[JURIST] New York Attorney General Andrew Cuomo [official profile] filed a lawsuit [complaint, PDF] against financial firm UBS [corporate website] on Thursday for allegedly misrepresenting so-called "auction rate securities" as low-risk despite the actual volatility of such investments. In the complaint, Cuomo alleges that UBS led investors to believe they could easily divest themselves of the long-term securities, and that after the company was aware of market instability, they continued to push the funds even though top executives had moved quickly to sell their own holdings. During a press conference on the lawsuit, Coumo said [press release]:
Not only is UBS guilty of committing a flagrant breach of trust between the bank and its customers, its top executives jumped ship as soon the securities market started to collapse, leaving thousands of customers holding the bag. Today we bring the first nationwide lawsuit against UBS, seeking to recover billions of dollars for customers and sending a resounding message to the rest of the industry that this type of deceptive behavior will not be tolerated.Cuomo is seeking to force UBS to buy back the securities from investors and to pay restitution for any profits made from their sale, as well as other damages. AFP has more.
On Wednesday, the Texas Securities Board [official website] said [Reuters report] it is considering banning UBS from selling securities in the state because of auction rate securities misrepresentations. A March New York Times report [text] said the practice of representing the securities as low-risk and highly liquid was widespread and has resulted in large loses and a number of lawsuits around the country.