TD Ameritrade, Inc. is a broker that processes trading orders for consumers. The complaint for this class action alleges that on January 28, 2021, TD did not process orders for AMC securities, either prohibiting customers from making the trades or delaying in making them. The complaint alleges breaches of contract and of the implied covenant of good faith and fair dealing.
The class for this action is all TD Ameritrade self-directed brokerage account customers who tried to sell AMC securities at that platform and were prevented from doing so, and whose orders to sell were delayed on January 28, 2021, resulting in their sales having a lower price, in any of the US states, the District of Columbia, Puerto Rico, and other US territories and possessions.
Towards the end of 2020, the complaint says, “the stock price per share of certain companies began to act volatile…” AMC is a movie-theater chain, and its share price had been falling due to the pandemic’s depression of movie attendance. However, the complaint says, “AMC’s stock price began to increase substantially as a result of retail investors buying the stock in January 2021.”
Some of this trading activity was done on TD’s trading platform. The complaint claims that individual and retail investors were buying AMC stock “for its value as well as … to combat the actions of hedge funds to ‘short’ the stock.”
Shorting a stock involves betting that its price will fall. In a short sale, an investor borrows shares of stock and then sells them, with the hope that by the time the investor must again buy the stock to return the shares, the price will have fallen. The investor’s profit is the difference between the price earned by selling the shares and the price paid to buy them to return them.
Hedge funds had begun to short AMC, betting that its share price would continue to fall. When retail investors began buying the shares, the price rose rather than fell, putting the hedge funds in what’s called a “short squeeze.” That is, the hedge funds stood to lose billions of dollars if they had to buy back the shares at a higher price. Meanwhile, the retail investors stood to gain, because they could sell their shares at a profit.
What happened then? On January 28, 2021, TD Ameritrade delayed or prevented retailer investors from making trades in AMC stock. This brought the AMC share price down again, profiting the short sellers and damaging the retail traders who were holding shares.
The complaint charges that “TD used its power as a securities broker” to stop individual investors from trading in the AMC stock. “TD purposely, knowingly and willingly prevented plaintiff and the proposed class [in this case] from trading AMC stock from its trading platform in the midst of a short squeeze, thereby manipulating the open market to artificially lower the price.”
Article Type: LawsuitTopic: Investments
Most Recent Case Event
TD Ameritrade Prohibitions on Sales of AMC Stock Complaint
March 8, 2021
TD Ameritrade, Inc. is a broker that processes trading orders for consumers. The complaint for this class action alleges that on January 28, 2021, TD did not process orders for AMC securities, either prohibiting customers from making the trades or delaying in making them. The complaint alleges breaches of contract and of the implied covenant of good faith and fair dealing.
TD Ameritrade Prohibitions on Sales of AMC Stock ComplaintCase Event History
TD Ameritrade Prohibitions on Sales of AMC Stock Complaint
March 8, 2021
TD Ameritrade, Inc. is a broker that processes trading orders for consumers. The complaint for this class action alleges that on January 28, 2021, TD did not process orders for AMC securities, either prohibiting customers from making the trades or delaying in making them. The complaint alleges breaches of contract and of the implied covenant of good faith and fair dealing.
TD Ameritrade Prohibitions on Sales of AMC Stock Complaint