Dynex Capital Securities Litigation (Merit)
According to the Notice:
Settlement Fund: $7,500,000 in cash. Your recovery will depend on which Merit Bonds you purchased or acquired, the number of Merit Bonds you purchased or acquired, and the timing of your purchases or acquisitions, and any sales.
The Lawsuit: The Settlement resolves class action litigation involving claims that Dynex Capital, Inc. (“Dynex Capital”), Merit Securities, and certain of its current and former executive officers and directors (Thomas H. Potts and Stephen J. Benedetti) (collectively, “Defendants”), allegedly made false and misleading statements during the Class Period regarding the Merit Bonds. See “What Is This Case About? What Has Happened So Far?” below for more information.
Average Amount of Damages: The Settlement Fund consists of $7.5 million plus interest. Based on the total initial face dollar value of the affected Certificates as stated in the prospectus supplements (without subtracting the principal paydowns (if any) received on the Certificates), and assuming all purchasers of the initially offered certificates who were damaged elect to participate, the estimated average distribution is $56.90 per $1,000 in initial certificate value of the Merit Bonds that were damaged. Class Members may recover more or less than this amount depending on, among other factors, when their Certificates were purchased or sold, which Certificates they purchased, the number of Class Members who timely file claims, and the Plan of Allocation, as more fully described in this Notice. In addition, the actual recovery of Class Members may be further reduced by the payment of fees and costs from the Settlement Fund. Defendants disagree and believe that Plaintiff and the Class do not have any recoverable damages.
What has happened so far?
On February 7, 2005, Lead Plaintiff filed a complaint against Defendants Dynex Capital, Inc, Merit Securities Corporation, Thomas H. Potts, Stephen J. Benedetti, Lehman Brothers Inc., and Greenwich Capital Markets, Inc. in the United States District Court for the Southern District of New York under the caption Teamsters Local 445 Freight Division Pension Fund v. Dynex Capital, Inc. et al., Civ. No. 05-1897-HB (S.D.N.Y.) alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) , 78t(a), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5, on behalf of purchasers of Merit Securities’ Collateralized Bond Series 13 Bonds (Merit 13 Bonds”) between August 11, 1999 and May 11, 2004 (the “Initial Complaint Class Period”). On February 7, 2005, pursuant to the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), Lead Plaintiff published a notice of its action to investors, which provided a deadline of April 8, 2005, to seek lead plaintiff appointment.