Court Dismisses ARS-Related Securities Class Action Against UBS

On Monday, Judge Lawrence M. McKenna of the SDNY dismissed the securities class action against UBS, which alleged that the bank misled investors when it sold them auction rate securities.  The court ruled that the case could not continue because UBS had already reached a $19.4 billion settlement in the matter in August with the SEC and several state regulators in which UBS agreed to buy back nearly that amount of securities and pay a fine, the NYT reports.

The court stated:

Given that Plaintiffs have availed themselves of the relief provided for in the Regulatory Agreement, Plaintiffs cannot now allege out-of-pocket damages. When Plaintiffs elected to have UBS buyback their ARS at par value, they received a full refund of the purchase price. Therefore, Plaintiffs have already been returned to the position they were in before they purchased the ARS and before any fraud ensued. They paid $25,000 per share for ARS and have now received $25,000 per share plus the interest or dividends the ARS accrued during the period Plaintiffs held them. And though Plaintiffs allege that they “overpaid” for the ARS, the full refund they received certainly accounted for an inflated purchase price. In sum, Plaintiffs’ out-of-pocket damages are necessarily zero because after choosing to rescind the ARS purchases, Plaintiffs have effectively paid nothing for their ARS.

The NYT article adds that the dismissal could mean that similar lawsuits against other banks might also be dismissed.

Read the NYT article

Read the Court’s Order in In re UBS Auction Rate Securities Litigation