Mutual Fund Losses Can Be Recovered With Help from an Attorney

New York, NYWhen you're invested in mutual funds and suffer mutual fund losses, such a loss is usually devastating to the average investor. Few are the investors who do it for sport. Most do it out of desperation to fund a retirement, or as a means to send the kids to college. With traditional retirement plans now virtually a thing of the past, Americans have been called upon to fund their own retirement.

Thus when you lose, it's more than just an annoyance. It's devastation. So you won't want to hear about the piles of money that some fund managers are continuing to make.

Today it will be revealed in Alpha Magazine that the 25 top hedge fund managers took home a combined $11.6 billion in 2008. Now, hedge funds are a different animal than mutual funds and many of the top managers who took home more than a billion dollars each did so because their funds did well in spite of the downturn in the economy.

For example, the manager of a fund who may have spotted the pending implosion of the housing and mortgage market and got out before the crisis happened, saved their investors from much pain. One can therefore forgive the savvy manager for such a lucrative payday. He earned it.

The fact remains, however that despite the huge losses in the stock market over the last 18 months, it is widely held that fund managers continue to be well-paid as a group—an observation that appears to mirror the current executive compensation climate that has Americans up in arms right now.

The AIG fiasco has galvanized public opinion, and numerous executives who were contractually owed so-called bonus compensation forfeited the cash in the name of public decency.

There is little doubt that managing someone else's money is a tremendous responsibility, and that responsibility comes with certain requirements. The requirement for fiduciary duty, for example. Under the terms of the Employee Retirement Income Security Act (ERISA), fund managers have a fiduciary duty to manage investor funds with the best interests of the investor at heart, not their own. When that fiduciary duty is breached, there are various penalties under ERISA that can be brought to bear.

And of course, in a case like that of Bernie Madoff which revealed an unprecedented demonstration of fraud, criminal charges are justified and often swift.

However, when mutual fund losses occur, don't cry for the mutual fund manager. He may lose sleep at night—especially if he is conducting his affairs on your behalf honestly—but he is still being paid, and handsomely at that. Chances are his investment portfolio is a lot larger than that of the average American who has long since given up the American dream, and instead is simply hoping to eat with a decent roof over his head.

When losses DO occur, take heart. There is hope.

Witness the losses by 16 households in California after they lost a total of almost $9 million dollars in the collapse of APEX Equity Options Fund in 2007. After consulting with an experienced attorney, the investors filed a joint Securities Arbitration claim through the Financial Industry Regulatory Authority (FINRA).

The plaintiffs claimed that their broker, licensed as a securities broker by Associated Securities, failed in his fiduciary duties to properly advise them and was therefore responsible for the losses. After 12 days of hearings the arbitration panel deliberated and found in favor of the plaintiffs, awarding $8.8 million. That figure represented the entire sum of their losses.

Mutual fund losses stemming from the overall downturn of the economy and the bottom dropping out of the stock market would be a challenge to pursue for compensation. Everyone has lost in this market. However, if your losses may have been avoidable were it not for the lax, or misguided oversight of those responsible for overseeing and managing your investment, a claim may be worth investigating.

After all, you're the one at risk of losing much of your retirement security due to the alleged negligence of others—some of whom are well-paid, and do not lose for poor performance. Indeed, many—as the AIG fiasco has taught us—are rewarded handsomely, regardless of performance.

Mutual funds are an integral part of many investor's retirement and investing plans. When mutual fund losses occur, it's important to consult a qualified attorney. A mutual fund ERISA claim might be possible, and prudent.