Bank of America Corp.'s Merrill Lynch unit won an appeal of a ruling dismissing an investor suit over auction-rate securities.
A federal appeals court in New York ruled today that Merrill Lynch provided the investor, Colin Wilson, with sufficient information about its practice of propping up auctions in the securities by submitting its own bids, barring his claim that Merrill misled investors about the securities' liquidity. Wilson had appealed a lower court's dismissal of the suit.
“Merrill's particular disclosures sufficiently alerted investors in Merrill ARS of the likelihood that the interest rates and apparent liquidity of these ARS reflected Merrill's own intervention in these auctions rather than the natural interplay of supply and demand,” U.S. Circuit Judge Robert Katzmann wrote on behalf of a three-judge panel.
Wilson, who sought to represent a class of investors in Merrill's auction-rate securities, bought $125,000 of the securities from an online brokerage in 2007. In 2008, Merrill and the other major dealers in auction-rate securities withdrew their support for the auctions, causing most of them to fail. Wilson claimed he and other investors were left with securities they couldn't sell.
Auction-rate securities are municipal bonds, corporate bonds and preferred stocks whose rates of return are periodically re-set through an auction.
Bill Halldin, a spokesman for Charlotte, North Carolina- based Bank of America, said in an e-mail that the company is pleased with the court's decision. Bank of America bought Merrill in 2009.
The case is Wilson v. Merrill Lynch & Co., 10-1528, Second U.S. Circuit Court of Appeals (New York).
Bloomberg
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
- Informative weekly newsletter featuring news, analysis, real-world case studies, and other critical content
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
