A Shaky Future For Securities Act Claims Against Mutual Funds

摘要

Investors who purchase shares of a mutual fund while the fund's registration statement contains a material misleading statement have broad legal recourse under § 11(a) and § 12(a)(2) of the Securities Act of 1933. These shareholders can prevail in a lawsuit to recover any subsequent decrease in the shares' value without claiming they relied on the misleading statement or that a defendant was at fault with respect to the misleading statement. Moreover, the shareholders' § 11 (a) and § 12(a)(2) claims do not have to meet heightened pleading requirements that apply solely to fraud-based claims.rnHowever, § 11 and § 12 each provide a "loss causation" affirmative defense that defendants have used to defeat § 11(a) and § 12(a)(2) claims at the pleading stage of a lawsuit. The affirmative defense is available to a defendant who can show that the prospectus' material misstatement or omission did not cause the plaintiff's losses. This article explains why, for a mutual fund and related defendants, establishing a loss causation defense is uncomplicated.