The plaintiffs brought a class action against mutual fund managers for allowing certain investors to engage in frequent short-term trading (market timing/time zone arbitrage), which allegedly diluted the returns of long-term unitholders.
The court found that the defendants owed a duty of care to the funds and breached the standard of care by failing to prevent, and actively facilitating, frequent short-term trading contrary to their prospectuses.
However, the court dismissed the claim for breach of fiduciary duty, finding no bad faith or dishonesty.
The matter was directed to proceed to a damages trial.
