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Supreme Court Ruling On Mutual Fund Fees
Tom Burroughes
31 March 2010
The Supreme Court has sent a key lawsuit over excessive fund fees back to a lower court, much to the relief of the mutual fund industry, media reports said. The ruling should make it easier for mutual fund operators to repulse shareholder suits where allegedly excessive fees are being charged. (To view the court's ruling and comments, click here). In the specific case in question, which is the 2004 case of Jones v. Harris, it involved a suit filed by a group of investors against Harris Associates, the advisor to the Oakmark Funds. In the case, the plaintiffs allege that Harris breached its fiduciary duty by charging excessive management fees. In 2008, the 7th US Circuit Court of Appeals dismissed the case. In its ruling yesterday, the Supreme Court said that the law – rather than market forces - should dictate mutual fund pricing. It said that under the Investment Company Act of 1940, a fund's board members are charged with acting as the fund's fiduciaries.