Reproduced with permission from Securities Regula-
tion & Law Report, 42 SRLR 802, 04/26/2010. Copy-
right 姝2010 by The Bureau of National Affairs, Inc.
(800-372-1033) http://www.bna.com
MUTUAL FUNDS
The Market Meltdown and Mutual Fund Investors:
Likely Claims and Several Potential Defenses
BYDEBORAH G. HEILIZER AND S. LAWRENCE POLK
According to the Financial Industry Regulatory Au-
thority (FINRA), 2009 witnessed a significant in-
crease in arbitration filings and complaints by mu-
tual fund investors. Contrary to past experience, mutual
funds now make the largest single product source for
customer complaints, outpacing claims arising from in-
vestments in common stocks and corporate bonds.
Overall, FINRA reports that the total number of new ar-
bitration claims filed in 2009 approached the level of ac-
tivity last witnessed in the ‘‘tech wreck’’ era of 2001–
2004.
1
One likely reason for this surge of claims by fund in-
vestors is alleged losses from funds with exposure to
structured finance products often associated with the
subprime, ‘‘Alt-A’’ or commercial real estate markets.
By 2006, the market for issuance of mortgage-backed
1
‘‘Summary Dispute Resolution Statistics’’ reported at
http://www.finra.org/ArbitrationMediation/AboutFINRADR/
Statistics/.
Deborah Heilizer and Lawrence Polk are part-
ners in Sutherland Asbill & Brennan LLP’s
Securities Enforcement, Regulatory and Liti-
gation practice. Kurt Lentz, a Sutherland
associate, assisted with the preparation of this
article.
REPORT
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