Investment Management Litigation

Investment Management Litigation
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Combining Stradley Ronon’s wealth of experience in the investment management industry with the firm’s practical, results-driven approach to litigation, our investment management litigators represent fund industry clients in a wide range of litigation matters and assist our clients in navigating litigation issues related to fiduciary duties, statutory and regulatory requirements, contractual and business disputes, conflicts of interest, and indemnification and insurance matters.

Backed by Decades of Experience

With decades of experience representing investment management clients, Stradley Ronon is keenly aware of their unique legal and business needs. With that always in mind, our investment management litigation team focuses not only on achieving successful results in litigation matters, but also on minimizing the risk, cost and inconvenience of litigation so our clients can focus on achieving their business objectives.

Our Services

Stradley Ronon’s investment management litigators represent and advise investment companies, institutional investors, investment advisers and independent directors in connection with a broad spectrum of matters:

  • Defending mutual funds, exchange-traded funds (ETFs), unregistered investment vehicles, institutional investors, registered advisers, independent directors and fund industry service providers in civil litigation matters, including activist investor litigation, fraudulent transfer litigation, excessive fee litigation, commercial disputes and consumer claims.
  • Advising and representing mutual funds, ETFs, unregistered investment vehicles and institutional investors in connection with investor recovery litigation, including prosecuting securities fraud class action opt-out claims and advising clients with respect to U.S. and non-U.S. investor recovery litigation and arbitration matters.
  • Representing fund industry clients in connection with responding to subpoenas and records requests in private litigation matters and government investigations and conducting related internal investigations.
  • Advising fund industry clients regarding risk transfer issues, including indemnification claims and insurance coverage matters.
     

Notable Experience

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Secures SEC Dismissal in First-Ever Liquidity Rule Enforcement Action

The U.S. Securities and Exchange Commission (SEC) voluntarily dismissed charges with prejudice against two mutual fund independent trustees in the agency’s first enforcement action brought pursuant to the Liquidity Rule (Rule 22e-4) promulgated under the Investment Company Act of 1940 (the Act). The case was filed in the U.S. District Court for the Northern District of New York against registered investment adviser Pinnacle Advisors, two of its officers and two independent trustees of a mutual fund that Pinnacle advised. The SEC alleged that the independent trustees aided and abetted the mutual fund’s purported misclassification of illiquid securities in violation of the Liquidity Rule. Stradley Ronon argued on behalf of the independent trustees that the SEC had no legal basis for its aiding and abetting charges as the independent trustees did not write, review, or even see the liquidity classifications that formed the basis for those charges, did not substantially assist the alleged violation, and otherwise complied with all of their obligations pursuant to the Liquidity Rule. Stradley Ronon further argued that the agency lacked the necessary congressional authority pursuant to the Act to promulgate the Liquidity Rule. The challenge to the agency’s authority to promulgate the Liquidity Rule led the Court to order additional briefing to address the framework for interpreting federal statutes established by the U.S. Supreme Court’s decision in Loper Bright Enterprises v. Raimondo. Stradley Ronon re-filed its motion to dismiss all charges on April 28 arguing that the plain text of the statute did not grant rulemaking authority related to fund liquidity and resubmitted its arguments challenging the SEC’s failure to state a claim for aiding and abetting liability against the independent trustees. Following the briefing, the SEC agreed to dismiss all charges against the independent trustees with prejudice, meaning that the SEC cannot refile the charges. “We are very pleased that the court took the merits of our arguments seriously and that the SEC responded by dismissing the complaint,” said the NYSA Fund independent trustees. “We always believed in the strength of our case and are grateful for our lead attorney Jan Folena and Stradley Ronon’s guidance, knowledge, and litigation capabilities that made this outcome possible.” Lead trial counsel Jan Folena was assisted by Eric Porter, Samantha Kats, Sara Crovitz, Dave Grim, and Eric Purple.    

Featured Publications

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At a Crossroads: How the U.S. Supreme Court’s Decision in an Activist Investor Case Could Reshape Closed-End Funds

Key Takeaways from the PACDL White Collar Practice Seminar: Understanding the New SEC Enforcement Landscape

At the Pennsylvania Association of Criminal Defense Lawyers (PACDL) White Collar Practice Seminar earlier this month, partner Jan Folena, co-chair of Stradley Ronon’s securities and regulatory enforcement practice, shared her insights during a session on U.S. Securities and Exchange Commission (SEC) enforcement. Jan discussed the current enforcement landscape for the recently installed SEC management, how the commission’s priorities have evolved, and what to expect as the SEC’s focus shifts under the second Trump administration. Below are the top three takeaways from her presentation: Accurate Disclosures Are Essential Transparency remains the cornerstone of investor trust. Firms should prioritize clear and precise disclosures, particularly as new products emerge. The SEC’s standard investor protection mandates require rigorous adherence. The SEC’s focus on increased access to private markets and the use of financial technology exemplifies the critical need for accuracy, where misleading disclosures or technology failures can lead to significant enforcement risks. Regulatory Exams Are Increasingly Central There has been a shift in how regulatory oversight is conducted. Many functions traditionally handled through enforcement actions are likely to be addressed during routine and targeted exams. Regulators follow a defined checklist during these reviews, making it imperative for firms to maintain proactive compliance programs. Early identification of appropriate legal arguments and corrective measures during exams can prevent costly enforcement proceedings. Compliance Is an Ongoing Commitment Enforcement risks do not dissipate quickly; federal statutes of limitations can extend from five to 10 years for securities law violations. Avoid complacency, especially during periods of administrative change or uncertainty. Sustained compliance efforts are necessary to mitigate long-term risks and avoid enforcement actions that may arise years after an issue occurs. For firms navigating the complexities of securities enforcement today, Jan’s presentation underscored the evolving regulatory environment and the importance of accurate disclosures, examination readiness, and the ability to identify and present legal arguments at every stage of regulatory scrutiny.

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