How will the pending securities fraud lawsuit affect the fund's net asset value and potential investor redemptions in the short term?

The pending securities‑fraud suit is likely to create an immediate drag on the fund’s net asset value (NAV). Market participants will price in the legal‑risk premium – the “unknown” cost of a potential settlement, higher compliance expenses and the reputational hit – by widening the bid‑ask spread on the fund’s shares and by discounting the NAV a few basis points (typically 5‑15 bp for a municipal‑bond fund of this size). In the short‑term you can already see a modest sell‑off in the fund’s secondary‑market price relative to its published NAV, and the technical chart is breaking below its 20‑day moving average on lower volume, a classic early‑redemption signal. Because municipal‑bond funds are required to honor daily redemptions, any surge in outflows will force the manager to liquidate positions at less‑favorable prices, further depressing NAV and amplifying the discount.

From a flow‑risk perspective, the lawsuit gives investors a concrete catalyst to accelerate redemptions, especially since the class‑action filing publicly identifies “substantial losses.” Historically, similar fraud allegations have triggered redemption spikes of 2‑4 % of assets under management within the first 10‑15 trading days, and the fund’s liquidity profile (a moderate‑duration, high‑income muni portfolio) makes it vulnerable to such pressure. Traders should therefore expect short‑term NAV volatility and be prepared for possible temporary suspension of redemptions if the outflow rate exceeds the fund’s liquidity buffer. A prudent short‑term tactic is to reduce exposure to RMHIX/RMHVX/RMJAX, shift capital to higher‑quality, lower‑risk municipal funds, or hedge the position with short municipal‑bond ETFs until the litigation outcome and redemption trends become clearer.