Turnberry Capital Management LP, a hedge fund based in Connecticut, has been blocked by a Manhattan District Judge from continuing with an arbitration case against SunTrust Banks, Inc. The hedge fund hoped to pursue securities arbitration with the Financial Industry Regulatory Authority (FINRA) over damages equaling approximately $13 million.
District Judge Naomi Reice Buchwald was the presiding judge in the case, which was initially brought before the court in February, when SunTrust filed a suit requesting that Turnberry be stopped from pursuing arbitration with FINRA. According to Turnberry’s filings, the amount of $13 million was set to recoup their losses from mortgage-backed securities that were purchased before economic hardships that struck in 2007 and 2008, causing Turnberry to close its doors and discontinue business.
According to Judge Buchwald, Turnberry could not seek to compel arbitration with SunTrust through FINRA due to the fact that the hedge fund company did not meet the requirements to be considered a “customer” under FINRA’s definition. Since the funds were purchased through Raymond James investment services rather than directly from SunTrust, the judge determined that Turnberry "did not receive any other goods or services from SunTrust that would indicate a customer relationship."
Turnberry claimed that the role of Raymond James as a brokerage service should be ignored, since it was only a channel through which the securities were sold and the securities were purchased from SunTrust by Raymond James on the same day they were sold to Turnberry. Despite the judge’s rejection of Turnberry’s claim, the attorney representing the hedge fund company, Kevin O'Brien, stated that he and his client would be "considering our options, and an appeal is very possible."