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A group of Philadelphia attorneys has secured an NASD arbitration award of more than $8 million on behalf of a brokerage services provider that claimed a brokerage firm it had previously contracted with did not offer full compensation when their business relationship concluded. The brokerage firm, WM Financial Services Inc., has filed a petition to vacate that award in federal court in New York, where National Association of Securities Dealers’ hearings are held. The matter is captioned WM Financial Services v. Fiserv Securities Inc. Fiserv provides “back-office” services — such as bookkeeping and tax reporting — for brokerage firms that lack in-house departments for such purposes, according to Michael Coran of Klehr Harrison Harvey Branzburg & Ellers, who represented Fiserv in the matter along with partner Michael Iaconelli and associate Joseph Bradica. When WM chose to go with another back-office broker in the fall of 2003, Coran said, it argued it did not have to pay $30 per-account fees for terminating Fiserv’s handling of 250,000-plus WM IRA accounts. Fiserv contended it was entitled to such fees under the parties’ original agreement and that, under the agreement, it would need to perform tax reporting for the WM IRA accounts even after work on those accounts was handed to WM’s new back-office broker, Coran said. According to WM’s petition to vacate — filed by its attorney in the matter, Robert Zito of Schiff Hardin in New York — Fiserv could not prove it needed such an “astronomical sum” to handle the electronic transferring of the relevant files to WM’s new back-office broker. WM further argued in its petition that the roughly $7.9 million awarded to Fiserv by the panel as to the IRA termination fees amounted to drastically more than Fiserv had ever recovered for either transferring records or preparing tax forms. Coran said his client was pleased the three-member panel agreed with its position. “What we argued is, the case is about the agreed fee, and whatever our costs are isn’t relevant,” Coran said. WM and Fiserv’s agreement called for all disputes to be settled by arbitration before NASD, according to Coran. In December 2003, WM sought from NASD a declaration that it did not have to pay the money Fiserv was seeking, he said. Fiserv filed a counterclaim for the fee payments it believed it was owed. After briefing and limited discovery, the NASD panel held nine days of hearings in the matter over the course of October, November and December 2004, Coran said. On Dec. 23, the panel notified the parties of its award, which included $181,012 in securities movement fees and $7,992,300 in IRA termination fees, according to the panel’s award memorandum. WM’s claims — including one for $600,000 in compensatory damages related to early termination of the agreement with Fiserv — were denied. WM’s petition — filed Friday in the U.S. District Court for the Southern District of New York and assigned to Judge Richard M. Berman, according to Zito — challenges only the portion of the award concerning the IRA termination fees. Zito wrote that the NASD panel had ignored language in the agreement that limits application of the IRA termination fees provision to accounts “maintained with another broker/dealer.” Coran said counsel for both parties indirectly chose the arbitrators who sat on their panel by ranking a list of potential NASD arbitrators early in the process. Coran said Fiserv retained two main experts to assist in presenting its case. Howard Landers, principal at 1st BridgeHouse Consulting in Coral Gables, Fla., was the expert on traditional securities industry practices; and Raymond Dovell, a senior shareholder with the Philadelphia-based public accounting firm Nihill & Riedley, who stressed Fiserv’s position that the dispute involved only the agreed-to fees, and not Fiserv’s potential future costs.

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