Law Commons^™

Sub-Adviser Fee Litigation: Will Section 36(B) Acquire Teeth?, Francis J. Facciolo, Leland S. Solon

Faculty Publications

(Excerpt)

Section 36(b) of the Investment Company Act establishes a private breach of fiduciary duty cause of action for shareholders in an investment company, or mutual fund, to challenge the fees charged by the mutual fund’s investment adviser, in recognition of the fact that the adviser or one of its affiliates customarily creates the mutual fund and has a great deal of influence over the composition of the mutual fund’s board of directors or trustees, which negotiates the fees paid to the investment adviser. Under the Gartenberg standard, which was substantially adopted by the Supreme Court in Jones v. Harris …