Monday, October 15, 2012
Labaton Sucharow Secures $62 Million Settlement in a Rare Achievement in Subprime Related Mutual Fund Class ActionNEW YORK (October 15, 2012) — Labaton Sucharow LLP served as sole lead counsel in In re Regions Morgan Keegan Closed-End Fund Litigation in the U.S. District Court for the Western District of Tennessee (No. 07-CV-02830) on behalf of investors in the publicly traded shares of four closed-end investment companies. On October 12, 2012, the Firm reached a $62 million settlement, a rare achievement.
Labaton Sucharow partner Joel H. Bernstein, who lead the case team, stated: "It is unusual to reach a settlement of this nature in a class action against mutual funds, even those stuffed with subprime mortgage-backed securities. The $62 million settlement is a huge benefit for the shareholders."
The lead plaintiffs, on behalf of persons who purchased the publicly traded shares of four closed-end mutual funds: RMK High Income Fund, Inc. ("RMH"), n/k/a Helios High Income Fund, Inc.; RMK Strategic Income Fund, Inc. ("RSF"), n/k/a Helios Strategic Income Fund, Inc.; RMK Advantage Income Fund, Inc. ("RMA"), n/k/a Helios Advantage Income Fund, Inc.; and RMK Multi-Sector High Income Fund, Inc. ("RHY"), n/k/a Helios Multi-Sector High Income Fund, Inc. (collectively, the "Closed-End Funds"), between June 24, 2003 and July 14, 2009 (the "Class Period"), allege that the Funds fraudulently overstated the values of portfolio securities and reported false Net Asset Values per share, resulting in significant losses to shareholders.
In addition, the Closed-End Funds allegedly concentrated between 65%-70% of their portfolio securities in subprime mortgage-backed securities or asset-backed securities ("ABS") in violation of their stated restriction against investing more than 25 percent of portfolio securities in the "same industry." The Closed-End Funds also allegedly misclassified more than $240 million of ABS—18 percent of the Funds' gross initial market capitalization—as "corporate bonds" and "preferred stocks" so as to hide their same industry violations and to appear more diversified than they actually were. Further, the Closed-End Funds' chosen benchmark index allegedly misled investors because it tracked solely corporate bonds and preferred stock and not ABS or MBS.