U.S. Rep. Tom Emmer (R-MN) on Tuesday proposed legislation to protect Americans’ mutual fund investments by halting excessive litigation against mutual fund advisers.
“Many Americans may not be aware how much of their savings is invested in mutual funds,” Rep. Emmer said. “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.”
Rep. Emmer sponsored the Mutual Fund Litigation Reform Act, H.R. 8188, to amend the Investment Company Act of 1940 to provide complaint and burden of proof requirements for certain actions for breach of fiduciary duty, according to the text of the bill.
By improving litigation requirements, H.R. 8188 would reduce trivial lawsuits against heavily regulated firms to ensure investor protection, according to Rep. Emmer’s office, which noted that plaintiffs involved in Section 36(b) suits would be required to provide the factual basis for their claims with “clear and convincing evidence.”
“By ensuring lawsuit claims have evidence and are worth pursuing, we can increase the stability of these funds and secure investments in our future,” said Rep. Emmer, who serves on the U.S. House Financial Services Committee, where the bill is referred for consideration. The bill also has been referred to the U.S. House Judiciary Committee.
Rep. Emmer’s bill received support from The Investment Company Institute President and CEO Paul Schott Stevens, who said, “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.”