Section 10(b) of the Exchange Act

Second Circuit Affirms Dismissal of Class Action Alleging That RBS Mislead Investors About RMBS Exposure

On April 15, 2015, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of a putative investor class action against the Royal Bank of Scotland (RBS).  The plaintiffs had brought claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging that RBS induced them into buying American Depository Shares (ADSs) of RBS between October 2007 and January 2009 by misrepresenting the scope of RBS’s investment exposure to subprime mortgage-backed securities at that time.

The Second Circuit affirmed the District Court’s dismissal on all grounds, holding that certain of the alleged misstatements could not serve as the basis for the investors’ claims because they were made in August 2007, before the class period began, and that other alleged misstatements, concerning RBS’s acquisition of Dutch Bank ABR AMRO, likewise could not sustain a claim because they constituted inactionable puffery.  Opinion.

SEC Charges Mortgage Company and Its President/CEO with Fraud

On March 7, 2011, the SEC filed a complaint against Radius Capital Corporation and its president and CEO, Robert A. DiGiorgio in the US District Court for the Middle District of Florida. The complaint alleges that the defendants falsely represented to investors and Ginnie Mae that the residential loans underlying RMBS it issued were or would be insured by the FHA. The SEC alleges that 70% the loans were not FHA-insured and could not be FHA insured because they failed to meet the FHA’s minimum requirements. The SEC alleges violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and SEC Rule 10b-5. Complaint.