Alert

Recommended Alerts

Sign Up For Alerts

Second Circuit Affirms Dismissal of Mutual Fund Class Action, Applies SEC Guidance on Industry Concentration

In a decision ratifying the mutual fund industry’s long-standing treatment of portfolio concentration, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of a putative class action against the Sequoia Fund on September 9. In Edwards v. Sequoia Fund, Inc., the shareholder-plaintiffs alleged that the Fund violated its industry concentration policy when healthcare stocks grew to comprise more than 25% of the Fund’s assets in 2015, due to strong growth in the value of its holdings in Valeant Pharmaceuticals, Inc. The Fund’s healthcare position grew to more than 25% due solely to increases in Valeant’s share price, not because of any additional share purchases. Applying SEC guidance from 1983, the Second Circuit affirmed the trial court’s holding that such “passive” increases in concentration cannot constitute a policy violation, defeating the plaintiffs’ claims. The Fund is represented by a Ropes & Gray litigation team.

Read More

Converting Traditional Open-End Funds into ETFs

Practices: Asset Management, Investment Management

Read the report

The Securities and Exchange Commission (the “SEC”) recently published a notice relating to an application for exemptive relief filed by Precidian ETFs Trust (“Precidian”) that would permit an actively managed exchange-traded fund (“ETF”) to operate without being subject to the current daily portfolio transparency condition included in past active ETF orders. We anticipate that this structure may be attractive to many active managers who may seek to offer their strategies as ETFs, including potentially through the conversion of an existing open-end fund into an ETF.

Cookie Settings