Vanguard Sued Over New S&P-Based; Fund

Standard & Poor’s parent company, McGraw-Hill Cos., filed a breach-of-contract lawsuit Thursday against mutual fund giant Vanguard Group, claiming that the firm has violated a 1988 licensing contract that allows Vanguard to create investment products based on S&P;’s widely used stock indices.

Vanguard announced plans last month to introduce a line of so-called exchange-traded funds, or ETFs, designed to mimic the performance of various S&P; indices.

But according to the suit, Vanguard created the new products based on trademarked S&P; property without obtaining Standard & Poor’s permission.

Vanguard issued a statement Thursday, calling the suit “baseless and without merit, and a surprising tactic.”

Greg Barton, Vanguard’s general counsel, said the Malvern, Pa.-based fund company has issued nine investment products in the last few years based on S&P; indexes “without objections from S&P; or McGraw-Hill.”

Vanguard said it will vigorously fight the suit.

S&P; said in the suit that it has already issued several licenses that allow other investment companies to create ETFs based on S&P; indices.