In this class action damages trial arising from negligent facilitation of frequent trading in retail mutual funds, the court held that dilution caused by time zone arbitrage should be quantified using the Next Day NAV method rather than the profits method.
The court rejected the argument that prior OSC settlements conclusively compensated investors, found that objective trading characteristics and circumstantial evidence were sufficient to identify time zone arbitrage, and declined to require direct evidence of each trader’s subjective motivation.
Additional timer accounts were included for one defendant outright and for the other subject to specified filters, and the class definition was amended accordingly to exclude those market timers from recovery.
The court awarded principal damages of $60.48 million against one remaining defendant, plus further amounts for qualifying additional accounts, and $37,900,659.63 against the other, with simple prejudgment interest at 2.8% from commencement of the action.
