Wave of Lawsuits Over Losses Could Hit a Wall

Shareholders in big financial firms have accused UBS, Merrill Lynch, MBIA and Morgan Stanley, among others, of trying to hide their home loan problems, which later led to declines in their stock prices.

Institutional investors have sued investment firms, including UBS, saying that they were misled into buying risky securities that later fell sharply in value. And there are more possible defendants, like the rating agencies that were supposed to evaluate these mortgage securities and the accounting firms that audited these companies.

“The wave of litigation that we’ve seen, and certainly the current momentum, is going to eclipse what we saw out of the savings and loan crisis” of the early 1990s, said Jeff Nielsen, managing director at Navigant Consulting. “Some of those cases are still ongoing.”

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Most shareholder class-action claims follow a pattern. For example, in a suit filed in federal court in Los Angeles in February against Morgan Stanley’s chief legal officer, shareholders charged that the company had delayed disclosing its exposure to mortgage-backed securities.

NY Times