Canadians who invested in mutual funds managed by four fund companies between September 1998 and September 2003 have launched a class action seeking compensation as a result of market timing.

Toronto legal firm Rochon Genova LLP said today the claim filed in Ontario Superior Court names IG Investment Management Ltd., CI Mutual Funds Inc., Franklin Templeton Investments Corp., and AGF Funds Inc.

IG, CI and AGF reached settlements last December with the Ontario Securities Commission under which $97.7 million was distributed to fund investors hurt by market timing. Franklin Templeton followed with a $49.1 million OSC settlement in March.

The Rochon Genova claim alleges those amounts drastically understate the losses to long-term unitholders caused by market-timed trading.

Market timing involves the high-speed in-out buying and selling of mutual fund units to take advantage of transient price staleness on foreign holdings in other time zones.

The lawsuit states that the management companies breached their fiduciary duties and were negligent in allowing market timing between September 1998 and September 2003.

“In allowing market timed trading to occur, the management companies did not act in the best interests of all fund investors and appear to have favoured the interests of market timers over long-term investors of the funds,” said Joel Rochon, a partner at Rochon Genova LLP, in a release.

“The actions of the management companies have affected thousands of Canadian investors who have unwittingly been deprived of hundreds of millions of dollars in investment savings.”