SOURCE: Sparer Law Group

Sparer Law Group

January 07, 2011 06:00 ET

Sparer Law Group Announces That Investors in Rydex Inverse Fund Win Important Court Victory

SAN FRANCISCO, CA--(Marketwire - January 7, 2011) - The U.S. District Court for the Northern District of California has issued an order substantially denying defendants' motion to dismiss a class action lawsuit filed on behalf of investors who purchased Rydex's Inverse Government Long Bond Strategy Fund (NYSE Arca: RYJAX) (NYSE Arca: RYJUX) (NYSE Arca: RYAQX) and (NYSE Arca: RYJCX).

In its prospectuses, the Fund claims that its share price moves inversely to the price of the 30-year U.S. Treasury Long Bond. The lawsuit, filed by the Sparer Law Group, alleges that the prospectuses misled investors by failing to disclose that because the Fund "resets" daily it necessarily will not track its benchmark for periods longer than a single day. Therefore, it is unsuitable for investors who plan to hold it for longer than one day. For example, between March 20, 2008 and February 22, 2010, the price of the U.S. Treasury long bond fell by 4.91%. During the same period, the price of the Fund, which should have gained 4.91%, fell by 11.29%.

Judge Lucy Koh ruled that the complaint states a valid claim that the Fund's July 2007 and July 2008 registration statements were misleading. In particular, Judge Koh upheld the allegations that defendants "marketed their Fund as a way to profit from a decline in the value of the 30-year U.S. Treasury bond, but did not specify that the Fund was only appropriate for investors who thought the value of the 30-year Treasury bond would fall that day and discouraged investors from selling shares over the shorter term with sales charges for shares sold within a year or eighteen months of purchase."

Lead attorney, Alan W. Sparer, stated, "Rydex cannot advertise that its product benefits investors in a rising interest rate environment, charge high up-front loads and early sales fees, and then deliver a product that will only track its benchmark for a single day. We think it sends a very important message that Judge Koh has allowed the case to proceed."

A copy of the complaint and the order can be found at

If you would like to discuss the lawsuit or add your name to a list of potential class members receiving updates, please contact Sparer Law Group at (415) 217-7300, or e-mail You may also submit your contact information at

About the firm:
Founded in 2003 by Alan Sparer, after 20 years with a large San Francisco law firm, Sparer Law Group protects investor rights and recovers investment losses for individuals and institutions. The firm specializes in cases involving complex securities products, including derivatives, restricted stock, hedge fund and private equity investments. In 2009, Sparer Law Group was appointed lead counsel in the consolidated securities class action against the Oppenheimer California Municipal Fund, which lost nearly $1 billion of net asset value in 2008.

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