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Morgan Stanley, Credit Suisse Group and 10 other securities firms won't have to face combined claims by investors who contend the firms rigged initial public stock offerings in the 1990s, a federal appeals court ruled.
The US Court of Appeals in New York yesterday said a judge erred in granting class-action, or group status to six of 310 cases arising from allegations that the IPO market was manipulated by the banks and the internet start-ups they took public during the technology stock boom.
"The judges really are leaving some people who have been injured without any remedy," said Melvyn Weiss, the lead lawyer for investors. The ruling means investors will have to pursue their claims individually.
The decision doesn't apply to JPMorgan Chase, a legal expert said, which in April settled claims in the case for US$425 million ($619 million).
Investors contend that during the internet stock boom, investment banks raised US$130 billion for the companies they brought to market in initial public offerings. The banks and securities firms reaped billions in fees.
Many of those companies' share prices collapsed in 2000 and 2001, resulting in a wave of bankruptcy filings.
The investors who sued said the banks had secret arrangements requiring IPO clients to buy more stock later at higher prices. That created artificial demand that drove prices higher, until they collapsed, the suit contends.
- BLOOMBERG
