2008 financial institution litigation update: banks face surge in securities litigation
The ongoing turmoil in the financial markets has shaken the foundation of the banking world. This crisis, which started with a crack in the armor of subprime mortgage loans, has grown into a global dilemma that threatens governments around the world with the collapse of their financial and credit markets. Many of the oldest and most revered financial firms in the US have fallen or been rescued by the government. In a recent article on financial institution litigation, Tom Vartanian, Dan Loeb, and Nick Arni discuss the unprecedented challenges institutions that are fortunate enough to remain standing face after the first wave of this crisis. Financial Crisis Brings Surge in Securities Litigation Against Banks, 92 Banking Rep. (BNA) 457 (Feb. 24, 2009). Included in these challenges are a dramatic surge in federal securities class actions filed against banks and other financial institutions and a yet-to-come increase in actions brought by the Federal Deposit Insurance Corporation as receiver against parties deemed responsible for bank failures.
The authors conclude that securities fraud claims against banks face significant hurdles due to the structure of the federal securities laws and the ongoing and widespread instability in the financial markets. Nevertheless, in light of the substantial increase in the number of securities fraud class actions filed against banks in 2008, the authors suggest that financial institutions should exercise significant caution when issuing public statements regarding their operations. This is a good time for financial institutions to reevaluate the processes they employ to (i) reach disclosure decisions and (ii) identify information that would be or could reasonably be perceived as being material to the public’s investment decisions. Most important is the process employed by financial institutions to ensure they are not institutionally aware of any material facts that are contrary to their public statements. Similarly, any forward-looking statements should be identified as such and accompanied by specific, tailored, and meaningful cautionary language warning investors of any known or anticipated risks. Although financial institutions would be prudent to follow these steps under any circumstance, doing so is essential in the current financial climate.
Popular related articles
-
In the late 1980s, Clemens Franek sought and received trademark registration status for his "radical" round beach towel.
-
Plaintiff IDG USA, LLC (“IDG”), a Georgia company with its principal place of business in North Carolina, commenced an action against a former employee, Kevin J. Schupp (“Schupp”), a New York resident, alleging breaches of a Non-Compete Agreement, breach of a Confidentiality Agreement, unfair competition, and theft of trade secrets.
-
A 10-year employee accounting manager systematically transfers amounts via ACH to her personal checking account.
-
On August 11, 2010, a federal court rejected a terminated employee's "cat's paw" argument.
-
Massachusetts recently enacted an economic development statute which contains an important amendment to the Massachusetts Personnel Records Statute, G.L. c. 149, § 52C.
-
A recent NSW case has shed useful light on the judicial treatment of misrepresentations in advertising of properties for sale.
-
In the late 1980s, Clemens Franek sought and received trademark registration status for his "radical" round beach towel.
-
An argument over a narrow strip of land has left a mother and son facing massive costs after their case was heard in the Court of Appeal recently.
-
Plaintiff IDG USA, LLC (“IDG”), a Georgia company with its principal place of business in North Carolina, commenced an action against a former employee, Kevin J. Schupp (“Schupp”), a New York resident, alleging breaches of a Non-Compete Agreement, breach of a Confidentiality Agreement, unfair competition, and theft of trade secrets.
-
Set-off effectively allows one person to deduct from sums he owes to another, amounts that the other person owes to him.
-
A 10-year employee accounting manager systematically transfers amounts via ACH to her personal checking account.
-
Where property is obtained by fraud, equity imposes a constructive trust on the recipient so that the property is recoverable and traceable in equity.
-
With the recent shocking findings of the Oliphant Inquiry concerning apparently "gratuitous" cash payments to former prime minister Brian Mulroney, and the current high-profile Basi/Virk trial in British Columbia regarding allegations of bribery and corruption, it is perhaps time for a short lesson in the law related to corruption of public officials.
-
Hedge-fund managers can become fiduciaries of their investors, opening them up to prosecution under the antifraud provisions of the federal Investment Advisers Act, 15 U.S.C. § 80b-6.
-
This is the thirty-fourth in a series of Installments on this blog that discusses issues that arose in the aftermath of the Bernard L. Madoff (“Madoff”) scandal.
-
Shortly before dissolution the last parliament passed the Mortgage Repossessions (Protection of Tenants etc) Act 2010.
-
Where property is obtained by fraud, equity imposes a constructive trust on the recipient so that the property is recoverable and traceable in equity.
-
An applicant for pre-action disclosure must show that its potential claim is more than merely speculative for an application to succeed.
-
In 2007, the Supreme Court resolved, or so we thought, the dispute between the Office of the Comptroller of the Currency (and its regulated entities) on the one hand, and state regulators on the other, regarding preemption over state laws for operating subsidiaries of national banks.
-
The landscape of the financial services industry changed drastically on July 21, 2010, when President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
-
Hedge-fund managers can become fiduciaries of their investors, opening them up to prosecution under the antifraud provisions of the federal Investment Advisers Act, 15 U.S.C. § 80b-6.
-
After the enactment of the Dodd-Frank financial reform bill confirmed its authority to do so, the SEC moved quickly and has adopted proxy access rules—though the debate on this issue is far from over.
-
In his Mansion House speech George Osborne, the Chancellor of the Exchequer, said he would abolish the Financial Services Authority and give most of its power to the Bank of England, undoing the regulatory system set up by Gordon Brown when the Labour party came to power in 1997.
-
This is the thirty-fourth in a series of Installments on this blog that discusses issues that arose in the aftermath of the Bernard L. Madoff (“Madoff”) scandal.
-
On August 25, the SEC adopted final "proxy access" rules by a 3-2 vote.
-
On July 21, 2010 President Obama signed into law The Dodd-Frank Wall Street Reform and Consumer Protection Act.
-
Effective tomorrow, New York's False Claims Act becomes one of the strongest state laws of its kind in the country, even exceeding the federal FCA in several respects.
-
A new regulation that entered into force on 1 June 2010 means that large retailers must re-assess their contracts with suppliers.
-
Recently, the Ninth Circuit clarified its approach to determining the nature of the attorney-client relationship between corporate employees and corporate counsel.
-
On July 13, 2010, the Court of Appeals for the Third Circuit ruled in IUE-CWA v. Visteon Corporation (In re Visteon) that despite a debtor‟s unilateral right to modify or terminate retiree benefits outside of bankruptcy, the debtor must still comply with the restrictions set forth in section 1114 of the Bankruptcy Code when seeking to modify or terminate those benefits during a chapter 11 case.
If you are interested in submitting an article to Lexology, please
contact Andrew Teague at ateague@lexology.com.
