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Federal Housing v. Ubs Americas

June 26, 2012


The opinion of the court was delivered by: Denise Cote, District Judge:


This Opinion addresses an issue that was left open by the Court's decision of May 4, 2012, granting in part defendants' January 20 motion to dismiss the Second Amended Complaint. See Federal Housing Finance Agency v. UBS Americas, Inc., ___ F. Supp. 2d ___, No. 11 Civ. 5201 (DLC), 2012 WL 1570856 (S.D.N.Y. May 4, 2012) (the "May 4 Opinion").

Familiarity with the May 4 Opinion and the facts underlying this litigation is assumed. The parties' briefs regarding the motion to dismiss contained cursory footnotes debating the issue of whether, for seven of the issuances upon which plaintiff's claims rely, the Securities Act's three-year timeliness bar had passed on September 6, 2008, when the Government Sponsored Entities ("GSEs"), whose rights plaintiff asserts, were placed into conservatorship. An Order of May 4 directed the parties to submit supplemental briefing addressed to that issue. The briefs were fully submitted on May 23. This Opinion rejects the defendants' contention that the Securities Act claims on the seven securities are time-barred.


The Housing and Economic Recovery Act of 2008 ("HERA") prescribes a three-year statute of limitations, running from the date of the GSEs' conservatorship, for "any action" that the FHFA might bring on their behalf. 12 U.S.C. § 4617(b)(12). As recognized in the May 4 Opinion, HERA's timeliness provision supplants the limitations periods that generally govern claims under the Securities Act. See 2012 WL 1570856, at *2-*5. The parties agree however that, subject to certain exceptions not relevant here, HERA does not revive claims that were time-barred prior to the conservatorship. Under Section 13 of the Securities Act, the right to enforce a liability created under Section 11 generally expires "three years after the security was bona fide offered to the public." 15 U.S.C. 77m (emphasis added).

Thus, the question is whether the seven certificates at issue*fn1 were "bona fide offered to the public" more than three years before September 6, 2008, when FHFA became conservator of the GSEs. For present purposes, it is undisputed that if the offering date is the date that the certificates themselves became available for purchase, FHFA's claims are timely.

Defendants point out that each of the seven certificates was marketed pursuant one of three shelf registration statements, all of which became effective before August 31, 2005. Defendants maintain that the effective dates of these registration statements, not the dates the certificates were actually marketed for sale, establish the beginning of Section 13's three-year repose period. Thus they conclude that the GSEs' claims regarding these certificates expired prior

("ARSI 2006--W3"); MASTR Asset Backed Securities Trust, Series 2005--WF1 ("MABS 2005--WF1"); MASTR Asset Backed Securities Trust, Series 2005--FRE1 ("MABS 2005--FRE1"); MASTR Asset Backed Securities Trust, Series 2005--HE2 ("MABS 2005--HE2"); MASTR Adjustable Rate Mortgages Trust, Series 2005--8 ("MARM 2005--8"); Home Equity Mortgage Loan Asset--Backed Trust, Series INABS 2005-- C ("INABS 2005--C"); Home Equity Mortgage Loan Asset--Backed Trust, Series INABS 2005--D ("INABS 2005--D").

September 6, 2008, making them ineligible for the extension provided by HERA and therefore untimely. For the reasons set forth below, the Court concludes that FHFA's claims with regard to these offerings are timely.

I. Securities Act Shelf Registration

Shelf registration is a process by which securities can be registered to be offered or sold on a delayed or continuous basis. The purpose of shelf registration is to afford the issuer the "procedural flexibility" to vary "the structure and terms of securities on short notice" and "time its offering to avail itself of the most advantageous market conditions." Shelf Registration, SEC Release No. 6499, 1983 WL 408321, at *4 (Nov. 17, 1983) ("SEC Reg. 6499"); see In re WorldCom, Inc. Sec. Litig., 345 F. Supp. 2d 628, 667 (S.D.N.Y. 2004).

As a general matter, the registration statement for a new securities offering must include a copy of the prospectus that will be used to market the securities for sale to the public.

17 C.F.R. § 230.404. In order to satisfy Section 10(a) of the Securities Act, 15 U.S.C. § 77j(a), the prospectus must make detailed disclosures about the securities at issue and, in the case of asset-backed securities, the underlying asset pools. See Regulation S-K, 17 C.F.R. § 229.10 et seq.; Regulation AB, 17 C.F.R. § 229.1100 et seq.; see also In re WorldCom, Inc. Sec. Litig., 345 F. Supp. 2d at 658.

The shelf registration process allows certain would-be issuers to file a generic registration statement with the SEC that omits the type of detailed information that must generally be disclosed to purchasers. 17 C.F.R. §§ 230.409, 230.415, 230.430A. A qualified registrant commits that, at the time of any offering, it will have made the omitted disclosures in some form or another, including by filing a post-effective amendment to the registration statement, filing a prospectus supplement with the SEC, or filing an annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act. See 17 C.F.R. § 229.512. Once this "shelf registration statement" becomes effective, the issuer can take the registration statement "off the shelf," make the required supplemental disclosures, and use the shelf registration statement to ...

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