Texas Instruments Inc (TXN) has sued Citigroup (C), Morgan Stanley (MS) and Bank of New York Mellon Corp (BK), accusing the banks of misleading the chipmaker into buying $524 million of auction-rate securities that have become illiquid.
In a complaint filed Wednesday in a Texas state court in Dallas County, Texas Instruments said the banks falsely marketed the securities, which were backed by student loans, as a low-risk, liquid alternative to other short-term investments. It said the banks also failed to disclose the extent to which they participated in auctions to support the market.
As a result of the banks’ actions, “Texas Instruments was unable to accurately analyze the risks and possible interest rates for the auction-rate securities it was purchasing or holding,” the Dallas-based company said. [via Reuters]