Asplund
Asplund v. Selected Invs. in Fin. Equities, Inc.
Opinion
Opinion
Kline, J.
The chief question in this case is whether a broker-dealer of securities has a common law duty to supervise sales by its registered representatives of investments in which the broker-dealer has no economic interest to persons who are not customers of the broker-dealer. We hold that where, as here, the registered representative is not an employee of the broker-dealer, has no actual or apparent authority to sell the investment at issue, and the broker had no notice of and did not in any way benefit from the transaction, the broker-dealer has no such duty.
Facts and Proceedings Below
In 1996 and 1997, appellants Kenneth and Sandra Asplund and Marguerite Summers purchased promissory notes issued by Medco, Inc. (Medco), a Florida-based medical equipment company, from Joseph P. Tufo. Tufo was a registered representative of respondent Selected Investments in Financial Equities, Inc. (SIFE), a California corporation that is registered as an investment adviser with the Securities and Exchange Commission (SEC) and also as a broker-dealer with the National Association of Securities Dealers (NASD). SIFE’s only purpose is to act as a management company for a mutual fund, the SIFE…