The Markets June 13, 2011

Russell Announces Index Additions

Russell Investments has posted its official lists of companies that are set to join or leave the broad-market Russell 3000 Index when its indexes are reconstituted on June 24.
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These lists of U.S. companies—and lists of additions and deletions for the Russell Global Index—are available at http://www.russell.com/Indexes/tools-resources/reconstitution.asp. The list of preliminary additions for the Russell 3000 features 186 companies, including 22 initial public offers, and shows a relatively even distribution of “additions” among sectors. The list shows 35 firms in the health care sector, 33 in the financial services sector and 31 in the technology sector.   

Russell’s index research shows Exxon Mobil ($411.2 billion) and Apple ($321.7 billion) will continue to rank as the largest two companies in the Russell 3000 in terms of market capitalization, while Chevron will re-enter the top 10 as the fourth largest stock.   

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With these changes, the combined market capitalization of stocks in the Russell 3000, which reflects about 98% of the investable U.S. equity universe, will increase from $13.4 trillion as of May 31, 2010, to $16.7 trillion as of May 31, 2011. Similarly, the median market capitalization will increase by 23.0% from $802 million in 2010 to $1.04 billion.   

Russell said any updates to these lists will be posted June 17 and 24. The final membership lists for the Russell 3000, Russell 2000 Index, and Russell 1000 Index will be posted June 27.
Compliance June 13, 2011

High Court Finds Janus not Liable for Allegedly Misleading Prospectuses

The U.S. Supreme Court has ruled that Janus Capital Group and a subsidiary cannot be held liable in a lawsuit by shareholders over allegedly false statements in prospectuses for several Janus mutual funds.
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Reuters reports that Janus argued that the funds were separate legal entities and that neither the parent company nor its subsidiary was responsible for the prospectuses and could not be held liable. The high court agreed, finding that the alleged false statements in the prospectuses were made by an investment fund, not Janus Capital, and that Janus and the subsidiary therefore cannot be held liable in a private securities fraud lawsuit.  

The lawsuit was brought on behalf of those who bought Janus stock from mid-2000 through early September 2003 (see “High Court Revives Janus Market Timing Suit“).  

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According to Reuters, the allegations that the prospectuses of several Janus funds created the false or 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 arrangements.  

The news report said Janus paid $225 million in 2004 to settle claims by regulators that it had failed to disclose the trading arrangements to long-term investors.  

A district court had dismissed the suit (see “Court Dismisses Janus Shareholders’ Market Timing-linked Claim“), but a federal appellate court ruled the suit could move forward.

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