The original complaint alleges that the Funds and the Funds' registrants, the Funds' adviser, First Trust Advisors L.P., the Funds' sub-advisers, and certain of the Funds' officers and/or directors with violations of the Securities Exchange Act of 1934 and the Securities Act of 1933.
Specifically, the complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Funds' portfolios and financial results. As a result of defendants' false statements, the Funds' shares traded at artificially inflated prices during the Class Period. Beginning in August 2007 and continuing through July 2008, the Funds began to acknowledge the serious deterioration in the Funds' portfolios. As a result of these disclosures, the price of the Funds' shares collapsed.
According to the complaint, the true facts which were omitted from the Registration Statements/Prospectuses or were known by the defendants but concealed from the investing public during the Class Period were as follows: (a) the 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 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 Funds' liquidity risk due to the illiquid nature of a large portion of the
Funds' portfolios was omitted; (d) the extent of the 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.
According to the court minutes for January 20, 2009, The First Trust Group is appointed lead plaintiff and the law firm of Brower Piven is appointed as Lead Counsel for Lead Plaintiff and the Class and the law firm of Krislov & Associates, Ltd. is appointed as Liaison Counsel for Lead Plaintiff and the Class. The Lead Plaintiff shall file a consolidated amended complaint by April 3, 2009. On April 30, 2009, the lead plaintiffs filed a Consolidated Amended Complaint, adding violations of Section 14(a) of the Exchange Act. On July 29, 2009, the defendants filed a motion to dismiss the Consolidated Amended Complaint. On December 17, 2009, the Honorable Samuel Der-Yeghiayan signed the Court's Memorandum Opinion denying the defendants’ motion to dismiss. The parties soon after engaged in settlement discussions.
On January 27, 2011, a minute entry was filed before Honorable Samuel Der-Yeghiayan notifying the Court that the parties have reached a settlement in principle. On March 22, 2011, the plaintiffs filed a motion for preliminary approval of the class action settlement. The proposed settlement is in the amount of $5 million in cash. The motion was approved on April 1, 2011. The final settlement hearing was set for July 28, 2011.
On July 28, 2011, the Honorable Samuel Der-Yeghiayan granted the request for final class certification. According to the Order and Final Judgment, the Court finds that the settlement is fair, reasonable and adequate. The attorneys' fees and costs are reasonable and appropriate. The instant action is dismissed pursuant to settlement. All pending dates and motions are hereby stricken as moot. Civil case terminated.