February 25, 2022

U.S. District Court Rules That “Control Share Acquisition” Provision of Closed-End Fund Bylaws Violates the Investment Company Act of 1940

A judge for the U.S. District Court for the Southern District of New York ruled that certain closed-end funds (funds) and their trustees violated the Investment Company Act of 1940 (1940 Act) by approving a change to fund bylaws that impaired the voting rights of the plaintiff shareholder.

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March 4, 2013

Supreme Court Rules in Favor of Adviser in Statute of Limitations Case

The U.S. Supreme Court unanimously ruled in favor of an investment adviser against the SEC holding that the five-year statute of limitations that governs many penalty provisions throughout the U.S. Code begins when a fraud occurs, not when the SEC discovers the fraud. The Court held in Gabelli v. SEC that the SEC must seek civil penalties within five years after alleged conduct occurs, rather than within five years after the SEC discovered (or could have discovered) the conduct.

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October 5, 2011

FINRA Cannot Use Courts to Collect Disciplinary Fines

In Fiero v. FINRA, No. 09-1556-cv (2d Cir. Oct. 5, 2011), the United States Court of Appeals for the Second Circuit held that FINRA and other self-regulatory organizations lack the authority to bring federal court actions to collect on their disciplinary fines. Therefore, FINRA can levy fines, but it cannot…

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August 24, 2011

Court Backs Advisers in Mutual Fund Fee Case

The Ninth Circuit Court of Appeals upheld the lower court’s decision in favor of Capital Research and Management (CRMC) in a suit brought by plaintiff shareholders claiming CRMC’s advisory fees were excessive.  Plaintiffs had argued that CRMC had misused advisory fees earned from investment companies over the year, which amounted to over $6 billion.  They further argued that the shareholders of the funds did not receive any benefits from the economies of scale realized by CRMC.  The District Court had ruled that the plaintiffs failed to prove that the advisory fees charged by CRMC were so disproportionately large that they bore no reasonable relationship to the services rendered.  In upholding the District Court’s ruling, the 9th circuit stated that the District Court had meticulously applied the Gartenberg standard for determining when fees are excessive. 

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July 22, 2011

DC Court of Appeals Strikes Down Proxy Access Rule

The U.S. Court of Appeals in Washington struck down the “proxy access rule” adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The rule, had it been effective, would have allowed investors or shareholder groups that own at least 3% of a company’s stock for three years to put their own board nominees on proxy statements.

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June 13, 2011

Supreme Court Case Limits the Ability of Shareholders to Sue Advisers

The U.S. Supreme Court ruled in favor of an adviser to a mutual fund, Janus Capital Group Inc. and a subsidiary (Janus), in a case that will limit the ability of shareholders of mutual fund companies to prevail in securities fraud suits.

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January 21, 2011

Judge Allows DoubleLine Capital to Operate Pending Trial

The judge presiding over the legal battle between L.A. money managers TCW Group Inc. and DoubleLine Capital has thrown out TCW’s attempt to effectively shut down DoubleLine’s mutual funds pending a trial.

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October 4, 2010

Shareholder Director Nominations Rule Amendments on Hold

The SEC took the unusual act of “staying” its recently adopted amendments to Rule 14a-8 and new Rule 14a-11 under the Securities Exchange Act of 1934 that would have made it easier for shareholders to nominate director candidates.

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July 14, 2010

D.C. Circuit Court Vacates SEC Fixed Indexed Annuities Rule

The Court of Appeals for the D.C. Circuit in American Equity Investment Life Insurance Company v. SEC vacated Rule 151A under the Securities Act of 1933, the SEC's rule that regulated indexed securities.

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June 25, 2010

Supreme Court Upholds the Creation of the PCAOB

Audit firms of ETFs and mutual funds, as well as other issuers of public securities, are required to be registered with the Public Company Accounting Oversight Board (PCAOB) and are subject to inspection by the PCAOB.  In Free Enterprise Fund (FEF) and Beckstead and Watts, LLP v. PCAOB and United States of America, FEF claimed that the PCAOB was unconstitutional.

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