SW Legal studies in Business

Investor in Mutual Fund Has No Right to Sue Over Fees Charged by Advisor to Fund
Description

Appeals court affirmed that an investor in a mutual fund had no right of action under the Investment Company Act to contend that fees paid by the fund to an investment advisor were excessive. The mutual fund would have to bring such suit.

Topic

Securities Law

Key Words

Investment Company Act; Investment Advisor; Compensation

C A S E   S U M M A R Y
Facts

Harris Associated advises the Oakmark mutual funds. Plaintiffs, who own shares of Oakmark, contend that the fees paid by Oakmark to Harris are too high and thereby violate the Investment Company Act of 1940. Plaintiffs requested that Harris be required to return investment advisor fees to Oakmark. The district court granted summary judgment for Harris; plaintiffs appealed.

Decision

Affirmed. Plaintiffs had no right to bring the suit. Oakmont had to be a party to the action against the investment advisor under the Investment Company Act. It would have to claim that the compensation paid to Harris was too high for the court to have jurisdiction. As a matter of fact, the fees for Harris were not excessive as they were roughly equal to fees paid by other mutual funds of similar size and investment goals. Under the Investment Advisers Act, an investment advisor is a fiduciary who must make full disclosure, but there is no cap on compensation under that act.

Citation

Jones v. Harris Associates, 527 F.3d 627 (7th Cir., 2009)

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