Law firm Girard Gibbs has filed a class action lawsuit on behalf of persons who purchased auction rate securities from UBS, UBS Securities and UBS Financial Services between March 21, 2003 and February 13, 2008, inclusive, and who continued to hold such securities as of February 13, 2008.
The class action, captioned Chandler versus UBS, is pending in the US District Court for the southern district of New York.
The complaint alleges that UBS 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, UBS 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 UBS 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 UBS to ‘withdraw their support’ for the periodic auctions at which the interest rates paid on auction rates securities are set.