According to a recent report by Law360 [1], the Federal Deposit Insurance Corp. (FDIC), has asked a Manhattan federal court to uphold its updated legal claims against multiple investment banks for involvement in selling risky residential mortgage-backed securities (RMBS) to Alabama’s Colonial Bank, which is now shut down.
The FDIC, which is the bank’s receiver, first sued the bank in 2012. The agency filed a second amended complaint in June—attempting to recover a minimum of $213 million from affiliates of Deutsche Bank AG, HSBC Holdings PLC and others for “allegedly hiding the risks involved with Colonial’s purchase of thousands of bundled mortgages, violating state laws and the federal Securities Act.”
According to the FDIC, the new claims in the second amended complaint are based on the same allegedly untrue or misleading statements, made in the same offering documents, for the same securities, as the claims in the initial and first amended complaints.
These claims were brought to light eight years after Colonial failed and went into government receivership. Due to this, the defendants attempted to have the claims dismissed in September on grounds that the allegations were barred by statutes of limitation and statutes of repose. However, the FDIC said its new claims, “relate back to earlier complaints and deadlines under court rules and should be sustained.”
Previously, the FDIC complaints sought damages under Section 11 of the Securities Act, according to the report. As the defendants tried to state that under the state securities laws of Alabama and Nevada, where Colonial and its RMBS investment subsidiary were based, it was too late for the complaint.
However, the agency retaliated by “resting on Rule 15 of the Federal Rules of Civil Procedure, which covers amended pleadings.” Additionally, the FDIC argued that a delay in filing the complaint is irrelevant, and the rule supersedes the Securities Act’s deadline in this case.
Lawyers for the defendants didn’t respond to requests for comment Tuesday. The FDIC doesn’t comment on pending cases, reported Law360.