Last week, in Pictet Overseas, Inc. v. Helvetia Trust, the Eleventh Circuit U.S. Court of Appeals affirmed a Florida district court’s order permanently enjoining two offshore trusts from pursuing a FINRA arbitration against a FINRA member and its associated person owners.

In Pictet, two offshore trusts, Helvetia Trust and AAA Group International Trust, held custodial accounts at a Swiss bank, Banque Pictet, and alleged that they were defrauded into investing in a Ponzi scheme by an unrelated investment advisor. Instead of suing Banque Pictet in Switzerland per the parties’ custodial account agreement, the Trusts brought a FINRA arbitration against FINRA member and Banque Pictet affiliate, Pictet Overseas, and its indirect individual owners. Pictet Overseas and its owners had never agreed to arbitrate with the Trusts before FINRA, so they filed a lawsuit in federal court seeking to enjoin the putative arbitration. Indeed, the Trusts were not customers of nor had they ever done business with Pictet Overseas or its owners. After an evidentiary bench trial, the Honorable Kenneth A. Marra of the United States District Court for the Southern District of Florida agreed with Pictet Overseas and enjoined the FINRA arbitration, concluding that the Trusts’ claims were not arbitrable. The Trusts appealed to the Eleventh Circuit Court of Appeals.

 For a summary of the Eleventh Circuit’s decision in Pictet, click here.