Ashland v. Morgan Stanley & Co., Inc.
Ashland v. Morgan Stanley & Co., Inc., No. 10-1549-cv, slip op. (2d Cir. July 28, 2011)
July 28, 2011
The Court of Appeals for the Second Circuit affirmed the dismissal of a complaint against a broker-dealer that alleged fraud through the misrepresentation of the liquidity of certain auction rate securities at a time when the broker-dealer allegedly knew the market was collapsing. The court, Judge Winter writing, found that "sophisticated" investors such as the chemical company plaintiff in the case, "cannot plead reasonable reliance on the . . . alleged misrepresentations in light of [the broker-dealer's] publicly-filed statements [which disclosed liquidity risks]," even where the plaintiff's financial advisor at the broker-dealer made statements assuring liquidity in the ARS market at the time the plaintiffs purchased the securities.
Cross References
- Ashland v. Morgan Stanley & Co., 700 F. Supp. 2d 453 (S.D.N.Y. 2010) (lower court decision)
- Exchange Act § 10(b)
- Exchange Act Rule 10b-5