A federal judge has dismissed a class action against UBS that alleged fraud in the sale of auction rate securities.
The investor plaintiffs had no standing to sue since they had been made whole by the brokerage firm, Judge Lawrence McKenna of the U.S. District Court for the Southern District of New York ruled yesterday.
The UBS plaintiffs also attempted to include investors who were not covered in the settlement in their claim, but Mr. McKenna said they had no standing to do that.
Last August, UBS Financial Services Inc. of New York settled with federal and state regulators, and agreed to buy back almost $19 billion of ARS.
Similar class actions against other major brokerage firms are pending.
"UBS is very pleased with the court's decision,” its spokesman Kris Kagel said in a statement.
“UBS has been a leader in working to restore liquidity for [clients],” he added.
“We simply disagree ... with the [judge's] reasoning,” said Daniel Charles Girard, a partner at Girard Gibbs LLP in San Francisco, one of the lead plaintiff's attorneys in the case.
The relevant law “is particularly unclear,” he said.
Mr. Girard said he may refile the case with some plaintiffs who bought ARS from so-called downstream firms.
“We have those clients,” he said. “This is not the end point for this litigation.”
