Thursday, August 5, 2010
Purchasers of auction rate securities that have sued for consequential damages resulting from the illiquidity of their investments have not fared well in court; for example, Aimis Art Corp. v. Northern Trust Securities, Inc., 641 F. Supp.2d 314 (S.D.N.Y. 2009), held these damages claims to be "speculative" and violative of section 28(a) of the Exchange Act. There is some evidence that purchasers may get better outcomes in arbitration. A FINRA arbitration panel, set up as part of a special arbitration program for ARS purchasers from firms that settled SEC charges, awarded an investor $81 million in consequential damages against UBS Financial Services. UBS says that it will seek to vacate the award, although the grounds for vacating are very narrow. Inv. News, UBS will seek to have $81M Finra ruling overturned.