Search By:
Products
Injury
Topic
Company
Industry
First Trust Portfolios may have misrepresented to investors the risk portfolio of the assets in the First Trust Strategic High Income Funds.
Investigation Source (Case #08-cv-05213)
- Nationwide
Investigation Scope
Category Information
Investigation Topics
- Investments
- Mutual Funds
- Registration Statement
- Mortgage-Backed Securities
Product or Service
- Mutual Funds
Injury Type
- Monetary Loss
Investigation Details
This is a securities class action lawsuit against First Trust Portfolios L.P.; Hilliard Lyons Asset Management; and Valhalla Capital Partners LLC.
First Trust is the investment advisor to a series of closed end mutual funds, which includes First Trust Strategic High Income Fund, First Trust Strategic High Income Fund II and First Trust Strategic High Income Fund III (collectively the "First Trust Funds"). Hilliard Lyons Asset Management; and Valhalla Capital Partners LLC.are sub advisors to funds within the First Trust Funds.
The class action complaint alleges that during the Class Period, First Trust issued materially false and misleading statements regarding the First Trust Funds' portfolios and financial results. As a result of defendants' false statements, the First Trust Funds' shares traded at artificially inflated prices during the Class Period.
Beginning in August 2007 and continuing through July 2008, the First Trust Funds began to acknowledge the serious deterioration in the First Trust Funds' portfolios. As a result of these disclosures, the price of the First Trust Funds' shares collapsed.
According to the class action complaint, the true facts which were omitted from the Registration Statements/Prospectuses or were known by First Trust but concealed from the investing public during the Class Period were as follows:
(a) the First Trust Funds lacked effective controls and hedges to minimize the risk of loss from mortgage delinquencies which affected a large part of their portfolios;
(b) the First Trust Funds lacked effective internal controls to ensure that the Funds would remain in compliance with restrictions and limitations related to their investment portfolios and strategies;
(c) the extent of the First Trust Funds' liquidity risk due to the illiquid nature of a large portion of the First Trust Funds' portfolios was omitted;
(d) the extent of the First Trust Funds' risk exposure to mortgage-backed assets was misstated; and
(e) the extent to which the Funds' portfolios were subject to fair value procedures was misstated.
First Trust is the investment advisor to a series of closed end mutual funds, which includes First Trust Strategic High Income Fund, First Trust Strategic High Income Fund II and First Trust Strategic High Income Fund III (collectively the "First Trust Funds"). Hilliard Lyons Asset Management; and Valhalla Capital Partners LLC.are sub advisors to funds within the First Trust Funds.
The class action complaint alleges that during the Class Period, First Trust issued materially false and misleading statements regarding the First Trust Funds' portfolios and financial results. As a result of defendants' false statements, the First Trust Funds' shares traded at artificially inflated prices during the Class Period.
Beginning in August 2007 and continuing through July 2008, the First Trust Funds began to acknowledge the serious deterioration in the First Trust Funds' portfolios. As a result of these disclosures, the price of the First Trust Funds' shares collapsed.
According to the class action complaint, the true facts which were omitted from the Registration Statements/Prospectuses or were known by First Trust but concealed from the investing public during the Class Period were as follows:
(a) the First Trust Funds lacked effective controls and hedges to minimize the risk of loss from mortgage delinquencies which affected a large part of their portfolios;
(b) the First Trust Funds lacked effective internal controls to ensure that the Funds would remain in compliance with restrictions and limitations related to their investment portfolios and strategies;
(c) the extent of the First Trust Funds' liquidity risk due to the illiquid nature of a large portion of the First Trust Funds' portfolios was omitted;
(d) the extent of the First Trust Funds' risk exposure to mortgage-backed assets was misstated; and
(e) the extent to which the Funds' portfolios were subject to fair value procedures was misstated.
Defendant Details
| Name (Stock Symbol) | Brief Description |
|---|---|
| First Trust Portfolios LP | First Trust Portfolios LP is an asset manager and investment advisor. |
| Lyons Asset Management Inc. | Lyons Asset Management Inc. is an asset manager. |
| Valhalla Capital Partners | Valhalla Capital Partners is an asset management fiirm focused on managing high-yield fixed income portfolios. |