“Sub-prime” Securities Class Actions Against Mutual Funds?
Among his predictions for the big stories that the mutual fund industry will see in 2008, Columnist Chuck Jaffe of the Arizona Daily Star sees a potential wave of class action lawsuits against funds that have been burned by the sub-prime mortgage problem. He explains:
There hasn’t been a good wave of lawsuits against funds for years, but with funds like Regions Morgan Keegan Intermediate Bond and High Income, there’s little doubt that the plaintiff’s bar has potential cases to talk about. Those funds were each hurt in their own way by investments made in sub-prime mortgages; in the case of the RMK funds, the fallout was disastrous, amounting to losses surpassing 45 percent. Even in cases like Fidelity Ultra Short — down about 5 percent this year — lawyers will say the fund should not have lost money stretching out of its comfort zone in an effort to get additional yield.
