Federal Judge William H Alsup ruled that the case could go ahead but dismissed some portion of it and ordered additional investors to come forward by November 17th 2006. The National Association of Securities Dealers fined Wells Fargo $6.99 million for mutual fund kickbacks in 2005.
The lawsuit, filed last year by a number of mutual fund investors, alleges that brokers at WPC and HD Vest Investment Services accepted millions of dollars worth of illegal kickbacks and clients were then pushed into particular mutual funds. The case against Wells Fargo will be heard in San Francisco federal court next month.
The list of mutual funds accused of accepting secret payments for biased advice includes Wells Fargo funds, as well as those managed by Fidelity, Franklin Templeton, Hartford, Dreyfus, Oppenheimer, Putnam and MFS.
Judge Alsup accepted the allegations of illegal conduct in two forms - biased advice from broker-dealers and fund assets dissipated by excessive fees.
The US Securities and Exchange Commission is reported to be investigations alleged kickbacks from outside administrative contractors paid to 27 mutual fund companies.