(Reuters) - A Brazilian banking heiress who netted $3.6 million in a securities arbitration case against Merrill Lynch stemming from alleged unauthorized trades, is trying to overturn parts of that ruling, which ordered her to pay Merrill some money and denied further damages, according to court documents.
The heiress, Camelia Nasser de Kassin, asked for more than $21 million in damages when she filed a securities arbitration claim against Bank of America Corp.'s Merrill Lynch unit with the Financial Industry Regulatory Authority in 2008.
Lawyers for de Kassin filed a complaint on Thursday in a Manhattan federal court asking a judge to overturn parts of the ruling, decided on September 11. Arbitrators rendered a split decision finding de Kassin and Merrill both at fault for losses in the Sophin account. Both the arbitration and court case were filed in the name of Sophin Investments SA, a company set up to handle an inheritance Kassin received from an uncle.
The FINRA ruling and newly filed court case are just two facets of a larger battle between members of the prominent Nasser banking family from Brazil and Merrill Lynch over several steep trading losses.
A Merrill Lynch spokesman declined to immediately comment.
In the FINRA arbitration, de Kassin, through Sophin, accused Merrill Lynch of letting her brother, Ezequiel Nasser, make $389 million in unauthorized trades thought accounts at two Merrill Lynch units.
Nasser, who de Kassin alleged invested in risky securities such as "naked puts" - a type of options strategy - in Bear Stearns and Lehman Brothers ultimately left a deficit totaling between $10.4 million and $11.4 million in the two accounts.
Merrill denied the claims and filed a counterclaim in the arbitration case against Sophin for breach of contract, seeking a total of $5.5 million for the deficits in the two accounts.
Arbitrators, in September, found both parties liable. While Merrill must pay Sophin $6.1 million, Sophin must pay Merrill $2.5 million - a net of $3.6 million for Sophin. The panel admonished Merrill for "lapses in record keeping and supervisory procedures" but said those missteps did not indicate a widespread problem at the company.
Lawyers for de Kassin, in court papers filed at the U.S. District Court for the Southern District of New York, argued that the court should overturn portions of the ruling requiring de Kassin to pay damages to Merrill, and other parts of the ruling that deny her further damages.
Lawyers for de Kassin argue that arbitrators disregarded the law and violated U.S. public policy by ignoring that no power of attorney was in place authorizing third-party trades in the Sophin account. But the panel, at the same time, acknowledged "that such conduct had occurred and that it was illegal."
Securities brokerage customers typically agree in their account opening statements to arbitrate legal disputes against their brokerage in FINRA's arbitration forum. Court actions to overturn arbitration rulings, which are generally binding, are unusual.
However, courts can overturn, or vacate, arbitration rulings in limited circumstances, such as when arbitrators are biased or show a "manifest disregard" of the law.
Merrill, in addition to its involvement in the arbitration case, sued three members of the Nasser family in 2008 for massive trading losses, leading to a $99 million judgment in Merril's favor upheld in April by a New York appeals court.
Reporting By Suzanne Barlyn; Editing by M.D. Golan