ST. LOUIS (CN) – Stifel Financial Corp. and Stifel, Nicolaus & Co. violated securities laws by misleading investors about auction rate securities, a class action claims in Federal Court.
Named plaintiff Joseph Merrick says the defendants represented to investors that auction rate securities (ARS) were cash equivalents or better than market money funds, were highly liquid and meant for short-term investing.
Actually, ARS are complex, long-term instruments with 30-year maturity dates or longer and that they were only liquid at the time of the sale because the defendants were artificially supporting and manipulating the market, the suit states.
On Feb. 13, 2008, Merrick said 87 percent of all ARS markets failed when all the other major broker-dealers refused to support the market, leaving holders of more than $300 billion in ARS with no means of liquidating the investments.
The class consists of all people who bought ARS from the defendants between June 11, 2003 and Feb. 13, 2008. The class is represented by James Rosemergy.