An interesting issue, which has generated a district court split, is whether securities class actions can be brought against a mutual fund based on misstatements about the fund’s investment objective and holdings. Mutual funds have argued that it is impossible for plaintiffs to establish loss causation. The price of mutual fund shares is not determined by market securities trading, but rather is based on the fund’s net asset value (NAV)….
Courts have been reluctant to embrace this argument, with several courts noting that as a matter of public policy mutual funds should not be allowed to escape securities liability. In In re State Street Bank and Trust Co. Fixed Income Funds Investment Litigation, 2011 WL 1206070 (S.D.N.Y. March 31, 2011), however, the court examined claims brought under Section 11 and 12 of the ’33 Act and found that this policy rationale cannot trump the required legal analysis.
‘Enforcement 40’ for 2020
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