The case that the Supreme Court is scheduled to hear in November, Jerry N. Jones et al. v. Harris Associates LP, claims that the
Harris Associates wrote, “The growth of the mutual fund industry has created a powerful check on fees: Investors are free to transfer their dollars elsewhere.”
The Directors Forum said that any court should defer to a fund board on fees and an advisor contract, and that the fund advisor has a fiduciary duty with respect to charging fair fees. It also noted that over the past 15 years, the
“The statutory regime relies upon on independent, engaged and able board,” the Forum said. “Boards effectively use an [arm’s length] Gartenberg-like approach to determine whether a contract is appropriate from the shareholder’s perspective, and courts should ordinarily give deference to the conclusions reached by an informed, engaged board. Failing to give deference to a responsible board determination would, in effect, undermine the existing regulatory regime.”
The U.S. Chamber said the plaintiffs are seeking a huge settlement and it fears the high court could set a precedent that would be detrimental to the mutual fund industry.
“The [existing] standards have worked very well to benefit investors, and we see that in steadily declining fees,” Paul Schott Stevens, president and CEO of the ICI, told The Wall Street Journal. “All of that is at risk if the trial bar is successful in overturning the standards courts have used.” He stressed that comparing the fees charged on retail funds to those imposed on institutional funds is so wrong that it’s “not even apples to oranges; they’re apples to melons.”
But industry critics, including Ryan Leggio, a fund analyst with