A Morgan Stanley client is suing the brokerage for “deceptively marketing” auction rate securities as cash alternatives.

The investor, according to wire service accounts, asserts that Morgan Stanley failed to make material disclosures about the securities. The complaint seeks injunctive relief to “compel Morgan Stanley to rescind millions of dollars in ARS transactions” and is seeking compensatory and punitive damages, according to the Associated Press.

“Morgan Stanley deceptively marketed [auction rate securities] as cash alternatives to money market funds for investors needing liquidity and utterly failed to disclose material information,” investor Gary Miller said in the lawsuit, which was filed in U.S. District Court in Manhattan, according to Reuters.

The lawsuit seeks class-action status on behalf of thousands of investors who acquired auction-rate securities from Morgan Stanley between March 25, 2003, and Feb. 13, 2008.

“The challenges of the auction rate markets are industry-wide, and result from broader credit market conditions,” the brokerage reportedly said in a statement. “The auction rate securities market has existed for over 20 years without significant disruption until recent market events.”

ARS are long-term investments typically marketed as alternatives to cash since their interest rates are reset at short-term intervals. Also, investors can choose to sell the securities.

However, earlier this years a number of auctions failed due to the global credit crisis, forcing many investors to hold on to the securities, which have become illiquid.

The AP noted that earlier this month Deutsche Bank AG and UBS were sued over their marketing of ARS.

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