Oppenheimer & Company won dismissal of a lawsuit brought by investors who claim the group overstated the value of one of its portfolio companies.
A US district court dismissed the complaint saying that certain federal securities laws didn’t apply to the Oppenheimer vehicle under question because it was offered through private placements and not in a public setting.
Plaintiffs rested their case on Section 12(a)(2) of the Securities Act, which makes liable any person who “offers or sells a security . . . by means of a prospectus or oral communication, which includes an untrue statement of a material fact”.
The court struck down that argument ruling that a “prospectus” for these purposes refers only to “a document soliciting the public to acquire securities,” citing the 1995 Supreme Court ruling Gustafson v. Alloyd Co to defend its reasoning.
“The court accepts as true all factual allegations contained in the complaint, but not legal conclusions,” the verdict said.
Two Massachusetts pension plans had sued Oppenheimer in connection with an investment in Global Resource Private Equity Fund I. The plaintiffs allege that the firm used inflated figures to solicit potential investors, misleading them into believing the fund was showing a profit when in fact it was operating at a loss.
Oppenheimer was not immediately available for comment outside of normal business hours.