The U.S. Court of Appeals for the Seventh Circuit issued a unanimous opinion on May 19, 2008, rejecting the Gartenberg standard by which courts have judged the “reasonableness” of mutual fund investment advisers’ fees for nearly 30 years. The court, in the case of Jones v. Harris Associates L.P., stated that market forces and investor decisions were better suited than a court to regulate an adviser’s fees, so long as the adviser “make[s] full disclosure [to investors] and play[s] no tricks.” As long as an adviser meets this basic fiduciary obligation, the court said that there is no cap on its compensation.

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Source: Investment Management Alert
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