A securities lawsuit targeting KPMG and seven former Signature Bank executives and directors is headed back to federal court after an appeals panel ruled that the bank’s 2023 receivership did not strip investors of their right to pursue fraud claims arising from their own stock purchases.
The Second US Circuit Court of Appeals on Wednesday overturned a March 2025 dismissal of the proposed class action, rejecting the FDIC’s argument that it inherited the investors’ securities claims when it became Signature Bank’s receiver, Reuters reports.
Lead plaintiff Sjunde AP-Fonden, a Swedish public pension fund, alleges that Signature officials made misleading statements about the bank’s liquidity and risk management before its collapse.
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Investors also accuse KPMG, Signature’s auditor from 2001 through 2023, of issuing audit opinions that allegedly misrepresented the condition of the bank’s financial reporting and internal controls.
The FDIC had argued that the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 transferred those rights to the agency as receiver. The district court agreed in 2025, finding that the investors no longer had standing to sue.
The Second Circuit disagreed, finding that the relevant claims belonged directly to investors because they arose from their securities purchases rather than from rights belonging to Signature Bank itself.
KPMG and the individual defendants had separately asked the district court to dismiss the complaint for failure to adequately plead securities violations. The lower court never reached those motions after accepting the FDIC’s standing argument, meaning those challenges remain ahead as the litigation resumes.
Signature Bank was closed by New York regulators on March 12, 2023, after a rapid deposit run and was immediately placed into FDIC receivership. The FDIC later concluded that poor management and inadequate risk controls contributed to the bank’s failure.
