Bank of America Wins Claims Dismissal in Auction-Rate Case
Bank of America Corp. won dismissal of claims by investors that it misled them about the liquidity of its auction-rate securities and manipulated the market for the investments, a federal judge in San Francisco ruled.
U.S. District Judge Jeffrey White said in an order today that investors could renew market-manipulation claims if they added more information to their complaints.
Investors who bought auction rated securities from 2003 to 2008 sued Bank of America in 2009 on claims that auction rate securities were offered as safe, cash-like investments while the company hid the products’ risks. Banks running periodic auctions abandoned the $330 billion market for the securities in 2008 amid the fallout from the subprime market slump and investors were stuck with the products.
Bank of America, based in Charlotte, North Carolina, agreed in October 2008 to buy back $4.5 billion in auction-rate securities from investors and pay a $50 million fine in agreements with the U.S. Securities and Exchange Commission and then New York Attorney General Andrew Cuomo.
Plaintiffs in the case pending in federal court in San Francisco haven’t benefited from the settlement and continue to hold the securities or sold them at a loss, according to White’s ruling.
Dan Girard, an attorney for investors, didn’t immediately return a voice-mail message seeking comment.
The case is Bondar v. Bank of America, 08-02599, U.S. District Court, Northern District of California (San Francisco).
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