In a nutshell, the suit evokes the Investment Company Act of 1940, and claims iShares and its ilk are mandated to avoid "overly concentrating its assets in bonds issued by banks shaken by the financial crisis." Yet, "This is just what the Fund did. Defendants deviated from this fundamental policy by diverting approximately 11 percent of the Fund's total net assets into a wholly speculative purchase of distressed, subordinated debt of failing bank Lehman Brothers, approximately one business day before Lehman filed for Chapter 11 bankruptcy." Without getting overly technical, plaintiffs claim that's too damn much money invested too damn riskily in too damn small a basket.
This is a 25-page lawsuit, but, you know, this summary works decently for the whole shebang: You broke the rules to recklessly invest too much money in a narrow, risky move -- what were you thinking? You can see the suit here, if you're not into the whole brevity thing.
You can't squeeze blood from a turnip -- and iShares' total loss in its Lehman investment leaves them unable to purchase even a single turnip to squeeze. So, what do the plaintiffs want? Well, they want the companies and individuals they claim broke the law and behaved incompetently to be punished. And they want "compensatory damages," whatever those may be.
Well, good luck with that. In any event, here's a recipe for turnip mashed potatoes. You could do worse -- and it appears you already have.
H\T | CourthouseNews.com