US appeals court revives Signature Bank lawsuit despite FDIC objection

Former Signature Bank shareholders just got a second shot at holding the bank’s executives and its auditor accountable for what they allege were misleading statements about the bank’s health before it spectacularly imploded in March 2023. The US Second Circuit Court of Appeals reversed a lower court’s dismissal of a securities fraud class action, ruling that the FDIC’s role as receiver for the defunct bank does not strip investors of their right to sue. The decision reopens a case that traces a stock price collapse from roughly $70 to $0.09, one of the more dramatic wipeouts in recent banking history. What the court actually decided The legal fight centers on a law called FIRREA, the Financial Institutions Reform, Recovery, and Enforcement Act. When a bank fails and the FDIC steps in as receiver, FIRREA includes a “succession clause” that transfers certain legal claims to the agency. US District Judge Frederic Block had ruled that this clause gave the FDIC exclusive standing to bring the kind of claims shareholders wanted to pursue. In plain terms: if anyone was going to sue over Signature Bank’s collapse, it had to be the FDIC, not individual investors. The Second Circuit disagree...