A district court has ruled that Belmont Holdings Corp. v. SunTrust Banks Inc., a putative class securities action claiming that a 2008 SunTrust (STI) securities’ offerings documents contained faulty financial disclosures, can proceed. According to Judge William Duffey Jr. of the U.S. District Court for the Northern District of Georgia, investors’ claims made against SunTrust and affiliates, and a number of underwriters, and Sections 11 and 12(a)(2) of the 1933 Securities Act are enough for moving forward with the case. The statutory provisions place liability on specific participants in a securities offering where these documents have material omissions and misstatements.
Per the court, SunTrust put out securities that were pursuant to a registration statement. This was done as amended by a prospectus supplement, which incorporates by reference SunTrust’s 2007 Form 10-K. In their initial securities lawsuit, the plaintiffs argued that when the offering was made three years ago, the US housing market was in chaos. To raise funds, SunTrust allegedly put out the securities and a prospectus supplement that included misleading and false information about is reserves, capital, and ability to manage risk.
As a result, investors were misled about the degree of risky loans that SunTrust was exposed to in the housing market. An amended complaint was submitted by the plaintiff pushing forward similar claims that were made in the first lawsuit. However, clarifying allegations supporting the claim that the prospectus supplement was misleading because it failed to adequately disclose SunTrust’s ALLL and because the financial firm’s loss reserves were not enough to cover its loan losses were also included with this lawsuit.
The plaintiff contends that SunTrust knew that it used flaw financial information that would lead to misleading information being added to its prospectus supplement. This flawed information was allegedly used to determine loan loss reserves, ALLL, and loan loss.
Because the court determined that there is sufficient grounds to allege that SunTrust defendants “did not truly believe” the Provision and ALLL that were disclosed, the plaintiff was able to sufficiently allege plausible claims. The court said that claims against the underwriter defendants can also proceed. Except for a few exceptions, claims against outsider auditor Ernst & Young can also move forward.
If you have been the victim of securities fraud, you may be able to recover your losses from the negligent party. The best way to do this is to work with an experienced securities fraud attorney. Your case may be able to be resolved in arbitration or in court.
Belmont Holdings Corp. v. SunTrust Banks Inc. , Docket (PDF)
More Blog Posts:
Investor May Proceed With Suit Alleging Faulty Financial Disclosures by SunTrust, Institutional Investor Securities Blog, August 6, 2011
Wells Fargo Settles Mortgage-Backed Securities Class Action Case for $125M, Institutional Investor Securities Blog, July 19, 2011
8/31/11 is Deadline for Opting Out of $100M Oppenheimer Mutual Funds Class Action Settlement, Institutional Investor Securities Blog, August 17, 2011