OppenheimerFunds decided to settle a lawsuit filed by the state of Oregon over its 529 plan for $20 million, payable to 45,000 investors in the plan early next year.

Oregon had sued the firm for losses in the OppenheimerFunds Core Bond Fund, which the firm marketed as conservative but sustained $36 million in losses due to exposure to mortgage-backed securities. OppenheimerFunds said that “the settlement allows both the state and OppenheimerFunds to avoid a lengthy and expensive legal process and to apply resources to more constructive ends.”

In announcing the settlement, Oregon Attorney General John R. Kroger noted, “On average, class-action securities lawsuit settlements recover 3% of losses. In this case, a 3% recovery of the Core Bond Fund would mean just over $1 million. In contrast, the settlement with Oppenheimer will recover $20 million. This is 57% of the total losses in the Core Bond Fund, and 65% of the losses which a jury might fairly attribute to OppenheimerFunds’ conduct.”

Under the terms of the settlement, OppenheimerFunds does not admit any wrongdoing.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.