U.S. District Judge Michael Davis found that claimant Allina is indeed a UBS client even though the financial firm had argued that under Financial Industry Regulatory Authority rules ARS issuers are not underwriter customers. The Minnesota non-profit healthcare system had filed its securities claim over ARS it issued in October 2007 that were part of a $475 million bond issuance to finance renovations and remodeling, as well as refinance debt. UBS was its underwriter.
Allina contends that the market collapsed in 2008 because UBS and other financial firms stopped putting in support bids to keep auctions from failing. The healthcare group says that because of this, it had to pay a great deal of money to refinance the securities and make higher bound payments after losing its bond insurance. Allina claims that UBS did not properly represent the ARS market risks, breached its fiduciary duties, and violated state and federal securities laws.
In his decision, Judge Davis noted other rulings in similar cases that rejected other banks’ contentions that the plaintiff was not considered a customer under FINRA rules. One need only look to last month’s 4th U.S. Circuit Court of Appeals decision to let Carilion Clinic proceed with its ARS arbitration case against Citigroup (C) and UBS. Davis also turned down UBS’s claim that agreements it made with Allina mandated that any disputes be submitted to the New York courts or the American Arbitration Association.
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