Investors of all varieties are at risk of negligent investment advice, abuse by bad brokers and faulty financial products – a risk that can lead to financial difficulty, and even financial ruin, as well as destroyed trust. Whether the wronged party is an individual or an institutional investor, Sam Edwards and his team at the securities firm Shepherd Smith Edwards & Kantas are known as go-to investor advocates.
Throughout his career, Edwards has represented retirees, high-net-worth individuals, credit unions, banks and municipalities whose losses have ranged from tens of thousands of dollars to billions. The scope of his practice is unique: The firm takes on both smaller cases, like $100,000 individual losses, and high-stakes ones, like representing the state of New Jersey in a multibillion-dollar auction rate litigation.
When they represented New Jersey, Edwards and his team sued nearly every major Wall Street investment firm – their commitment to justice undeterred by Wall Street’s might. The challenge is part of the thrill for Edwards: He relishes being the underdog. “We often go against the largest banks and financial institutions in the world, who hire the largest and most prestigious law firms in the world to defend them,” he says. “Many of our cases are a true David versus Goliath situation and I enjoy having to meet the challenge of very competent and experienced counsel on the other side.”
Outside of his firm, Edwards continues to advocate for investor rights as a board member and past president of the Public Investors Arbitration Association (PIABA). He also served as editor-in-chief of the PIABA Bar Journal and is still a contributing author.
Lawdragon: Can you describe the mix of work you do within your securities practice?
Sam Edwards: My firm and I exclusively represent wronged investors. Much of that work is done through arbitration, as almost all brokerage firms and investment advisors require an investor to sign an arbitration agreement before opening an account.
Our practice varies from representing individual investors who have lost their retirement as a result of negligent advice or outright fraud to representing institutional investors (such as pension plans, small banks and even municipalities) who have been defrauded and misled by Wall Street.
LD: How did you first become interested in securities litigation?
SE: I clerked for a litigation boutique while in law school that took on these types of cases as a small part of its practice. At the time, the firm was engaged in a large case involving foreign nationals that were defrauded out of hundreds of millions of dollars. I fell in love with the work and after that case was done (the firm won the largest NASD arbitration award in history at the time) I asked about other opportunities to continue the work. That firm introduced me to Bill Shepherd, who was the founder of my current firm. I joined the firm out of law school and have been here ever since.
LD: What continues to keep you excited about your work at Shepherd Smith?
SE: This practice offers the unique ability to work on behalf of regular people while also being involved with incredibly sophisticated and challenging investment products. I love getting to know our clients personally and become a part of their lives when we work with them. Although not as lucrative as large cases on behalf of institutional investors, I especially enjoy representing the retirees and other investors who worked and saved their entire lives and lost that hard work to fraud. Being able to help those types of clients is incredibly satisfying as the losses are so meaningful to them and we know we have really helped a deserving victim. At the same time, the practice offers involvement in incredibly sophisticated financial products that are often incredibly intellectually challenging to understand and figure out what went wrong. Tackling the analysis and breaking down the problems with these financial products is the ultimate puzzle to solve for me.
This practice offers the unique ability to work on behalf of regular people while also being involved with incredibly sophisticated and challenging investment products.
LD: Do any cases stand out in particular?
SE: During the financial crisis, it was uncovered that a particular type of bond offering, auction rate securities, were actually propped up by Wall Street and had a very limited real market. While the regulators stepped in to help individual investors who were trapped in this flawed product, we learned that municipal issuers were in even worse trouble as this type of bond offering was sold in conjunction with costly and complicated interest rate swaps. When interest rates were taken to almost zero, those swaps became massive burdens on issuers of auction rate securities, many of whom owed billions of dollars on the swaps.
We represented the state of New Jersey in a series of auction rate cases against essentially every major Wall Street firm. The way this structure was sold to municipalities and other issuers was very misleading, even though those issuers were sophisticated. The complex nature of the swaps themselves and making the fact finder understand how these swaps were sold in combination with the auction rate securities made the cases very challenging and very interesting.
