Platinum Lawsuit Against CBOE Revived

Aug 16 2012 | 11:03am ET

A hedge fund's lawsuit against a major exchange has new life.

A state appeals court in Illinois overturned a lower-court ruling that threw out Platinum Partners' complaint against the Chicago Board Options Exchange. Platinum claims it lost $10 million when the CBOE and Options Clearing Corp. mistakenly cut the strike price on India Fund options and then improperly gave that information to some market participants.

The district court ruled that, as self-regulatory organizations, the CBOE and OCC could not be sued. But the appeals panel was not willing to grant SROs "complete immunity from lawsuits."

"While the price adjustment itself may have been a regulatory decision, the manner in which it was disclosed—privately and prematurely—to the John Doe defendants was not," the court wrote. Platinum has also sued the sellers of the India Fund options, the John Doe defendants.

"In addition to its quasi-governmental functions, defendants CBOE and OCC have a private, for-profit business, and in the private disclosure of the price-adjustment decision to the John Doe defendants, they were acting in their private capacity and for their own corporate benefit. Therefore, this non-public announcement cannot be construed as conduct under the delegated authority of the Securities Exchange Act of 1934 and thus cannot be protected by the doctrine of regulatory immunity."


In Depth

'Smart Beta' Funds In Regulators' Sights, Hedgies May Be Next

Mar 26 2015 | 11:11am ET

Funds that mimic strategies used by active managers for a fraction of the cost could...

Lifestyle

Study: Both Marriage and Divorce Lead to Negative Hedge Fund Performance

Mar 25 2015 | 6:51pm ET

Trouble at home leads to trouble in the market for fund managers, according to researchers...

Guest Contributor

The Life Settlement: Yield For The Investor And Cash For The Consumer

Mar 31 2015 | 6:48am ET

Investors are languishing in a yield-starved, low-interest rate environment, looking...

 

Sponsored Content

    Mar 9 2015 | 6:35am ET

    Kelly RodriquesKelly RodriquesAs more investors look to diversify, many are beginning to use retirement funds to invest in alternative assets such as private equity and real estate. Kelly Rodriques, CEO & President of PENSCO Trust Company, explains how companies can connect with those looking to use their retirement accounts in a different way. Read more…

Editor's Note