Funds in Dispute: The Cost of Not Knowing

Funds in Dispute: The Cost of Not Knowing Your Rights at the Outset

As specialists in funds’ disputes, our engagement almost invariably starts in the same manner. An investor will contact us and request advice in relation to a potential dispute. There could be any number of reasons why the dispute has arisen. Perhaps the investment manager is refusing to provide documents being requested by the investor; maybe the investment manager might have triggered a suspension; or perhaps a redemption notice was rejected or remains unpaid. There are many more reasons why funds’ disputes commonly arise.

While the issue underpinning any dispute will vary, there is one consistent theme. It is highly unlikely, from our experience, that the investor will have sought litigation or insolvency advice in relation to the fund documents before entering those documents. To state the obvious, funds are vehicles which can offer investors the opportunity to make decent returns. They are part and parcel of the global financial landscape. The fund creates a commercial relationship whereby the parties will endeavor to perform their commitments, and all parties will be financially rewarded as agreed under the documents. It is entirely understandable, therefore, that investors believe there is no need to engage funds’ disputes specialists before making the investment. Unnecessary legal costs and potential delay can be avoided.

Go forward in time and an issue has arisen. The litigators are called in, and we commence our review of the information which was available to the investor since the fund launched. As litigators, we undoubtedly concentrate our focus on certain provisions in the fund documents. We will immediately consider – by way of example – jurisdiction, contractual entitlements to information as regards performance and suspension rights. These are just examples of certain clauses which are often not at the forefront of investors’ minds at the outset. Indeed, it is not uncommon for investors to be unaware of their contractual rights (or limitations), and their review of the litigators’ advice can sometimes make for uncomfortable reading.

Investors shouldn’t just hope for best; they should also prepare for the worst. Knowing your rights and limitations could be the difference between making the investment or seeking to alter the terms while the opportunity still exists.

Contact us today to find out how Gilson Gray can be the right advisor for you.