In the latest development in a number of civil lawsuits nationwide, where mutual fund investors are alleging that several mutual fund companies allowed improper trading in funds, a federal judge lifted the ban on plaintiffs from using documents that would help them build their case against the companies, according to The Associated Press.
Earlier this week, U.S. District Judge J. Frederick Motz granted the plaintiffs' request to discovery, or to have access to documents that defendants in the case, such as Janus Capital Group Inc., Putnam Investments, Strong Capital Management Inc., Alliance Capital Holdings and other mutual fund companies, submitted to state and federal regulatory agencies that are determining settlements.
Investors accuse the companies of giving preferential treatment to wealthy clients, who apparently were allowed to place trade orders after the 4 p.m. market close, an illegal practice also known as late trading. Investors say these rich clients were also allowed to trade rapidly in and out of funds, a legal practice known as market timing, which shoots up expenses for long-term shareholders.
"Plaintiffs' access to the documents may assist in evaluating the worth of any potential settlements and in bringing to an efficient and economic resolution all claims arising from the allegations of late trading and market timing that have been made," Motz wrote in his order.
The fund companies involved in the case are not taking this lying down. At a hearing last week in U.S. District Court in Baltimore, attorneys for the companies asked the judges to postpone any discovery until after June hearings, where it will be determined whether or not to dismiss the lawsuits. Attorneys said that more than $2 billion already has been set aside as recovery claims, which are to be paid through independent distribution consultants.