subprime mortgage-backed securities

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.

New York State Common Retirement Fund Settles Securities Suit With Merrill Lynch/Bank of America

On January 13, 2011, the New York State Common Retirement Fund announced a $4.25 million settlement of a securities suit against Merrill Lynch and two former officers. In the suit, the Fund alleged that Merrill Lynch tried to cover up the extent of its involvement in subprime mortgage-backed securities, thus artificially inflating the value of its stock. The lawsuit had been filed in the United States District Court for the Southern District of New York in July. Press Release.