Auction Rate Securities Collapse Litigation

Seeger Weiss was part of a consortium of law firms that played a major role in bringing actions against the broker-dealers involved in the auction rate securities market’s collapse. A number of the Auction Rate Securities litigation cases resulted in successful settlements negotiated to allow for recovery of financial assets for the investors.

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Seeger Weiss was part of a consortium of law firms that brought actions against the broker-dealers involved in the auction rate securities market’s collapse.

Lawsuits were filed on behalf of investors who suffered financial harm against:

  • UBS
  • DeutscheBank
  • Merrill Lynch
  • Wachovia
  • TD Ameritrade
  • Morgan Stanley
  • E*Trade
  • Raymond James
  • Wells Fargo
  • Oppenheimer
  • Bank of America
  • Royal Bank of Canada

The Auction rate securities market was a sales format which held auctions to sell securities that were touted as “highly liquid” short-term investments to be purchased with excess cash but were much less secure than implied.

The Auction Rate Securities lawsuits alleged that the banks knew, but failed to disclose material facts about the auction rates market and the securities they sold to their investors, including that the securities were not cash alternatives, like money market funds but were actually complex, long-term financial instruments with 30-year or longer maturity dates.

Failure of the Auction Rate Securities Market

Even though it was implied that they were “highly liquid” or easily sold, banks knew that they were only liquid at the time of sale because the broker-dealers were artificially supporting and manipulating the auction market to maintain the appearance of liquidity and stability

During the 2008 market crash, the broker-dealers simultaneously withdrew their support of the auction rate securities market on the same day in February 2008, resulting in its collapse.

One New York Times reporter has referred to the collapse of the auction rates market as a “hostage crisis,” in which thousands of investors, including senior citizens, have hundreds of billions of dollars in investments that they cannot access despite having been told that they were liquid investments that were as good as cash. Many of these investors had been misled about the risks and suddenly found their investments were unavailable or potentially worthless.

Auction Rate Securities Lawsuits

Seeger Weiss, along with other law firms sued a number of the largest banking institutions to represent investors who had been financially harmed by the banking practices. Specifically, Seeger Weiss held critical roles in a number of litigation efforts including being appointed Liason Counsel in Waldman v. Wachovia (08-2913), In Re UBS Auction Rate Securities Litigation (08-cv-2967), and Ciplet v. JP Morgan Chase & Co. (08-cv-4580). All three cases were heard in the Southern District of New York.

Additionally, Seeger Weiss and its co-counsel have moved to have the Judicial Panel on Multidistrict Litigation centralize all of the cases against the broker-dealers before a single judge in the Southern District of New York. The majority of the ARS lawsuits were ultimately resolved by agreed settlements which involved the repurchase of securities by appropriate banks, and by payment of fines by those financial institutions.



Since its establishment in 1999, Seeger Weiss has led some of the most complex and high-profile litigations in the U.S.