RMHIX

What is the expected timeline for the lawsuit and any related disclosures that could affect the fund's reporting periods?

Created August 07, 2025 at 08:15 PM

Answer

Below is a step‑by‑step outline of the expected timetable for the securities‑fraud class‑action lawsuit that the Law Offices of Frank R. Cruz are preparing on behalf of investors who lost money in the Easterly ROCMuni High‑Income Municipal Bond Fund (formerly Principal Street High‑Income Municipal Fund) and the disclosures that the fund will likely have to make in its regular reporting filings.

1. Anticipated Litigation Timeline

Stage	Typical Time‑frame	What will happen	Implications for the Fund
1. Complaint filing with the U.S. District Court	0–30 days from the date the law firm announces the case (the press release is dated Aug 7 2025)	The plaintiffs will file a “Complaint” alleging securities‑fraud violations of Rule 10b‑5 (or 10b‑3) and Section 11 of the Securities Act. The filing will include a class‑action certification request.	The fund will be served with the complaint and a summons. The first public notice of the suit will appear in the fund’s next SEC filing (see “Disclosure Requirements” below).
2. Service of Process & Initial Response	30–45 days after filing	The fund (or its “defendant”) must be served and will have 21 calendar days to file an answer or a motion to dismiss.	The fund’s legal counsel will prepare an “Answer” (or a motion) and will also begin gathering internal documents for potential discovery.
3. Class‑Certification Motion	45–90 days after service of the complaint	Plaintiffs will move to certify the case as a class action. The court typically holds a pre‑trial conference within this window.	If the court certifies the class, the fund will be required to disclose the existence of a pending class‑action in its next periodic report (see “Disclosure Requirements”).
4. Discovery Phase	3–6 months (often overlapping with the fund’s quarterly reporting cycle)	Exchange of documents, written interrogatories, and depositions of fund managers, custodians, and possibly the fund’s auditor.	The fund may need to update its internal controls and risk‑disclosure sections in the 10‑K/10‑Q to reflect material “pending litigation” and “contingent liabilities.”
5. Settlement Negotiations / Mediation	6–12 months after filing (but can be earlier)	Many securities‑fraud cases are resolved through settlement before trial. The fund will be in talks with the plaintiffs’ counsel and may enter a confidential settlement conference.	If a settlement is reached, the fund will have to disclose the terms of the settlement, any cash or equity payments, and any related contingent liabilities in the next filing after the settlement is finalized.
6. Trial (if no settlement)	12–24 months after filing (typical “bench‑to‑bench” time for complex securities‑fraud cases)	A jury trial on the merits of the fraud allegations.	The fund will be required to disclose material trial outcomes (e.g., a judgment, award of damages, or a dismissal) in the first filing after the verdict.
7. Post‑judgment / Appeals	Up to 12 months after trial verdict	Either side may appeal the decision. The appeal process can add another year of uncertainty.	The fund must continue to flag the ongoing appeal as a “material pending litigation” in each subsequent filing until the matter is fully resolved.

Bottom‑line timeline:

- Complaint filing: early August 2025 (press release date)

- Initial court response: by late September 2025

- Class‑certification decision: by late October 2025 (if the court moves quickly)

- Discovery: Q4 2025 – Q2 2026 (covers the fund’s FY 2025 and FY 2026 reporting periods)

- Potential settlement or trial: mid‑2026 – mid‑2027 (most likely window for a settlement)

2. Required Disclosures & Their Impact on Reporting Periods

A. SEC Periodic Reports (Form N‑PORT, Form N‑CSR, Form 10‑K/10‑Q)

Report	When the disclosure must appear	What the disclosure must contain
Form N‑PORT (monthly) & N‑CSR (quarterly)	Immediately when the fund receives the complaint (i.e., the first filing after early August 2025). The fund must add a “Legal Proceedings” footnote that identifies the existence of a securities‑fraud class‑action, the parties involved, the alleged claims, and the potential financial impact (if any).
Form 10‑K (annual) – FY 2025	The FY 2025 filing (due mid‑February 2026) will need to include the lawsuit in the “Legal Proceedings” section, noting that the case is still pending, the stage of the litigation, and any estimated range of possible losses (if the fund’s counsel can reasonably estimate exposure).
Form 10‑Q (quarterly) – Q4 2025, Q1 2026, Q2 2026, etc.	Each quarterly filing after the complaint will repeat the “Legal Proceedings” footnote, updating the status (e.g., “class‑certified,” “discovery ongoing,” “settlement negotiations underway”).
Proxy Statement (DEF 14A) – FY 2026	If the lawsuit is still unresolved by the 2026 proxy deadline (mid‑2026), the fund must disclose the pending litigation in the “Item 1A – Risk Factors” and “Item 3 – Legal Proceedings” sections, describing the potential impact on the fund’s net asset value (NAV) and cash flow.
Form 8‑K (material event)	The fund is required to file an 8‑K within 4 business days of any material development (e.g., class‑certification, a settlement offer, a court‑ordered judgment, or a significant change in estimated exposure). This filing is separate from the regular periodic reports and is posted on the SEC’s EDGAR system.

