Defining the Scope of Broker and Dealer Duties -- Some Problems in Adjudicating the Responsibilities of Securities and Commodities Professionals

The purpose of this Article is to stress the need for grounding broker-dealer duties in sound, articulated understandings of the investment markets, as well as defensible statements of the responsibilities and expectations of both customers and market professionals. This important need will be demonstrated through the use of several cases illustrating problematical or failed processes by which broker-dealer duties have been established. This Article will focus primarily on two recent decisions, In re E.F. Hutton & Co., and Wasnick v. Refco, Inc., both of which have been criticized for inappropriately expanding broker and dealer duties. Each decision is better understood, however, as a case where the creation of a sound substantive duty becomes suspect because of the failure to state a wholly persuasive foundation for the establishment of that duty. This Article will begin with a rather detailed description of the Hutton litigation as it unfolded. Next, the aftermath of Hutton and a market-based alternative argument for the disclosure of the limit order execution policy required by Hutton will be discussed. Finally, the Article will review Hutton in the context of other litigation, focusing in particular on the expansion of a commodities broker\u27s duty to the customer resulting from Wasnick