LD: Tell me about your bond fraud cases in Puerto Rico.
SE: We actually represented hundreds of investors in Puerto Rico when the Puerto Rican bond market collapsed in the fall of 2013. But, one case does stand out to me. That case was on behalf of a local doctor and businessman who suffered significant losses over just a few weeks as a result of the collapse of the Puerto Rican bond market. The opposing firm took a very strong stance against the case and refused good faith settlement negotiations as a result of the wealth and sophistication of the doctor. After two weeks of hearings, which had gone well for us, a mediator we use a lot called me and essentially said that the wanted to know what it would really take to resolve the case.
The client had previously told us a number, well before we started the hearings, and so I told the mediator that was the last number I had heard, and he said he thought the firm would pay that if the doctor still wanted it. I went back to the doctor, and he said he no longer wanted to settle as he really wanted to see the case through, even if it meant he lost. So, we said no deal and ended up receiving an eight-figure award that included $1M in punitive damages against a major Wall Street firm.
It was a great result and the fact that the client was more interested in finding out what would happen than getting the sure thing sticks out to me. Since then, I have taken the same view several times, turning down good settlement offers at the end of a case and waiting to hear the verdict instead.
LD: Have you had any recent victories you can tell me about?
SE: We had a series of cases involving the largest single producing broker I have ever seen. This broker owned his own airplane and was the leader of an airplane club that met regularly across the country. He used those meetings and relationships to develop a base of clients unlike any I have seen. He then preyed upon those people, and their families, by investing them into a very high-risk strategy that paid him and his firm enormous commissions.
We arbitrated the very first case in the country in this series of cases and won a $4M award against the firm for the daughter of one of the broker's wealthiest clients.
LD: Were there any challenges in being the first case to go to arbitration?
SE: The client was part of a wealthy family and the broker and firm tried to blame her father for the fraudulent investment scheme that had been implemented. The suggestion was that the father was pushing for this strategy for his daughter, and that the father was very wealthy and so the losses should not matter to her anyway. We had to convince the panel to look beyond her father's wealth and instead to focus on her individual situation.
LD: Did the broker face any other consequences?
SE: Through our efforts, the broker who implemented this scheme was ultimately terminated and run out of the business. So, not only did we help get back wrongful losses, but we also helped to remove a broker who, in our opinion, should not be allowed to be in charge of investors’ assets.
LD: Did you learn anything new from arbitrating that case?
SE: Surprisingly, wealthy and even very sophisticated people are often the easiest for bad brokers and firms to defraud. These types of investors are frequently too busy to focus on their own investments and trust their advisors. Those investors also seem to be the ones who are easiest to sell on complicated products as they are told this is what other wealthy individuals are doing.
LD: Does that case relate to any recent trends you’re seeing in securities cases?
SE: Wall Street continues to make most of its money developing new financial products to sell to investors. Many of these products are layered with fees and other disadvantages that most investors do not understand until the product falls apart, sometimes years after the purchase. These products have become increasingly complicated and difficult to understand.
I believe that for the foreseeable future, representing investors in financial products that were misrepresented or otherwise incorrectly implemented will continue to be a driving force in our practice.
Not only did we help get back wrongful losses, but we also helped to remove a broker who, in our opinion, should not be allowed to be in charge of investors’ assets.
LD: Looking back, when did you first decide to go into law?
SE: I was thinking about law all the way back in high school when I joined the debate team at the recommendation of a friend. I loved traveling all over and meeting other students interested in debate. My legal career has followed that same pattern as my practice is national in scope and I enjoy traveling the country and working with other claimant's lawyers and even most defense lawyers.
LD: Ha! Can you tell me about a defense lawyer you’ve come up against who you particularly admire?
SE: I admire many of the attorneys I face, some of them for very different reasons. For example, I think Chris Kemnitz with Katten is a very talented trial attorney and I know that we are in for a very tough fight when he is on the other side.
