Indeed, Section 36(b)(3) expressly provides that "[n]o such action shall be brought or maintained against 4 Section 17(d) prohibits investment companies and their affiliates from participating jointly in transactions "in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe for the purpose of limiting or preventing participation by such registered . . . company on a basis different from or less advantageous than that of such other participant." 15 U.S.C. § 80a-17(d). 7 Case 3:13-cv-00046 Document 22 Filed 03/11/13 Page 13 of 27 PageID #: 129 any person other than the recipient of such compensation or payments, and no damages or other relief shall be granted against any person other than the recipient of such compensation or payments."

Section 17(e) provides that “it shall be unlawful for any affiliated person of a registered investment company . . . to accept from any source any compensation for the purchase or sale of any property to or for such registered company.” 15 U.S.C. § 80a-17(e). Section 36(a), titled “Civil actions by Commission,” authorizes the SEC “to bring an action in the proper district court . . . alleging that a person” breached a fiduciary duty “involving personal misconduct in respect of any registered investment company” for which such person served as an officer, director, or underwriter.

C 09-4775 PJH, 2010 U.S. Dist. LEXIS 112934 (N.D. Cal. Oct. 22, 2010) ........................................................................................................................6 Smith v. Oppenheimer Funds Distributor, Inc., 824 F. Supp. 2d 511 (S.D.N.Y. 2011) ..................................................................6, 7 Stegall v. Ladner, 394 F. Supp. 2d 358 (D. Mass. 2005) ......................................................................8 Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11 (1979) ...................................................................................................6 STATUES AND REGULATIONS 15 U.S.C. § 80a-17 ..................................................................................................... passim 15 U.S.C. § 80a-17(d) .................................................................................................. 2-3, 5 15 U.S.C. § 80a-17(e) ..........................................................................................................3 15 U.S.C. § 80a-35(a) ..........................................................................................................8 15 U.S.C. § 80a-35(b) ................................................................................................ passim 15 U.S.C. § 80a-35(b)(4) .....................................................................................................5 15 U.S.C. § 80a-47(b) ...................................................................................................... 6-8 15.

Likewise, the claims against MK and MAM are based on knowledge of the Funds’ mismanagement, gross negligence, or reckless disregard for the truth.55 ¶¶ 40, 104, 111-14, 54 ICA § 17(h) provides that a registered investment company’s articles of incorpora- tion cannot protect any director or officer “against any liability to the company or to its se- curity holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his of- fice.” 15 U.S.C. § 80a-17(h). 55 MK argues the exculpatory provision in the Underwriting Agreement bars a claim for negligent misrepresentation but concedes a claim for “gross negligence” or “reckless disre- gard” is allowed.

(See Compl., ¶ 17) Provisions limiting liability for ordinary negligence or errors in judgment are permitted by the ICA. 15 U.S.C. § 80a-17(i). Moreover, in view of the complete absence of allegations of fact challenging the nature and quality of the services rendered by HCA, the mere existence of a limitation of liability provision is meaningless.

PFAC ¶¶ 41, 51-52. The „40 Act‟s definition of “control” applies only to unrelated issues such as determining whether an unregistered investment company is controlling a buyer or seller of securities, 15 U.S.C. § 80a- 7(a) (2010), preventing a complex cascading structure of investment companies owning each other (known as “pyramiding”), 15 U.S.C. § 80a-12(d) (2010), and prohibiting certain Case 1:09-cv-01241-RJH Document 35 Filed 10/08/10 Page 27 of 31 - 22 - transactions, 15 U.S.C. § 80a-17 (2010). Likewise, the term “control” in the CSA arises in the context of corporate affiliation, CSA at 2-3, and is irrelevant to establishing agency.

The plain language of the exculpatory provision at issue certainly applies to claims for breach of contract. Moreover, § 17(i) of the ICA expressly permits such provisions, IS U.S.C. § 80a-17(i), and such provisions do not violate the Company/Funds' Articles of Incorporation merely because Plaintiffs assert that they are not "reasonable and fair and not inconsistent with" the Articles oflncorporation. (FADC ~ 697.)

Even more importantly, the ICA explicitly allows such exculpatory provisions in agreements between investment companies and their advisors. See 15 U.S.C. § 80a-17(i). Given the ICA’s express allowance of such provisions, the provision at issue here does not violate public policy and/or the ICA.

The only part of the cited Investment Company Act section that pertains to fraud is as follows: any affiliated person of or principal underwriter for a registered investment company or any affiliated person of an investment adviser of or principal underwriter for a registered investment company, to engage in any act, practice, or course of business in connection with the purchase or sale, directly or indirectly, by such person of any security held or to be acquired by such registered investment company in contravention of such rules and regulations as the Commission may adopt to define, and prescribe means reasonably necessary to prevent, such acts, practices, or courses of business as are fraudulent, deceptive or manipulative. 15 U.S.C. § 80a-17(j) (emphasis supplied). The only way this paragraph could apply to Moody’s is if it was a “registered investment company” or an “investment adviser” as defined in the Investment Company Act.

The Investment Advisory Agreement of each of the Funds in which plaintiffs claim they owned shares precludes investment advisor liability with respect to plaintiffs’ negligence and breach of fiduciary duty claims. The Investment Advisory Agreements – which are publicly on file with the SEC – specifically provide that, in the absence of willful misfeasance, gross negligence, and the like, the Adviser shall not be liable to the Fund or its investors for any act or omission in the rendering of its services.7 See also 15 U.S.C. § 80a–17(i) (liability of investment advisor may be limited except when the conduct is alleged to be the result of "willful misfeasance, bad faith, or gross negligence … or … reckless disregard.”) Accordingly, the Funds’ Investment Advisory Agreements bar these claims against Van Kampen Asset Management.