According to a press release dated April 8, 2008, the Complaint alleges that Raymond James 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, Raymond James 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 Raymond James 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 to “withdraw their support” for the periodic auctions at which the interest rates paid on auction rates securities are set.
The Complaint alleges that Raymond James 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 broker-dealers were artificially supporting and manipulating the auction rate market to maintain the appearance of liquidity and stability; (3) broker-dealers routinely intervened in auctions for their own benefit, to set rates and prevent all-hold auctions and failed auctions; and (4) Raymond James continued to market auction rate securities as liquid investments after it had determined that 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.
The judge appointed lead plaintiff and approved her selection of Girard Gibbs LLP to serve as lead counsel on July 2, 2008. Plaintiff filed a Consolidated Complaint on December 1, 2008.
On September 17, 2009, an order on defendants' motion to dismiss the First Amended Class Action Complaint was granted. The order was based on the plaintiffs’ inability state a legally sufficient claim against some or all of the defendants. Accordingly, plaintiff was granted leave to amend on or before October 16, 2009.
On October 16, 2009, a second amended complaint was filed with the court in this action.
On September 2, 2010, defendants' motion to dismiss the complaint was granted in all respects except that motion is denied with respect to plaintiff's (1) Section 10(b) and Rule 10b-5 claim against the defendants for the period November 2007 through February 13, 2008, and (2) the Section 20(a) claim against the defendants.
On August 30, 2011, the parties entered into a Stipulation of Dismissal with Prejudice.