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MARSILLO v. GENITON

May 28, 2004.

ANTOINETTE MARSILLO AND CARMELA BARILE, Petitioners, -against- EDWARD GENITON, Respondent


The opinion of the court was delivered by: THOMAS GRIESA, Senior District Judge

OPINION

Introduction

This is a petition to confirm an arbitration award. Petitioners Antoinette Marsillo and Carmela Barile seek to confirm an award in arbitration issued by the National Association of Securities Dealers ("NASD") in their favor against their former broker, Edward Geniton.

  Geniton failed to appear at the arbitration proceedings. Geniton opposes the motion, claiming insufficient notice of the arbitration proceedings and lack of jurisdiction. Geniton moves for a stay to give him time to appeal the arbitration award.

  Petitioners' motion is granted. The court hereby confirms the NASD arbitration award. Geniton's application is denied. Facts

  When employed as a broker with HSBC Brokerage (USA) Inc. ("HSBC"), respondent, Edward Geniton, caused losses to petitioners' investments. Petitioners sought arbitration by the National Association of Securities Dealers ("NASD"), claiming Geniton had engaged in common law fraud, fraudulent misrepresentation, breach of contract, breach of fiduciary duty, breach of supervisory duties and responsibilities, and negligent conduct. Petitioners were clients of HSBC, who had invested in various funds, stocks, annuities and life insurance policies, and had, apparently, been counseled by Geniton.

  Geniton was a registered securities broker from November 1993 until his termination in October 2001, according to Geniton's affidavit. As required by the NASD regulations, he filed a U4 Form ("Uniform Application for Securities Industry Registration or Transfer") with the NASD when he began his employment with HSBC in June of 2000. Portions of his completed U4 application are attached to the motion as petitioner's Exhibit F. The U4 Form requires various disclosures, including disclosures concerning a broker's personal history, contact information, employment history, current firm and type of business in which he engages. On the form Geniton listed the following address as his current residence: 101 Dogwood Drive, Staten Island, N.Y. 10312, Geniton affirmed that he had lived at this address from June of 1999, that is, for one year prior to beginning his new employment with HSBC. (Exhibit F).

  The U4 form contains an arbitration clause, which provides:
I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the SROs [Self-Regulatory Organization, including the NASD] indicated in Item 11 as may be amended from time to time and that any arbitration award rendered against me may be entered as a judgment in any court of competent jurisdiction, (emphasis in the original).
The form also contains a consent to service of process, which provides:
I consent that the service of process, pleading, subpoena, or other document in any investigation or administrative proceeding conducted by the SEC, CFTC or a jurisdiction or in any civil action in which the SEC, CFTC or a jurisdiction are plaintiffs, or the notice of any investigation or proceeding by any SRO [Self-Regulatory Organization, including the NASD] against the applicant, may be made by personal service or by regular registered or certified mail or confirmed telegram to me at my most recent business or home address as reflected in this Form U-4, or any amendment thereto, by leaving such documents or notice at such address, or by any other legally permissible means.
  On January 11, 2002 petitioners filed a claim with the NASD, initiating the arbitration proceeding against Geniton and his firm, HSBC. See Antoinette Marsillo and Carmela Barile (Claimants) vs. HSBC Brokerage (USA) Inc. and Edward Geniton (Respondents). NASD Dispute Resolution Arbitration No. 02-00197. HSBC filed an answer in May of 2002 and subsequently settled with petitioners.

  Geniton, however, never responded to any of the notices or correspondence sent to his Staten Island address at 101 Dogwood Drive by NASD Dispute Resolution. Attached to petitioners' notice of motion are at least 10 letters sent or copied to Geniton regarding the developments in the arbitration proceedings, including notices of appearance.

  On January 17, 2002, NASD Dispute Resolution sent Dan Brecher, petitioners' attorney, a letter stating that petitioners had filed a claim against Geniton with the NASD. This letter was copied to Geniton's Staten Island address.

  On April 3, 2002, NASD Dispute Resolution sent Geniton a letter stating that Geniton had been named as a party in NASD DR Case Number 02-00197, Antoinette Marsillo and Carmela Barile vs. HSBC Brokerage (USA) Inc. and Edward Geniton. The letter included the Statement of Claim that petitioners had filed with the NASD. The letter advised Geniton that he was required to file and serve an answer before May 23, 2002. It also detailed what steps Geniton was required to take in order to comply with the NASD Code, and stated that a hearing would be held.

  Further letters to Brecher on April 3, 2002, June 10, 2002, June 20, 2002, October 11, 2002, November 6, 2002, December 5, 2002, and January 16, 2003 concerning the progress of the arbitration proceedings were all copied to Geniton at the Staten Island address. Undoubtedly, there were additional letters addressed and sent to Geniton by the NASD which are not part of the record. On November 25, 2002 a telephonic pre-hearing was held to schedule the arbitration proceedings. Defendant HSBC appeared, but Geniton was absent. The December 5, 2002 letter gave notice that a hearing would be held on January 23, 2003 and includes a "Case Information Sheet."

  At the January 23, 2003 hearing, petitioners presented testimony and evidence, the content of which is not described in the award letter or in any of the other submission. Again, Geniton made no appearance.

  The hearing resulted in an award for petitioners, dated February 14, 2003. The arbitration panel awarded petitioners compensatory damages against Geniton in the amount of $139,661.44 (petitioners had ...


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