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A broker’s sexual harassment claim against the American Stock Exchange for allegedly failing to discipline another broker who was making unwanted sexual advances has been dismissed by a state appellate court that says her claims are pre-empted by federal law. The Appellate Division, 2nd Department, this week in Bantum v. American Stock Exchange, 2003-04678, unanimously reversed Justice James P. Dollard’s denial of motions by the American Stock Exchange (AMEX) to dismiss Dawn Bantum’s discrimination claims under New York state’s and New York City’s human rights laws. Bantum, the first black woman to become a floor broker at the stock exchange, had alleged that the exchange failed to conduct a proper investigation into her claims that a competing trader, Lawrence Polatchek of Heights Partners Inc., had been harassing her. Justice Dollard of Queens Supreme Court rejected all of the exchange’s arguments for dismissal, including one that the suit should be dismissed because the state and city human rights laws apply only to discrimination in places of public accommodation and that the trading floor was private. A four-judge appellate panel addressed only one issue, which it said disposed of the case: the pre-emption of federal securities law over the local human rights statutes. The question of pre-emption was one of congressional intent, the 2nd Department said. “In the instant case, the legislative history suggests that Congress intended to preempt state interference with a self-regulating organization’s regulatory functions through implementing regulations” of the Securities and Exchange Commission (SEC), the court said. The American Stock Exchange is registered as a national securities exchange and is a self-regulating organization as defined by SEC regulations, the judges observed, and it has a disciplinary process to punish members who violate federal securities laws or internal AMEX rules or regulations. “[T]o allow the plaintiff’s claims against AMEX arising out of its disciplinary functions would clearly ‘stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress’ … which is essentially to encourage stringent self-regulation of the securities industry,” they added. The panel, comprised of Justices Howard Miller, Daniel F. Luciano, Robert W. Schmidt and Sandra L. Townes, dismissed Bantum’s complaint against AMEX and its officials named in the suit and severed the action against the remaining defendants. However, Polatchek and Heights Partners Inc. settled with Bantum for an undisclosed amount before the appeal was argued, said Anthony Carabba of Carabba Locke, who represented Bantum. The AMEX defendants were represented by Peter A. Walker and Lori M. Mayers of Seyfarth Shaw and Brian G. Cesaratto of White Plains.

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