Mutual Fund Cases In Settlement Talks

The parties in the mutual fund trading practices cases, which have been consolidated in the D. of Md., are in settlement negotiations. The Wall Street Journal has an interesting article (subscrip. required) exploring the ramifications of the mutual funds’ agreement to pay $2.5 billion to settle with the SEC and state regulators. Almost all of these funds will go to mutual fund investors (in part because of the Sarbanes-Oxley provisions allowing the SEC to distribute penalties it obtains to injured investors), which is likely to reduce any settlement in the private lawsuits. (The 10b-5 Daily has posted about the cases frequently, most recently about the lead plaintiff contest.)

Quote of note: “Attorneys for the mutual-fund companies have cited the settlement agreements in their defense, which by some measures total more than the alleged damages. The ‘plaintiffs are tilling a plowed field,’ lawyers for Janus wrote in a court filing.”

Quote of note II: “The plaintiffs’ attorneys are likely to contend in amended complaints due later this month that the fund companies need to prove that they are fully compensating investors for the harm done by the trading. Some of the lawsuits are seeking the return of fund-management fees on the theory that the managers violated their fiduciary duty to investors, an issue not directly addressed by the SEC settlements.”

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