While it may not decide the fate of about a dozen similar “excessive fee” cases that were brought against mutual fund companies in 2003 and 2004, charging that they should impose institutional-share, rather than retail-share fees on individual investors, it is an important step in the right direction.

 

That is the industry’s take on a decision last week in a case involving Harris Associates, investment advisor to the Oakmark Funds, today’s Wall Street Journal reports.

 

The U.S. Court of Appeals for the Seventh Circuit last week upheld a lower court’s decision in Jerry N. Jones v. Harris Associates, in which the court tossed out charges that the firm has breached its fiduciary duties.

 

Barry Barbash, former director of the Securities and Exchange Commission’s Division of Investment Management, said, “It’s a very significant case because it develops and answers a lot of points that have been open for some time. Plaintiffs are going to have to work a lot harder” to argue excessive fees and rightly due economies of scale, added Barbash, who is now a partner with Willkie Farr & Gallagher LLP.

 

But Jay Baris of Kramer Levin Naftalis & Frankel is not so convinced of the ramifications of the decision. He said: “This case by itself will not result in sweeping changes, but it’s likely to share the debate in coming months and years. Other courts are not bound by the decision.”

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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