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Jones v. Harris: Supreme Court Hears Oral Arguments Monday

On Monday, November 2, at 10:00AM, mutual fund directors get their day in court, when the litigants in the Jones v. Harris Associates case will argue their cases before the Supreme Court.  As you may recall, in this case, the petitioners, the plaintiffs in the underlying suit, are requesting that the Supreme Court review whether the Seventh Circuit erroneously rejected the Gartenberg factors and held that, unless the shareholder can show that the adviser misled the fund’s directors who approved the fee, a shareholder’s claim that the fund’s investment adviser charged an excessive fee is not actionable under Section 36(b) of the Investment Company Act.

The Court's decision in Jones v. Harris Associates will determine the standard by which fund directors' approval of their funds' advisory contracts will be reviewed by courts. In other words, the way the court decides the Jones case will determine whether the factors enumerated in Gartenberg used by directors in assessing advisory fees will remain in place, or will be supplanted by some other perhaps more market-based approach. The role of fund boards is central to this case because under the governing statutory scheme, in reviewing a claim challenging an adviser’s compensation, a court is required to give appropriate consideration to a board’s approval of the advisory agreement.  A decision in the case could be issued as early as March of 2010.

The Forum's staff will attend Monday's oral arguments and post an update on Forum News Feed with analysis of the arguments presented.

The status and filings in the case can be followed at:

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