Klehr Harrison Wins $3 Million for Fiserv in NASD Arbitration

March 19, 2003

Fiserv Securities, a clearing broker and a member of the New York Stock Exchange, acted as clearing agent for Citicorp Investment Services and CIS’ clients, such as CitiBank Private Banking. In the summer of 1998, Fiserv, at the request of CIS, executed an order to purchase $3 million (Canadian) of a Canadian security for a customer of Citicorp Investment Services and Citibank Private Banking. Payment to the issuer of the securities was subsequently due for the $3 million. Citicorp’s customer failed to pay. Citicorp and CitiBank claimed that Fiserv had not properly cleared and delivered the securities and that, in any event, the trade had been cancelled. Fiserv claimed that it was a valid trade that had never been cancelled and that CitiBank’s client was the beneficial owner of the Canadian securities. The seller of the securities nonetheless sued Fiserv in Canada for the $3 million payment, even though Fiserv acted only as clearing agent in the transaction. The Canadian case is scheduled for trial in November 2003.

Fiserv filed an NASD arbitration against Citigroup and Citibank, seeking a complete defense and indemnification for all liability in the Canadian case. The arbitrators ruled that the trade had not been cancelled and was valid and that the customer of Citibank and Citicorp was the beneficial owner of the securities. Therefore, Citibank and Citicorp are required to defend and indemnify Fiserv in the Canadian action for 95 percent of all damages, attorney fees and costs.

Michael Coran of Klehr, Harrison, Harvey, Branzburg & Ellers successfully represented Fiserv in the arbitration.

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