On November 11, 2011, Town North Bank NA filed a complaint in the federal district court for the Northern District of Texas against UBS Financial Services Inc., Morgan Stanley & Co. LLC, Merrill Lynch & Co., LLC, J. P. Morgan Securities LLC as successor to Bear Stearns & Co., Inc., and Shay Financial Services, Inc. (Town North's investment advisor). Town North seeks $113 million in damages, alleging that the defendants misrepresented that the mortgage loans underlying RMBS that it purchased complied with underwriting guidelines, overstated the borrowers' capacity to repay their mortgage loans, and failed to disclose the quality of loans underlying the securities and their risk of loss. Town North asserts causes of action under Section 10(b) of the Securities and Exchange Act, state law fraud, and breach of fiduciary duty (against Shay Financial only). Complaint.
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