Washington, D.C. - Today, Congressman Tom Emmer (MN-06), introduced the Mutual Fund Litigation Reform Act, which will support Americans’ mutual fund investments. The legislation improves litigation requirements to reduce frivolous lawsuits against firms who are already heavily regulated to ensure investor protection. Congressman Emmer is a member of the House Financial Services Committee, where the bill is referred.
"Many Americans may not be aware how much of their savings is invested in mutual funds. Whether you’re a savvy investor or just placing a monthly amount into a 401(k) or other retirement account, these funds preserve our earnings and help us save for the future," said Congressman Emmer. "By ensuring lawsuit claims have evidence and are worth pursuing, we can increase the stability of these funds and secure investments in our future."
The Investment Company Institute (ICI) President and CEO Paul Schott Stevens said in support of the legislation, “The Mutual Fund Litigation Reform Act will help federal courts to terminate before trial abusive lawsuits against mutual fund advisers, while preserving the right of shareholders to bring meritorious actions. None of the lawsuits brought since Congress added Section 36(b) in 1970 has resulted in a final judgment against the defendant adviser, evidence that these suits waste adviser resources without any benefit for the shareholders that plaintiff lawyers say they’re helping. ICI appreciates the leadership of Rep. Tom Emmer (R-MN) as he works to address this important issue for mutual fund advisers and the more than 100 million US mutual fund shareholders."
Mutual funds are the go-to financial product for millions of Americans. Approximately 56 million households in America own mutual funds. These funds are heavily regulated and are often subject to excessive and unfounded lawsuits known as Section 36(b) suits. Abuse of this legal means of recourse can cost millions of dollars - costs which are born by investors and result in needless paperwork and administrative costs that would otherwise be spent on asset growth and improved returns for investors.
Emmer’s bill requires plaintiffs in these Section 36(b) suits to spell out the factual basis for their claims with “clear and convincing evidence.” This standard is used for adjudicating claims under several federal statutes, and would curb the growth of lawsuits brought without the evidence available to win on the merits. Mitigating these unworthy claims would limit significant costs in the pre-trial discovery phase of the litigation.
The Mutual Fund Litigation Reform Act passed the House Financial Services Committee during the 115th Congress. The Congressional Budget Office found the bill would result in no increased spending, and that it had no intergovernmental or private-sector mandates.
Read the full text of Mutual Fund Litigation Reform Act here.