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Tuesday, December 22, 2009

Principal Faces a Fee Suit

Reported by Neil Anderson, Managing Editor

The Oakmark fee case hasn't been decided yet by the Supreme Court, but another class action firm is already going after a different mutual fund firm over allegedly excessive fees. On Friday the attorneys at Seattle-based Keller Rohrback unveiled a lawsuit (filed October 28) over the Principal SAM Balanced Portfolio, claiming that Principal "improperly charged shareholders excessive investment management and distribution fees."

The suit may seem like deja vu all over again to fundsters on the defined contribution (i.e. 401(k), 403(b), etc.) side of the business, as this is not Keller Rohrback's first attack against Principal this year. In July the class action law firm revealed an investigation into Principal's target date lineup, the LifeTime series over "misrepresentations, mismanagement, and/or excessive fees" (see our sister publication, The 401kWire, 7/16/2009).

Principal and Harris Associates (the advisor to the Oakmark Funds) aren't the only fund firms facing "excessive" fee lawsuits. In 2008 a shareholder filed a similar suit against American Funds and Capital Group. Meanwhile, fund fee suits against Solomon Smith Barney and American Century floundered in 2007 and 2006, respectively.


Company Press Release

SEATTLE, Dec. 18, 2009 -- Attorney Advertising. Keller Rohrback L.L.P. (www.krclassaction.com) today announced that on October 28, 2009, it filed suit on behalf of a shareholder of the Principal SAM Balanced Portfolio mutual fund (SABPX), alleging that Defendants Principal Management Corporation, Principal Global Investors, LLC, and Principal Funds distributor, Inc., hereinafter "Principal," improperly charged shareholders excessive investment management and distribution fees. Plaintiff seeks to recover, on behalf of the SAM Balanced Portfolio any improper compensation retained by Principal, in breach of their fiduciary duty under Section 36(b) of the Investment Company Act of 1940.

The Principal SAM Balanced Portfolio is a fund of funds, which is a mutual fund that invests in other Principal funds, including the following:

  • Principal Capital Appreciation Fund (CMNWX)

  • Principal Disciplined LargeCap Blend Fund (PRMGX)

  • Principal Diversified International Fund (PRWLX)

  • Principal Equity Income Fund (PQIAX)

  • Principal High Yield Fund (CPHYX)

  • Principal Income Fund (CMPIX)

  • Principal International Emerging Markets Fund (PRIAX)

  • Principal LargeCap Growth Fund (PRGWX)

  • Principal LargeCap Growth Fund II (PLNAX)

  • Principal LargeCap Value Fund III (PPVAX)

  • Principal MidCap Stock Fund (WMCAX)

  • Principal Money Market Fund (PCSXX)

  • Principal Government & High Quality Bond Fund, (CMPGX) (formerly Principal Mortgage Securities Fund)

  • Principal Preferred Securities Fund (PPSAX)

  • Principal Real Estate Securities Fund (PRRAX)

  • Principal Short Term Income Fund (SRHQX)

  • Principal SmallCap Growth Fund (PMAAX)

    Plaintiff has alleged that shareholders of the SAM Balanced Portfolio actually pay four layers of advisory fees because Principal hires sub-advisors for the SAM fund as well as each underlying fund. For example, in 2008, Defendant Principal Management Corporation paid its sub-advisor, Edge, $1.8 million, to perform the investment advisory service for the fund, and then charged shareholders an additional $11.9 million for investment advisory services that it retained for itself even though it actually performed very few additional advisory services.

    If you are a current shareholder in one of the Principal funds mentioned above, and are interested in this litigation, you may contact paralegal Sara Duncan, or attorneys Michael Woerner or Laura Gerber toll free at (800) 776-6044, or via e-mail at investor@kellerrohrback.com.

    Keller Rohrback is one of America's leading class action firms handling cases for over two decades. We are committed to helping investors recover losses due to breaches of fiduciary duty and excessive fees. Keller Rohrback serves as lead or co-lead counsel in numerous class action cases, including cases against some of the biggest and most powerful corporations in the world. Keller Rohrback's trial lawyers have obtained judgments and settlements on behalf of clients in excess of seven billion dollars.

    Attorney Advertising. Prior Results Do Not Guarantee A Similar Outcome. 

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