Court Dismisses Complaint Filed By Auction Rate Securities Investor

A federal district court has dismissed claims brought by an investor in auction rate securities ("ARS") against a financial service firm and its two wholly-owned subsidiaries that underwrote, marketed and sold the securities and managed the auctions at which the interest rates they paid were set. The plaintiff claimed that the defendants knowingly misrepresented ARS to potential investors as highly liquid investments and earned millions of dollars in sales commissions and fees to their detriment. The court dismissed the complaint, finding that it failed to state a legally sufficient claim and ruling in particular that the complaint did not adequately allege that the defendants had made an actionable misstatement or material omission with scienter.