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TD Ameritrade says it will 'vigorously defend' against class action

By Kyla Asbury | Dec 11, 2014

OMAHA, Neb. (Legal Newsline) - TD Ameritrade said it will "vigorously defend" against a class action lawsuit recently filed against it

Joseph A. Giannone, a member of TD Ameritrade's communications and public affairs department, said while it is TD Ameritrade's policy not to comment on pending litigation, it will vigorously defend against this lawsuit and others.

"We take our best execution responsibilities seriously and we believe that our client orders receive best execution," Giannone said.

The class action lawsuit was filed on Sept. 15 in the U.S. District Court for the District of New Jersey.

Gerald J. Klein claims TD Ameritrade and CEO Fredric Tomczyk violated the Securities Exchange Act by making false or misleading statements about the manner in which it routes clients' orders to buy and sell securities.

Since 2011, TD Ameritrade acted as a broker for its clients and was bound by a duty of best execution.

"Rather than route its clients’ non-directed, non-marketable orders to the venue(s) which would provide the best execution, TD Ameritrade instead sent such orders to the venues which would provide the highest liquidity rebates, payments made by the venues to TD Ameritrade relating to the number and size of orders that were routed," the complaint states.

As a result of the defendants' alleged self-interested order routing, TD Ameritrade failed to provide best execution for its clients, causing them material harm in the form of economic loss due to their orders going unfilled, under-filled or filled at a suboptimal price.

By the end of 2012, the suit further alleges, all non-marketable limit orders were directed to Direct Edge, which offered the highest rebate for adding liquidity, rather than to the venue that would provide the best execution.

Klein claims this resulted in an economic loss for clients

TD Ameritrade earned routing revenue of $185 million in 2011, $184 million in 2012 and $236 million in 2013, according to the suit.

On Dec. 2, District Judge Michael A. Shipp approved the defendants' motion to transfer the class action lawsuit from the U.S. District Court for the District of New Jersey to Nebraska.

District Judge Joseph F. Bataillon is now presiding over the case.

Klein is represented by Katrina Carroll and Joseph J. DePalma of Lite DePalma Law Firm of Newark, N.J.

TD Ameritrade is being represented by Victoria H. Buter and Thomas H. Dahlk of Kutak Rock Law Firm in Omaha, Neb.; and Alex J. Kaplan, Robert A. Pietrzak and Jackie A. Lu of Sidley Austin in New York.

U.S. District Court for the District of Nebraska case number: 8:14-cv-00396

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