NEW YORK (Reuters) - A U.S. judge on Monday dismissed putative class action lawsuits seeking damages against UBS AG over allegations of securities fraud in the auction rate securities market.
The written ruling said that the plaintiffs had no claim because they were part of agreements with state and federal regulators and law enforcement in August 2008 in which UBS (UBSN.CH)agreed to buy back the ARS, a type of risky debt whose market collapsed in February 2008.
The first lawsuit was filed in March 2008 after the market froze and before UBS agreed to buy back the auction rate securities.
"Given that plaintiffs have availed themselves of the relief provided in the Regulatory Agreement, plaintiffs cannot now allege out of pocket damages," wrote Judge Lawrence McKenna in U.S. District Court in Manhattan. "When plaintiffs elected to have UBS buyback their ARS at par value, they received a full refund of the purchase price."
Auction rate securities are long-term debts whose rates are set at periodic auctions. The credit crisis of 2007 put increasing pressure on the ARS market and by February 2008 the market froze after UBS and other brokerages stopped supporting the auctions.
Plaintiffs were left holding ARS that were illiquid. They paid $25,000 per share and have been paid back $25,000 per share plus interest or dividends on the securities, the judge noted.
Several lawsuits were filed against UBS in New York and consolidated. The ruling grants a UBS request to the court to dismiss them all.
The judge said the plaintiffs may plead within 20 days.
The case is In Re UBS Auction Rate Securities Litigation 08-2967, 08-3082, 08-4353, 08-5251 in U.S. District Court for the Southern District of New York (Manhattan)
(Reporting by Grant McCool; editing by Carol Bishopric)