Chimicles & Tikellis LLP has filed derivative actions on behalf of certain mutual funds alleging that when certain preferential treatment is given to privileged investors – what has been termed “late trading” and “timing” – such treatment harms the mutual fund. Specifically, it has been alleged that, unlike ordinary investors, certain hedge funds were allowed to engage in "late trading" and "timing". Late trades are trades received after 4:00 p.m. EST that are filled based on that day’s net asset value, as opposed to being filled based on the next day’s net asset value, which is the proper procedure under SEC regulations. Late trading allows favored investors to make use of market-moving information that only becomes available after 4:00 p.m. Timing is excessive trading undertaken to turn a quick profit.

The complaints in these derivative cases assert numerous claims on behalf of the various mutual fund families against investment advisors to the funds, advisors’ culpable employees, directors and trustees of the funds, and others (usually timers) who were complicit in the unlawful timing and late trading. The causes of action asserted include: breach of fiduciary duty under Section 36(a) of the Investment Company Act (“ICA”); breach of fiduciary duty and control person liability under Section 36(b) of the ICA; breach of fiduciary duty under common law; aiding and abetting breaches of fiduciary duty; fraudulent or deceptive conduct under Section 206 of the Investment Advisers Act; violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 (with respect to the forced trading in the underlying securities); control person liability under Section 20(a) of the Exchange Act; and civil conspiracy.

The derivative complaints seek damages for harm caused to the various mutual fund families, disgorgement of excessive management fees and profits, removal of fund directors, rescission of fund management contracts, and the payment of attorneys’ fees and expenses, as well as therapeutic or structural changes in the funds’ policies and review procedures, aimed at decreasing the risk of similar wrongdoing occurring in the future. It is our belief that a derivative action will maximize recovery to investors because the illegally gained profits will be returned to the Fund and inure to the benefit of the investors.

Please contact us if you are an investor in one of the mutual fund families listed and would like to learn more about the cases and possibly become a named plaintiff in a derivate lawsuit filed on behalf of the mutual fund:

Denise Davis Schwartzman, Esquire (deniseschwartzman@chimicles.com)
Timothy N. Mathews, Esquire (timothymathews@chimicles.com)
Chimicles & Tikellis LLP
361 West Lancaster Avenue
Haverford, PA 19041
Toll Free: 866-399-2487

To learn more about the individual cases, click on the following links:

   Monday, May 12th, 2008