How might this lawsuit influence the credit ratings of the underlying municipal securities held by the fund?

The class‑action suit against Easterly ROCMuni High‑Income Municipal Bond Fund (formerly Principal Street) raises the possibility that the fund’s portfolio‑manager may have mis‑represented the credit quality of the underlying munis. If investigators uncover that the fund held a material share of bonds that were over‑rated, or that the fund’s “high‑income” label was based on inflated yield‑to‑worst calculations, rating agencies could be prompted to re‑evaluate those securities. In practice, a “fraud” finding tends to trigger a more granular review of each issuer’s fundamentals, which often results in one or more downgrades—especially for smaller municipalities that lack the depth of data that larger issuers enjoy. The net effect would be a modest upward shift in average spread (i.e., higher yields) across the fund’s holdings and a downgrade of the fund’s own internal rating (e.g., Moody’s “A‑” or S&P “A‑”) as the credit‑risk profile deteriorates.

From a trading perspective, the immediate market reaction is likely to be a sell‑off in the fund’s shares and a widening of municipal‑bond spreads in the “high‑income” segment. Expect the fund’s NAV to face pressure, with bid‑ask spreads expanding on the secondary market. Short‑term technicals will probably break below recent support levels (e.g., the 20‑day moving average on the fund’s price chart), while the broader muni market may see a modest flight‑to‑quality as investors rotate into AA/AAA‑rated state and local bonds. An actionable play is to consider a short position in RMHIX (or its related share classes) or, if you prefer a more defensive stance, shift exposure to higher‑rated municipal securities or to a municipal‑ETF that screens out the fund’s holdings. Keep an eye on any SEC or FINRA filings that detail the specific bonds in question—those disclosures will be the catalyst for any rating‑agency actions and will help fine‑tune the timing of the trade.