Important First Circuit U.S. Court of Appeals Decision on Auction Rate Securities

Wednesday, December 14, 2016

On November 21, 2016, the U.S. First Circuit Court of Appeals issued an interesting and important securities decision involving state and federal securities fraud claims against Bank of America Securities (now known as Merrill Lynch, by merger).  The claims boils down to an allegation that Bank of America fraudulently sold tens of millions of dollars of auction rate securities ("ARS") to a large customer, Tutor Perini Corporation.

The decision provides a primer on ARS, risks associated with them, and what Bank of America knew (and when) about ARS.  The decision contains a great deal of nuanced discussion about risk disclosures, reliance, and other elements of securities fraud claims (and defenses).

Tutor Perini has a few more hoops to jump through, but should get its chance to present its claims to a jury, hopefully sometime in 2017 (in a case it filed in 2011, judging by the docket number).

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