The Louisiana-based law firm Fishman Haygood Phelps Walmsley Willis & Swanson filed the class action lawsuit in the Southern District of New York on behalf of investors who bought Lloyds American Depositary Receipts between 1 October 2008 and 27 February 2009. The bank’s ordinary stocks are traded on the London Stock Exchange.

The complaint charges the bank and its former chairman, Sir Victor Blank, and chief executive, Eric Daniels, with violations of the Securities Exchange Act of 1934.

On 18 September 2008, the bank, then known as Lloyds TSB, announced the acquisition of Halifax Bank of Scotland. However, Lloyds did not disclose that HBOS was insolvent and received emergency liquidity assistance from the Bank of England as well as assistance from the Federal Reserve around that time, Fishman Haygood said in a statement.

Moreover, when filing its shareholder circular with the SEC recommending the acquisition of HBOS in November 2008, it failed to spell out the nature of the assistance in unambiguous language, according to the lawsuit.

In February 2009, Lloyds reported that the newly-acquired HBOS had suffered a £10 billion ($15.6 billion) loss in 2008, and the price of Lloyds ADRs dropped from $5.33 to $2.99, a decline of 44 per cent, in just a few days.

Fishman Haygood said in a statement that the plaintiff seeks to recover damages resulting from Lloyds’ misrepresentations and omissions on behalf of all buyers of Lloyds ADRs during the aforementioned period.  

A spokesperson for Lloyds Banking Group told this publication that the bank is aware of the case but is yet to hear from the plaintiff. It did not wish to make further comments.  

Lloyds Banking Group, partially owned by the UK taxpayer, is in the process of setting out a new course for its business, which has included integration of its UK wealth management operations. The bank faced an obstacle in 2011 when António Horta-Osório, who replaced Daniels at the helm at the beginning of the year, went on sick leave in November. Happy, he has since recovered and is expected to return to work shortly.