Securities Law Commons^™

Moving Beyond Gartenberg: A Process-Based And Comparative Approach To Section 36(B) Of The Investment Company Act Of 1940, John M. Greabe, Michael Brickman, James Bradley, Nina Fields

John M Greabe

Section 36(b) of the Investment Company Act of 1940 imposes on mutual fund advisers a fiduciary duty with respect to their receipt of compensation from fund assets for the advisory services they provide. For the past quarter century, courts adjudicating claims for breaches of this fiduciary duty have relied heavily on a rubric proposed in Gartenberg v. Merrill Lynch Asset Management Trust, 694 F.2d 923 (2d Cir. 1982). But in doing so, courts have tended to read Gartenberg to require them to serve as rate setters and to make substantive economic judgments about the fairness of mutual fund advisory fees. …