"This is just the industry repaying people what investors lost in these cases," says Bloom. "The settlements are not huge—we are not talking about people getting thousands and thousands of dollars."
By Bloom's estimate, there are about 20,000 mutual fund companies in the US, and although the bad actors were few in number, a handful of companies did step out on investors and violate rules laid down by the Securities Exchange Commission.
"Some of the better known ones that were the subject of class actions include Janis, Invesco and the Strong funds," says Bloom. "Some of the mutual fund companies allowed late trading. You are supposed to get the same price regardless of what time of day you sell, but some funds allowed companies held in the fund to get the beginning of the day price. It is sort of like betting on a horse race after it's over."
Others violated their own prospectus by allowing people to "time the market" or "do quick trading."
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"I tell clients this is almost like found money. You wouldn't have filed the lawsuit on your own because it would have been way too expensive. For most people there is no advantage to opt out of these suits. The dollar amounts are not huge and to hire an attorney to this on your own doesn't make sense."
A graduate of Michigan University's law program, Richard Bloom is a registered investment advisor, a CPA and attorney. Bloom Asset Mangement handles fee-based accounts for investors and offers financial planning, estate planning and other services in Farmington Michigan.