jgoff, 08 December 2011
Auction-rate securities holders seeking to win back part of the $330 billion they’ve invested, may get help from a U.S. Securities and Exchange Commission legal brief supporting claims that Merrill Lynch & Co. rigged the moribund market, a lawyer involved in the case said.
Merrill Lynch, now part of Bank of America Corp., failed to adequately inform investors of its alleged role in “propping up” auctions, the SEC said in the brief, filed in the U.S. Court of Appeals for the Second Circuit in New York.
“We think the SEC has come down on the side of investors,” Jonathan Levine, a lawyer with Girard Gibbs in San Francisco, said in a telephone interview. His firm represents investors in the appeal.
SEC Chairman Mary Schapiro moved to reinvigorate the enforcement unit after President Barack Obama appointed her in January 2009. Investigations surged by 32 percent and the agency went to court seeking emergency orders four times as often as it did a year earlier, Enforcement Director Robert Khuzami said at a congressional hearing in May 2009.
If the court agrees with the SEC’s argument, it may lead to the reversal of other dismissed auction-rate cases alleging brokers and dealers rigged the market, Levine said. “Now it depends on whether the court accepts the view of the SEC.”