on the account. A person acquires a security entitlement in one
of three ways, excluding exceptions not applicable here: (i) a
securities intermediary credits the person's securities account;
(ii) a securities intermediary receives an asset from the person
for credit to the person's securities account; and (iii) a
securities intermediary becomes obligated under law to credit an
asset to the person's securities account. U.C.C. § 8-501(b).
Thus, the fact that Devon was permitted to execute trade in the
`A' accounts is irrelevant to determining if Devon held any of
the securities entitlements in the accounts. What is relevant is
that the securities intermediary at issue in Black credited
securities accounts in the name of the customers, not Devon,
with assets. In both the `A' and `D' accounts, Devon was not
authorized to withdraw either securities or proceeds from the
client account. An entitlement holder can redeem a securities
entitlement. Thus, Devon was not the entitlement holder on the
`A' accounts, and the Shapiro FBO Account is not analogous to
Finally, the Shapiros argue that "[i]t is the existing facts
as of the date of the freeze order, and not hypothetical
possibilities, that should control." In support of this
argument, the Shapiros discuss at length Anderson v. Stephens,
875 F.2d 76 (4th Cir. 1989) (per curiam), rev'd CFTC v.
Franklin, 652 F. Supp. 163 (W.D.Va. 1986), which held that
checks which were deposited by a defendant in a securities
receivership action and which were then credited to the
defendant's account after an asset freeze should be returned to
the drawers of the checks. See 875 F.2d at 80-81.
Anderson is unavailing because the facts existing at the
time of the freeze order in this case demonstrate that CBL held
title to the Shapiro FBO Account, and had done so for months.
The defendant in Anderson carried checks around in his
briefcase and did not deposit them at his bank until after the
asset freeze. 875 F.2d at 77 n. 4. As the court ruled that the
bank should not have accepted the checks, id. at 80, the
defendant, unlike CBL, never came into ownership of the assets
represented by the checks.*fn7 The Anderson case is thus
clearly distinguishable from the instant case.
Finally, the Shapiros focus on various facts that they claim
distinguish their claim in equity from those of the other CBL
customers. These include the financial impact that this motion
will have on them. The Shapiros also construct a ten-item list
out of this Court's November 29, 2000 opinion concerning certain
intervenors' summary judgment motion, and the plan of partial
distribution, and then argue that because the Shapiro FBO
Account does not fit into any of these ten categories, the
account should be treated differently. Neither of these
arguments demonstrates that the Shapiros are entitled to special
While the financial impact on the Shapiros is, of course,
painful and unfortunate, the Shapiros do not explain how that
impact is different from the impact being felt by many other CBL
customers. Second, the list does nothing to change the facts
most pertinent to the equities of distribution of CBL's assets.
The Shapiros transferred legal title of the assets in the
Shapiro FBO Account to CBL, just like the many CBL customers who
put stock certificates in CBL's name. Moreover, CBL took the
Shapiros' assets from them with the intent to use those assets
as part of the same Ponzi scheme that included all of the other
customers' assets. The fact that the mutual fund shares were not
sold outright or margined by the time of the asset freeze, to
take two of the Shapiros' list items, does not change the fact
that CBL had the right and ability to do these things. Indeed,
other customers whose shares are not currently subject to margin
liens nevertheless must participate in the Plan of Partial
Distribution. Every CBL customer has unique facts; to elevate a
claim in equity, those facts should demonstrate that fairness
requires greater consideration. The facts offered by the
Shapiros do not do this.
The MFS Document Supplied by Jankowski Further Corroborates the
Fact that CBL was the "Owner" of the Jankowski FBO Account
Counsel for Lorraine Jankowski has joined in the Shapiros'
opposition to the Receiver's motion. In addition to objecting on
the general basis asserted by the Shapiros — that the FBO
Accounts differ from those accounts in CBL's name alone —
Jankowski's counsel provides a transfer instruction letter that
predates the re-registration of the account by more than three
months: it is therefore not clear whether this letter was
actually the transfer instruction letter honored. In any event,
Jankowski argues that the fact that Jankowski asked for the
account to be put in the name of CBL "for the benefit of
Lorraine Jankowski" should entitle her to full return of the
assets in the account. As already noted, this request provided
Jankowski with no legal protection.
Of greater significance is the rejection letter that Jankowski
attaches. When Jankowski asks that the account be re-registered
in "CBL's name for the benefit of Lorraine Jankowski," MFS
responds that it will need a tax form "signed by the new owner."
CBL is that new "owner." Jankowski was not preserving her rights
when she requested this transfer, she was instead doing what all
of the other CBL customers did, transferring legal title to
their assets to CBL. Thus, the documents provided by Jankowski
on this motion support the Receiver's position.
Because title remained in CBL and because equity requires CBL
investors to be treated the same, the motion of the Receiver is
It is so ordered.