US top court rules for Janus in securities case

WASHINGTON (Reuters) – The U.S. Supreme Court ruled Monday that Janus Capital Group Incand a subsidiary cannot be held liable in a lawsuit by shareholders over allegedly misleading prospectuses for several Janus mutual funds.

By a 5-4 vote, the justices overturned a ruling by a federal appeals court that reinstated the class-action securities fraud lawsuit.

“We conclude that (Janus) cannot be held liable because it did not make the statements in the prospectuses,” Justice Clarence Thomas said in the court’s majority opinion.

Janus, in appealing to the Supreme Court, argued the funds were separate legal entities and that neither the parent company nor the subsidiary was responsible for the prospectuses and could not be held liable.

The Supreme Court agreed.

The lawsuit was brought on behalf of those who bought Janus stock from mid-2000 through early September 2003. It alleged that the prospectuses of several Janus funds created the misleading impression that the company would adopt measures to curb market timing, when in fact secret arrangements with several hedge funds permitted such transactions, to the detriment of long-term investors.

The lawsuit alleged that Janus stock was purchased at inflated prices, until public disclosure of the market timing arrangements.

Janus settled the market-timing allegations with federal and state regulators in 2004.

The Supreme Court case is Janus Capital Group v. First Derivative Traders, No. 09-525. (Reporting by James Vicini, Editing by Gerald E. McCormick and John Wallace)