The Investment Company Institute of Washington D.C. has until July 31 to respond to a lawsuit filed by two shareholders alleging the organization is in violation of federal security laws, according to Ronald Rubin who is representing one of the shareholders. The ICI is expected to file a motion seeking a dismissal of the suit, said Rubin.

The lawsuit accuses the ICI of breaking federal securities laws by aligning too closely with fund advisers. Since 1997, more than 80 percent of the ICI's board of governors have been executives of advisers, allowing advisers to control the organization's policy agenda, the suit alleges. The large number of advisory firm executives sitting on the ICI's board makes it an affiliate of those advisers, the suit alleges. This creates a conflict of interest because more than 50 percent of the ICI's funding comes from fees paid by fund companies, which are supposed to be run for the benefit of shareholders, the suit alleges.

The lawsuit seeks repayment of all fees paid to the ICI by fund companies and seeks to halt future payment of fees to the ICI by fund companies.

The ICI did not return a call seeking comment.

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