The Dreyfus Corporation noted a triumph this week when a disgruntled investor voluntarily withdrew a class action lawsuit seeking to recover the costs of marketing fees in funds that had closed to new investors.
Mutual fund investor Milton Pfeiffer filed the lawsuit last year in a Manhattan federal court accusing Dreyfus of double-dipping by charging 12b-1 fees on class B shares of funds that had closed to new investors. According to Pfeiffer, Dreyfus had no business docking investors for marketing fees for funds that could no longer be sold.
Dreyfus successfully argued in its defense that class B shares have special circumstances in which 12b-1 fees are part of long-term strategy aimed at recovering up-front marketing costs. "Since it generally takes six years for the distributor to recoup the commissions it has paid out up front, the distributor -- when a fund closes -- is entitled to be reimbursed for amounts it has advanced," Dreyfus said in a statement.