Plaintiffs voluntarily dismissed their claims against the defendants on February 13, 2009.
According to a press release dated March 19, 2008, a class action lawsuit was filed on behalf of persons who purchased Auction Rate Securities from TD Ameritrade Holding Corporation and TD Ameritrade, Inc., formerly known as TD Waterhouse Investor Services, Inc. during the Class Period and who continued to hold such securities as of February 13, 2008.
Specifically, the Complaint alleges that TD Ameritrade 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, TD Ameritrade 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 TD Ameritrade 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 TD Ameritrade to “withdraw their support” for the periodic auctions at which the interest rates paid on auction rates securities are set.
The Complaint alleges that TD Ameritrade 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 TD Ameritrade and other broker-dealers were artificially supporting and manipulating the auction rate market to maintain the appearance of liquidity and stability; (3) TD Ameritrade 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) TD Ameritrade 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.