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Uniform Securities Act Gives Federal Courts Jurisdiction Over Suits Against Brokers
Description Federal trial court held that it had exclusive jurisdiction in a suit brought by an investor against a broker for alleged misrepresentations in the trading of securities. The court held that the Uniform Securities Act preempts state law on matters regarding the purchase and sale of securities.
Topic Securities Law
Key Words Uniform Securities Act; Federal Jurisdiction
C A S E   S U M M A R Y
Facts Abada brought a class action suit against a stockbroker in state court, contending unfair trade practices under California law, unjust enrichment, negligent misrepresentation, and fraud in connection with the purchase and sale of securities. The broker moved to remove the suit to federal court under the Securities Litigation Uniform Standards Act of 1998 (the Uniform Standards Act).
Decision The suit moves to federal court. Terms affecting the arrangement between a broker and its customers are directly related to the practices complained of in this suit, which is within the meaning of the Uniform Securities Act. The Act preempts state law on misrepresentation in connection with the purchase or sale of a security. Even though the complaint was not with respect to any specific security, the Act is broad in its coverage and affects relationships between brokers and customers.
Citation Abada v. Charles Schwab & Co., Inc., 68 F.Supp.2d 1160 (S.D. Calif., 1999)

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