I admire other attorneys for their ability to cut through the nonsense and get to the heart of a case, whether on settlement or in trial. A.J. Borrelli with Riker Danzig is very good at that. I admire that I can have an honest discussion with him about the strengths and weaknesses of a case, whether we are settling the case or in the middle of a trial. I trust and admire his integrity.
LD: Did you have any professors who left an impact on you?
SE: While at Georgetown, where I received my LL.M. in Securities Law and Regulation, almost all of my classes were taught by adjuncts who were practicing attorneys. Being able to apply the law and issues we were discussing to the practical cases these professors were handling at the time made the learning experience so much richer.
LD: What advice do you have now for current law school students?
SE: Focus on learning skills more than information. My experience has been that the actual "knowledge" gained in law school is how to think and behave like a lawyer, not the law itself. There are many classes in law school that focus more on developing your skills, not just theory, and I think those classes help to shorten the learning curve of being a new lawyer.
LD: Did you have any mentors outside of school?
SE: I first learned about this work from John O'Neill, who was one of the best and most respected trial lawyers in the country. John was a very aggressive and assertive attorney who I watched closely for clues on how to succeed. That said, Bill Shepherd, my former partner, is certainly the most influential attorney in my professional career. Bill showed me how to practice as an arbitration attorney, which is often very different than what an attorney would do in court.
LD: How has your practice changed since the early part of your career?
SE: Initially, our cases were focused on "bad brokers" who used their position of trust to take advantage of unsuspecting customers. Now, the practice is mostly focused on "bad products,” where the broker is often actually trying to save the client from the firm, who is interested in selling the most lucrative product rather than the best one for the client.
LD: How would you describe your style as a lawyer?
SE: I am a firm believer in the philosophy that we can disagree without being disagreeable. As long as the other side is fair and honest with me, I will always return the favor.
LD: What makes Shepherd Smith unique in the world of securities law?
SE: We know the securities business as well as those who work in it. Many of our attorneys and staff were in the securities business before joining our firm, so we know the business and how it works better than anyone else out there doing what we do.
LD: As a partner, what are some of the challenges you face in overseeing the management of the firm in addition to your practice?
SE: It is hard, at times, to balance running the firm and practicing law. Luckily, I have good partners and staff that have been with us for a very long time, so I can trust them to handle anything when I am too busy.
LD: How has managing the firm changed since the start of your career?
SE: Interestingly, it seems to take less staff than before to accomplish the same. I think this is a result of software innovations as well as the ability of younger attorneys to do a lot of the work themselves that older attorneys do not know how to or want to do.
We know the securities business as well as those who work in it.
LD: Are there any developments for the firm on the horizon?
SE: We are growing and have been handling a lot more court matters over the last few years. We have dipped our toes into class action work as well as some mass action work for investors and plan to continue to grow our practice in federal and state courts.
LD: Tell me about your work as past president of the Public Investors Advocate Bar Association.
SE: I was the president of PIABA during the high point of the pandemic in 2020 and 2021. That was a very challenging time for the organization as well as all attorneys, as we learned new technology and new ways to keep things going. I was very proud to be able to serve the great members of PIABA and to keep the organization in a healthy position while dealing with many new and unique issues.
LD: What do you do for fun when you’re outside the office?
SE: I have three kids and spend most of my free time with them. My two youngest are into competitive sports, so most weekends are spent at baseball and soccer tournaments.
LD: Do you have a favorite book or movie about the justice system?
SE: I still really like "A Civil Action," as it tells the reality of being a plaintiffs’ attorney. Everyone believes that you become a plaintiffs’ attorney and wait for that one big case and then retire rich. That simply doesn't happen. Rather, being a successful plaintiffs’ attorney requires a grind and a commitment to reinvest money constantly into your practice and systems to keep things going.
LD: If you weren’t a lawyer, what would you be doing now?
SE: I likely would be in the investment business as a broker or investment advisor.