Legal
Allianz Faces Lawsuit in California Over Auction Rate Securities
A class action is being brought in California on behalf of those who bought the common shares of certain mutual funds offered by Allianz Global Investors Fund Management.
The complaint says the defendants did not disclose that the funds lacked effective controls and hedges to minimise the risk of loss and risk of liquidity from a large exposure to auction rate securities, a class of debt instrument that has been particularly hard-hit by the credit crunch.
The credit crunch and its aftermath have seen a flurry of lawsuits against financial services companies and investment houses, in some cases over investment losses, and in other cases in connection with accusations of steering money to the US Ponzi scheme fraudster, Bernard Madoff.
The Allianz complaint also says that the funds lacked controls to keep the funds in compliance with restrictions and limitations related to their investment portfolios and strategies and that the extent of the funds' liquidity risk and loss exposure from the illiquid nature of a large portion of the funds' portfolios, including ARS, was omitted or misstated.
According to the complaint, when the full extent of the funds' liquidity risk and loss exposure from high risk instruments became known, the value of the funds' shares declined significantly.