Court reverses FSA ruling

It’s the latest chapter in whether insurers can sue participants in a municipal bond transactions for securities fraud.
SEP 19, 2007
An Atlanta federal appeals court yesterday reversed a ruling, thereby affirming the dismissal of securities fraud charges against underwriter Stephens Inc. The court turned down an appeal by Financial Security Assurance Inc., a New York-based insurer, against Stephens. In 2000, FSA filed suit against the underwriter in a district court, alleging that Little Rock, Ark.-based Stephens Inc. made misrepresentations related to $69.6 million in defaulted bonds that were issued in 1998 to cover the completion of a waste-processing facility in Cordele, Ga., according to the Bond Buyer. Specifically, FSA said that Stephens misled it regarding the facility’s operations and its ability to create sufficient revenue to cover the bonds, the Bond Buyer said. These charges were dismissed twice, but the FSA appealed in 2004. Two years later, a federal appeals court said that FSA could file charges against Stephens, but it blasted FSA’s inability to conduct due diligence on the waste facility and its funding. FSA again appealed this decision and lost. The bond industry has been eyeing the case through its duration: Trade groups, such as the Bond Market Association, SIFMA’s predecessor, rallied to the side of Stephens Inc., filing amicus curiae briefs with the appeals court and arguing that bond insurers must conduct their own due diligence.

Latest News

Mercer Advisors, Osaic deepen AI bets with Arch and Nitrogen deals
Mercer Advisors, Osaic deepen AI bets with Arch and Nitrogen deals

Arch claims 40% operating cost savings for Mercer as Nitrogen unlocks its agentic AI and tech suite to 10,000 Osaic advisors

LPL advisor, South Carolina state senator, elected to U.S. Congress
LPL advisor, South Carolina state senator, elected to U.S. Congress

A happy coincidence: one of LPL Financial’s corporate campuses happens to be based in Rep.-elect Wes Climer’s new district.

Advisor moves: JPMorgan lands $940M Merrill veteran in Los Angeles
Advisor moves: JPMorgan lands $940M Merrill veteran in Los Angeles

Wells Fargo and UBS also add advisors from Morgan Stanley, Edward Jones, Merrill and Fidelity in a fresh round of wirehouse recruiting

Wall Street products, Main Street regulators
Wall Street products, Main Street regulators

How we got here – and what to do about it

Most Americans are OK with AI managing their money - but not how you think
Most Americans are OK with AI managing their money - but not how you think

AI trust gap: Americans want protection, not autonomy, in their finances

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor