At least 19 underwriters and broker-dealers were sued in class-action, or group, suits after the $330 billion market for auction-rate securities cratered in February 2008. At least eight financial firms, including Citigroup Inc. and Deutsche Bank AG, got complaints tossed when judges ruled they didn't meet pleading requirements. In some cases, the investors were allowed to refile complaints with more detail.
In the lawsuits, investors accused financial institutions of steering them to instruments promoted as safe as cash that turned out to be illiquid and couldn't be redeemed. They also said the banks didn't sufficiently disclose that they took part in the auctions to keep them from failing. The market froze when the financial firms ended that participation.
The case is the People of the State of New York v. Charles Schwab & Co. Inc., 453388/2009, New York State Supreme Court (Manhattan).