Boston Business Lawyer for Stockbroker Lawsuits and Shareholder Lawsuits

As the stock market fluctuates wildly from triple-digit losses to triple-digit gains, more investors are filing shareholder lawsuits financial institutions. There were 110 securities class-action shareholder lawsuits filed through the end of June 2008. One report predicted that the number of claims filed this year will increase 27 percent from 2007.

The report, compiled by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse, found that in the first half of 2008 there were 58 class-action suits related to the sub-prime mortgage crisis. Out of those 58 suits, 17 were related to auction-rate securities.

Auction-rate securities consist of corporate stock or municipal bonds with dividend or interest rates that are reset through weekly auctions. Wall Street promoted auction-rate securities to investors as a cash alternative, and it earned hefty fees for creating and auctioning them off. But, the $330 billion market for these financial instruments crumbled early this year as skittish investors stopped bidding.

On August 18, 2008 a federal court in California agreed to the appointment of a Seattle law firm in a class-action suit against Charles Schwab. The plaintiffs hold shares two of Schwab’s YieldPlus funds. The suit alleges that the company misled investors regarding the extent of the funds’ investments in mortgage-backed securities.

Also in August, Massachusetts-based F.W. Webb, a plumbing, heating, and cooling supply company, sued State Street Bank. F.W. Webb’s lawsuit alleged that State Street’s investment in mortgage-backed securities was “out of line with the stated investment objectives” of the company’s 401k plan.

Investment banks created mortgage-backed securities by buying mortgages, usually residential mortgages, from lenders. The banks then pooled these mortgages, and issued securities that entitled investors to a portion of homeowners’ interest and principal payments. When defaults on these home mortgages escalated, however, the system collapsed.

According to the New York Times, eight different lawsuits have been filed against the Reserve Fund, the nation’s oldest money market fund. At least one of the suits alleges that the Reserve Fund’s management warned institutional investors before stock in its Primary Fund fell below a dollar per share, i.e. “broke the buck.”

Money market funds typically buy up low-risk investments, such as government securities. Money market funds keep their asset value at about one dollar per share, and earnings are derived from dividends. The Federal Deposit Insurance Corporation does not insure money market funds.

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Contact Parker|Scheer Business Lawyers

To speak with an experienced Boston Business Lawyer about a Shareholder Lawsuit, please contact Barry Scheer at Parker Scheer LLP seven days a week, toll free at 866-414-0400. There is no fee charged to discuss business litigation. All information furnished will be kept strictly confidential.

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