12b-1 fees continue to draw class action legal fire, and Capital Group
still lies at the heart of the controversy. After filing one 12b-1 fee-focused suit against the American Funds
' parent over a year ago, Wolf Haldenstein Adler Freeman & Herz
just filed two more such suits last month. Meanwhile, the trial for a similar suit, first brought by Milberg
five years ago, just finished last week.
Like In Re American Funds Fee Litigation
(the Milberg suit), Wolf Haldenstein's three cases accuse Capital Group of charging "excessive and disproportionate 12b-1 fees" for three funds: Korland vs. Capital Research and Management Company
, filed on June 18, 2008, involves the Europacific Growth Fund
; McBride vs. Capital Research and Management Company
, filed on July 21, 2009, involves the Fundamental Investors Fund
; and Beck vs. Capital Research and Management Company
, filed on July 31, 2009, involves the Washington Mutual Investors Fund
, a senior partner at Wolf Haldenstein, sees the three cases stemming from the very nature of 12b-1 fees.
"There's no reason why a fund with assets of $100 billion needs to pay a 12b-1 fee of a quarter of a percent or half a percent," Krasner told the MFWire
, asking rhetorically if a $100 billion fund needs to get bigger. "There's a real problem with 12b-1 fees. They really should be negotiating these fees with the brokers."
Krasner added that he's "very optimistic" about the three suits.
"We think that the SEC is waking up," Krasner said.
Yet Capital Group and the industry may be able to breathe easy about these three suits, at least for now. Chuck Freadhoff, a spokesman for Capital Group, confirmed that both parties have agreed to effectively put Korland on hold until In Re American Funds is resolved. (U.S. District Judge Gary Feess presides over both In Re American Funds and Korland.) After the trial for In Re American Funds ended Friday, the post-trial hearing is now scheduled for September 2.
Meanwhile, Capital Group's attorneys, Gibson Dunn & Crutcher
, have been granted extra time to respond to both Beck and McBride. Feess also presides over McBride, while Beck landed in judge James Otero's court.
Neil Anderson, Managing Editor
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