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Supreme Court upholds Gartenberg standard in Jones v. Harris

Cameron S. Avery (Of Counsel at K&L Gates LLP, Chicago, Illinois, USA)
Paul H. Dykstra (Partner at K&L Gates LLP, Chicago, Illinois, USA)
Richard M. Phillips (Partner at K&L Gates LLP, San Francisco, California, USA)
Paulita A. Pike (Partner at K&L Gates LLP, Chicago, Ilinois, USA)
W. Rotunno (Partner, Practice Area Leader – Litigation, at K&L Gates LLP, Chicago, Ilinois, USA)
Gwendolyn A. Williamson (Associate at K&L Gates LLP, Washington, DC, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 16 June 2010

80

Abstract

Purpose

The purpose of this paper is to analyze the US Supreme Court's March 30, 2010 decision in Jones v. Harris Associates, LP concerning the evaluation of investment advisory fees under Section 36(b) of the Investment Company Act of 1940.

Design/methodology/approach

The paper lays out the background of Section 36(b), the Second Circuit's 1982 decision in Gartenberg v. Merrill Lynch, and the plaintiff's allegation in the Jones case; discusses differences of opinion among the circuit courts on the fiduciary duty standard in Section 36(b); and explains the Supreme Court's reaffirmation of the Gartenberg standard, including a review of Section 36(b) on advisers' fiduciary duty, the role of comparative fees in the Section 36(b) calculus, the role of independent directors, and the dangers associated with judicial review of a board's decision regarding advisory fees.

Findings

The Court concluded its opinion by once more endorsing the principles articulated in Gartenberg.

Originality/value

The paper provides practical guidance from experienced securities lawyers.

Keywords

Citation

Avery, C.S., Dykstra, P.H., Phillips, R.M., Pike, P.A., Rotunno, W. and Williamson, G.A. (2010), "Supreme Court upholds Gartenberg standard in Jones v. Harris", Journal of Investment Compliance, Vol. 11 No. 2, pp. 27-30. https://doi.org/10.1108/15285811011056358

Publisher

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Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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