs signed the Forbearance Agreement, leaving only 20 potential members of the Notes Class. This is not enough, particularly where, as here, those 20 are “large, sophisticated entities,” with $100 million or more under management (as required by Rule 144), fully capable of filing their own claims. As to the FXCM Notes, therefore, certification should be denied on this basis alone, the Judge says.
The Judge recommends the following class be certified pursuant to Fed. R. Civ. P. 23(a) and (b)(3):
All persons and/or entities that purchased or otherwise acquired publicly traded Global Brokerage, Inc., f/k/a FXCM Inc. (“FXCM”) Class A common stock, during the period March 15, 2012 through February 6, 2017, both dates inclusive. Excluded from the Class are: (i) Defendants; (ii) current and former officers, employees, consultants and directors of FXCM and FXCM Holdings, LLC; (iii) siblings, parents, children, spouses, and household members of any person excluded under (i) and (ii); (iv) any entities affiliated with, controlled by, or more than 5% owned by, any person excluded under (i) through (iii); and (v) the legal representatives, heirs, successors or assigns of any person excluded under (i) through (iv).
Judge Moses further recommends that Shipco and E-Global be appointed as Class Representatives, and that Rosen Law be appointed as Class Counsel.
The parties in this case will have fourteen days from March 18, 2021, to file written objections to the Report and Recommendation.