A defunct hedge fund has to seek its money back from the firm that sold it mortgage-backed securities, rather than the bank that issued them, a federal appeals court ruled.
The U.S. Second Circuit Court of Appeals yesterday upheld an injunction against Turnberry Capital Management barring it from bringing a $13 million claim against SunTrust Banks before a Financial Industry Regulatory Authority arbitration panel. The appellate judges agreed with the lower court that Turnberry was not a customer of SunTrust, but of Raymond James Financial, which sold the MBS.
A lawyer for Turnberry, which closed its doors in 2008, said it was "disappointed" by the ruling but that it would pursue arbitration against Raymond James.
Last year, U.S. District Judge Naomi Reice Buchwald ruled that Turnberry could arbitrate only with firms from which it directly received goods or services.