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Compliance June 13, 2011
High Court Finds Janus not Liable for Allegedly Misleading Prospectuses
The U.S. Supreme Court has ruled that Janus Capital Group and a subsidiary cannot be held liable in a lawsuit by shareholders over allegedly false statements in prospectuses for several Janus mutual funds.
Reported by Rebecca Moore
Reuters reports that Janus argued that the funds were separate legal entities and that neither the parent company nor its subsidiary was responsible for the prospectuses and could not be held liable. The high court agreed, finding that the alleged false statements in the prospectuses were made by an investment fund, not Janus Capital, and that Janus and the subsidiary therefore cannot be held liable in a private securities fraud lawsuit.
The lawsuit was brought on behalf of those who bought Janus stock from mid-2000 through early September 2003 (see “High Court Revives Janus Market Timing Suit“).
According to Reuters, the allegations that the prospectuses of several Janus funds created the false or misleading impression that the company would adopt measures to curb market timing — when in fact secret arrangements with several hedge funds permitted such transactions, to the detriment of long-term investors. The lawsuit alleged that Janus stock was purchased at inflated prices, until public disclosure of the arrangements.
The news report said Janus paid $225 million in 2004 to settle claims by regulators that it had failed to disclose the trading arrangements to long-term investors.
A district court had dismissed the suit (see “Court Dismisses Janus Shareholders’ Market Timing-linked Claim“), but a federal appellate court ruled the suit could move forward.