Bank of America : Auction Rate Securities Summary: The original class action lawsuit was filed on behalf of persons who purchased Auction Rate Securities from Bank of America Corp. (NYSE: BAC), Banc of America Investment Services, Inc., and Banc of America Securities, LLC.
The Complaint alleges that Bank of America violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by deceiving investors about the investment characteristics of auction rate securities and the auction market in which these securities traded. Auction rate securities are either municipal or corporate debt securities or preferred stocks which pay interest at rates set at periodic “auctions.” Auction rate securities generally have long-term maturities or no maturity dates.
The Complaint alleges that, pursuant to uniform sales materials and top-down management directives, Bank of America offered and sold auction rate securities to the public as highly liquid cash-management vehicles and as suitable alternatives to money market mutual funds. According to the Complaint, holders of auction rate securities sold by Bank of America and other broker-dealers have been unable to liquidate their positions in these securities following the decision on February 13, 2008 of all major broker-dealers including Bank of America to “withdraw their support” for the periodic auctions at which the interest rates paid on auction rates securities are set.
The Complaint alleges that Bank of America failed to disclose the following material facts about the auction rate securities it sold to the class: (1) the auction rate securities were not cash alternatives, like money market funds, but were instead, complex, long-term financial instruments with 30 year maturity dates, or longer; (2) the auction rate securities were only liquid at the time of sale because Bank of America and other broker-dealers were artificially supporting and manipulating the auction rate market to maintain the appearance of liquidity and stability; (3) Bank of America and other broker-dealers routinely intervened in auctions for their own benefit, to set rates and prevent all-hold auctions and failed auctions; and (4) Bank of America continued to market auction rate securities as liquid investments after it had determined that it and other broker dealers were likely to withdraw their support for the periodic auctions and that a “freeze” of the market for auction rate securities would result.
NOTE: On February 12, 2009, three pending cases filed in the Northern District of California, Northern District of Illinois and the Southern District of New York filed against Bank of America, Inc. and its sale of Auction Rate Securities was consolidated or coordinated for pretrial proceedings in the U.S. District Court for the Northern District of California, MDL NO. 09-2014 JSW, under Judge Jeffrey S. White.
On August 5, 2008, the Court granted the stipulation appointing the Sitrin Group as lead plaintiff and approving Sitrin Group’s selection of Girard Gibbs LLP as lead counsel. On January 22, 2009, the lead plaintiff filed a First Amended Class Action Complaint. On March 13, 2009, the defendants filed a motion to dismiss the First Amended Complaint. Before any ruling on the pending motion to dismiss, the lead plaintiff filed a Second Amended Class Action Complaint on May 12, 2009.
On July 9, 2009, the lead plaintiff, the Sitrin Group, withdrew as lead plaintiff and were replaced with the Hamm Group by Court order dated August 26, 2009. On September 9, 2009, the defendants filed a motion to dismiss the Second Amended Class Action Complaint. Before any ruling, the Judge Jeffrey S. White granted the plaintiff’s stipulation re consolidation and terminated the pending motions to dismiss. On May 4, 2010, a Consolidated Class Action and Individual Complaint was filed. On June 1, 2010, the defendants filed a motion to dismiss. On February 24, 2011, the judge granted the defendants' motion to dismiss. The plaintiffs have leave to file an amended complaint.
On January 4, 2012, pursuant to Rule 41(a)(1) of the Federal Rules of Civil Procedure, Lead Plaintiffs N.R. Hamm Quarry, Inc. and Ed O’Gara gave notice of their voluntary dismissal of this action without prejudice.
SIC Code: 6021
Industry: Money Center Banks
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