First Trust Strategic High Income Fund (NYSE: FHI, NYSE: FHY, NYSE: FHO) Investor Securities Class Action Lawsuit 09/12/2008

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Company Name(s): 
First Trust Strategic High Income Fund
Case Name: 
First Trust Strategic High Income Fund Shareholder Class Action Lawsuit 09/12/2008
Case Status: 
Lawsuit Filed
Case Status: 
Settlement Approved
Affected Securities
NYSE: FHI
NYSE: FHY
NYSE: FHO
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
09/12/2008
Class Period Begin: 
07/26/2005
Class Period End: 
07/07/2008
Class Period Begin: 
03/28/2006
Class Period End: 
07/07/2008
Court of Filing: 
United States District Court for the Northern District of Illinois
Date Settled: 
07/28/2011
Settlement Amount: 
$5,150,000
Deadline to Participate in Settlement: 
07/20/2011
Summary: 

July 28, 2011 - The court approved the settlement, entered the orders approving the plan of allocation, the motion for attorneys' fees and expenses and dismissed the action.

July 28, 2011 - The court held a final settlement meeting.

April 1, 2011 - The court preliminarily approved the settlement.

March 21, 2011 - Parties filed stipulation of settlement.

December 17, 2009 - The court denied the defendants' motion to dismiss.

July 29, 2009 - Defendants filed a motion to dismiss.

April 30, 2009 - The lead plaintiffs filed an amended consolidated complaint.

January 15, 2009 - The lead plaintiff and lead counsel were appointed.

November 18, 2008 - All cases were consolidated.

November 12, 2008 - Lead plaintiff motions were filed.

September 12, 2008 - An investor in certain mutual funds shares offered by First Trust Strategic High Income Fund (NYSE: FHY, NYSE: FHI and NYSE: FHO formerly First Trust Portfolios LP) filed a lawsuit in the U.S. District Court for the Northern District of Illinois against First Trust Strategic High Income Fund over alleged violations of Federal Securities Laws in connection with certain allegedly false and misleading statements made between July 26, 2005 and July 7, 2008.

According to the complaint, the plaintiff charges First Trust Strategic High Income Fund and certain of its officers and directors with violations of the Securities Exchange Act of 1934 and Securities Act of 1933. The complaint alleges that between July 26, 2005 and July 7, 2008 defendant issued materially false and misleading statements regarding First Trust Strategic High Income Fund’s business and financial results.

The complaint alleges that during July 26, 2005 and July 7, 2008, defendants issued materially false and misleading statements regarding First Trust Strategic High Income Fund's portfolios and financial results. As a result of defendants’ false statements, First Trust Strategic High Income Fund’s (NYSE: FHY, NYSE: FHI and NYSE: FHO) mutual fund shares traded at artificially inflated prices during July 26, 2005 and July 7, 2008. Beginning in August 2007 and continuing through July 2008, the funds began to acknowledge the serious deterioration in the First Trust Strategic High Income Fund’s portfolios. As a result of these disclosures, the price of First Trust Strategic High Income Fund’s mutual funds shares collapsed.

The true facts which were omitted from the Registration Statements/Prospectuses or were known by the defendants but concealed from the investing public during July 26, 2005 and July 7, 2008 were as follows: (a) First Trust Strategic High Income Fund lacked effective controls and hedges to minimize the risk of loss from mortgage delinquencies which affected a large part of their portfolios; (b) First Trust Strategic High Income Fund lacked effective internal controls to ensure that First Trust Strategic High Income Fund would remain in compliance with restrictions and limitations related to their investment portfolios and strategies; (c) the extent of First Trust Strategic High Income Funds' liquidity risk due to the illiquid nature of a large portion of First Trust Strategic High Income Fund's portfolios were omitted; (d) the extent of First Trust Strategic High Income Fund's risk exposure to mortgage-backed assets was misstated; and (e) the extent to which First Trust Strategic High Income Fund's portfolios were subject to fair value procedures was misstated.

Plaintiff seeks to recover damages on behalf of all purchasers of shares of First Trust Strategic High Income Fund during July 26, 2005 and July 7, 2008, including shares issued in First Trust Strategic High Income Fund's IPOs (the “Class”).