B. Potential Effects on NAV & Reporting Periods

Event	Effect on NAV / Reporting	When it will be reflected
Complaint filing	Immediate “legal‑contingent‑liability” footnote; no quantitative impact yet.	First N‑PORT/N‑CSR (Sept 2025) and 10‑Q (Q3 2025).
Class‑certification	May increase the probability of a cash outflow (settlement or damages). Funds often disclose a range of possible loss (e.g., $0 – $X million). This can affect the risk‑adjusted NAV and may be reflected in the fair‑value pricing of the fund’s holdings.	First 10‑K (FY 2025) and subsequent 10‑Q filings.
Discovery of material misstatements (e.g., fund’s valuation methodology was allegedly misleading)	Could trigger a re‑valuation of portfolio holdings and potentially a write‑down in the quarter the information becomes known.	Immediate impact on the next quarterly NAV (e.g., Q4 2025 if discovery occurs in Oct 2025).
Settlement offer (cash or fund‑level relief)	If the settlement includes a cash payment to investors, the fund will need to record a liability (or a reduction of assets) in the period the settlement is accepted. The NAV will be adjusted downward in the quarter the settlement is booked.	Form 8‑K filing (within 4 business days) and the subsequent 10‑Q (e.g., Q1 2026).
Judgment / damages award	A court‑awarded monetary judgment becomes a contingent liability that must be accrued in the period the judgment is entered. This can materially affect the fund’s NAV and may trigger a material‑event disclosure.	Form 8‑K (within 4 business days) and the next 10‑Q (e.g., Q2 2026).
Appeal	The appeal does not change the liability amount but prolongs the “pending litigation” status, keeping the risk‑factor language in place for the remainder of the reporting cycle.	Continues to be disclosed in each quarterly filing until the appeal is resolved.

3. Practical Take‑aways for Investors & Stakeholders

Expect a “Legal Proceedings” footnote in every fund report from late August 2025 onward. The footnote will be updated each quarter to reflect the case’s progress.
NAV volatility may increase during the discovery and settlement‑negotiation phases (roughly Q4 2025 – Q2 2026) because the fund will have to estimate potential out‑of‑pocket costs.
Material‑event filings (Form 8‑K) will be the first source of detailed information if the case moves to class‑certification, settlement, or judgment. Watch for these filings on the SEC’s EDGAR system.
Risk‑factor updates in the FY 2026 proxy statement will likely highlight the lawsuit as a “potentially material risk” that could affect the fund’s ability to meet its stated investment objectives.
If a settlement is reached before the fund’s FY 2026 filing (mid‑2026), the settlement terms will be disclosed in the FY 2026 10‑K and the subsequent 10‑Q (Q1 2026) as a reduction in assets or a cash outflow, which could materially affect the NAV for that reporting period.

Bottom Line

Timeline: The lawsuit is expected to be filed in early August 2025, with the first court response by late September 2025, class‑certification by late October 2025, discovery through Q4 2025 – Q2 2026, and a likely settlement or trial resolution mid‑2026 – mid‑2027.
Disclosures: The fund will need to add a “Legal Proceedings” footnote to its monthly N‑PORT/N‑CSR and quarterly 10‑Q filings immediately, expand the disclosure in its FY 2025 10‑K, and continue updating each subsequent filing. Any material development (class‑certification, settlement offer, judgment) will trigger a Form 8‑K within four business days, and the impact on NAV will be reflected in the next quarterly NAV calculation.

These disclosures will be cumulative—each filing will build on the previous one—so investors can track the case’s progression and its potential financial effect on the Easterly ROCMuni High‑Income Municipal Bond Fund across the 2025‑2027 reporting horizon.