On December 23, 2009, the United States District Court for the Southern District of New York refused to dismiss a derivative securities fraud putative class action against defendant Ambac Financial Group Inc. (Tolin v. Ambac Financial Group Inc., 08 Civ. 11241 (S.D.N.Y., filed Dec. 24, 2008)). In so doing, the court answered a question of first impression: whether investors in mortgage-related derivatives had standing to pursue their claims where they had not purchased these securities directly from the issuer-defendant. The court ruled that the holding in Ontario Pub. Serv. Employees Union Pension Trust Fund v. Nortel Networks Corp., 369 F.3d 27 (2d Cir. 2004), which stated that a shareholder has to purchase or sell the securities of the defendant company to have standing under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, did not prevent purchasers of a derivative securities products from bringing a Rule 10(b)(5) fraud action against an issuer of securities where an intermediary issuer had bundled those securities to create the derivative. We detail the allegations in the complaint and the court’s legal analysis.