Bank of America Corp.'s Merrill Lynch unit won an appeal of aruling dismissing an investor suit over auction-ratesecurities.

A federal appeals court in New York ruled today that MerrillLynch provided the investor, Colin Wilson, with sufficientinformation about its practice of propping up auctions in thesecurities by submitting its own bids, barring his claim thatMerrill misled investors about the securities' liquidity. Wilsonhad appealed a lower court's dismissal of the suit.

“Merrill's particular disclosures sufficiently alerted investorsin Merrill ARS of the likelihood that the interest rates andapparent liquidity of these ARS reflected Merrill's ownintervention in these auctions rather than the natural interplay ofsupply and demand,” U.S. Circuit Judge Robert Katzmann wrote onbehalf of a three-judge panel.

Wilson, who sought to represent a class of investors inMerrill's auction-rate securities, bought $125,000 of thesecurities from an online brokerage in 2007. In 2008, Merrill andthe other major dealers in auction-rate securities withdrew theirsupport for the auctions, causing most of them to fail. Wilsonclaimed he and other investors were left with securities theycouldn't sell.

Auction-rate securities are municipal bonds, corporate bonds andpreferred stocks whose rates of return are periodically re-setthrough an auction.

Bill Halldin, a spokesman for Charlotte, North Carolina- basedBank of America, said in an e-mail that the company is pleased withthe court's decision. Bank of America bought Merrill in 2009.

The case is Wilson v. Merrill Lynch & Co., 10-1528, SecondU.S. Circuit Court of Appeals (New York).

Bloomberg