FINRA, Inc., Depository Trust Company Hit with Trust's Class Action

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A complex proposed class action has unfolded against defendants Financial Industry Regulatory Authority, Inc. (FINRA) and the Depository Trust Company (DTC). The former, the case alleges, failed to set an ex-dividend date—defined in the complaint as the date on and after which the right to a distribution is no longer transferred with shares— for distributions on account of shares issued by therapeutics company DNIB Unwind, Inc. The Depository Trust Company, the case continues, allegedly failed to “abide by its own rules and procedures” with regard to such distributions, which reportedly resulted in $8 million being disbursed among the wrong shareholders. Of note is that the plaintiff behind the case, B.E. Capital Management Fund LP, seeks no monetary compensation, but rather declaratory relief to prevent this scenario from happening again, as the party supposedly responsible for liquidating the plaintiff’s trust still has approximately $18 million to distribute.

From the lawsuit:

“FINRA abandoned the responsibility for setting the ex-date with respect to the Initial Equity Distribution of $8 million under the Plan of DNIB and its debtor subsidiary to holders of the company’s shares, which traded OTC under ticker symbol BINDQ until October 11 (the effective date of the plan). As a result, when the distribution was paid by the Liquidating Trustee to DTC on or about December 15, 2016 through the debtors’ transfer agent, DTC lacked instructions from FINRA as to whether the distribution should be made to shareholders in accordance with [Uniform Practice Code] Rule 11140(b)(1) or (b)(2).”