The original complaint alleges that Stifel Financial Corp. and its subsidiary Stifel, Nicolaus & Company, Inc. 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 the securities are traded. Auction-rate securities are municipal or corporate debt securities or preferred stocks that pay interest at rates set through periodic auctions. The instruments typically have long-term maturity dates or no maturity date.
The suit, filed on August 8, claims that, pursuant to uniform sales materials and top-down management directives, Stifel Financial Corp. offered and sold auction-rate securities to the public as highly liquid cash-management instruments and as suitable alternatives to money market mutual funds. On Feb. 13, 2008, all of the major broker-dealers, including Stifel Financial Corp., withdrew their support for the auctions. The suit claims that, as a result, investors have been unable to liquidate their auction-rate securities.
The lawsuit alleges that Stifel Financial Corp. 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; 2) The auction-rate securities were only liquid at the time of the sale because Stifel Financial Corp and other broker-dealers were artificially supporting and manipulating the market to maintain the appearance of liquidity and stability; 3) Stifel Financial Corp and other broker-dealers routinely intervened in the auctions for their own benefit to set rates and to prevent all-hold auctions and failed auctions, and; 4) Stifel Financial Corp. continued to market auction-rate securities as liquid investments even after Stifel Financial Corp. and other broker-dealers determined that they would likely be withdrawing support for the periodic auctions and that a freeze of the auction rate securities market would result.
On November 17, 2008, the Court appointed The Stifel Group as Lead Plaintiff and approved their selection of Carey & Danis, LLC and Stueve Siegel Hanson, LLP as Co-Lead Counsel. On January 9, 2009, the lead plaintiffs filed a First Amended Class Action Complaint. On March 10, 2009, the defendants responded by filing a motion to dismiss the First Amended Class Action Complaint. On November 16, 2009, the lead plaintiff filed a Second Amended Class Action Complaint. The pending motion to dismiss the First Amended Class Action Complaint was denied as moot. On December 4, 2009, the defendant filed a motion to dismiss a Second Amended Class Action Complaint.
As summarized in the Memorandum, Opinion and Order entered on July 6, 2010, in March, 2009, the State of Missouri brought a lawsuit against Defendants alleging violations of certain Missouri statutes. In April, 2009, Defendants voluntarily agreed to offer to repurchase certain ARS at par value from certain present and former customers. In January, 2010, Defendants and the State of Missouri entered into a Consent Order that resolves the State Lawsuit. Defendants agreed to offer to repurchase certain ARS at par value according to an accelerated timetable. Lead Plaintiffs accepted the offer. They agreed to a rescission of their ARS purchases, to not participate in any action, class action or lawsuit and to release Defendants “of and from any claim, actions. . . costs, expenses, bills, and controversies of any kind or description.” …By consent of Plaintiffs, this matter will be dismissed. Dismissal is based on the Consent Order entered in the Missouri lawsuit and in accordance with the terms set out in the Consent Order in that case. Accordingly, it is hereby ordered that the Motion for an Award of Attorneys’ Fees and Costs and Entry of Judgment, [Doc. No. 76], is denied as to the Award of Attorneys’ Fees and granted as to the request for dismissal of this action. It is further ordered that this matter is dismissed, with prejudice, as provided herein.