Dow Corning Sues Over Auction Rate Securities
Dow Corning, the world’s biggest silicone supplier, is suing BB&T Corp. over allegations the North Carolina bank falsely represented the safety and liquidity of $667 million in auction rate securities that Dow has been unable to sell. According to Dow’s complaint, it bought the auction rate bonds from 2005 to February 2008 after BB&T touted the instruments as a “highly liquid, highly rated and secure investments that were equivalent to cash.”
Problems for investors holding auction rate securities reached a fever pitch in February 2008 when the $330 billion ARS market came to a standstill after brokerages abandoned their support for the instruments. Meanwhile, individual investors and institutional investors were left stranded, unable to sell their so-called cash-like investments.
As reported Nov. 6 by Bloomberg, Dow’s complaint accuses BB&T and its Scott & Stringfellow broker/dealer unit of fraud, breach of fiduciary duty, negligent misrepresentation and omissions, and violations of the Michigan Uniform Securities Act.
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