Document Type

Article

Publication Title

New York Law Journal

Publication Date

10-4-2013

Abstract

(Excerpt)

Shareholders challenging fees paid to the advisers of their mutual funds in civil lawsuits under §36(b) of the Investment Company Act face steep substantive and procedural challenges, but a recent decision from the federal district of New Jersey holds promise for private plaintiffs in this area. The central allegation in Kasilag v. Hartford Investment Financial Services was that the defendant investment adviser retained sub-advisers to perform substantially all of the investment management services for the defendant’s client mutual funds, and then charged its fund clients much higher investment management fees than what those services actually cost defendant. Based on these allegations, the federal district court denied the investment manager’s Rule 12(b)(6) motion to dismiss and allowed the shareholders’ lawsuits to proceed.

The victory for the plaintiffs in Kasilag stands in contrast to the defeats of many other prior plaintiff shareholders who could not present convincing evidence that the challenged advisory fees were excessive. Forced to rely on speculative arguments as to what discovery would reveal, these plaintiffs often were unable to survive the crucial pretrial motion to dismiss stage, and, even if they did get past this stage, inevitably lost at either the summary judgment stage or trial. By highlighting the role of the sub-advisers, the plaintiffs in Kasilag were uniquely able to make a plausible showing that the defendant’s investment management fees were excessive under the circumstances.

Comments

Reprinted with permission from the October 4, 2013 edition of the New York Law Journal© 2019 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. ALLReprints.com – 877-257-3382 – reprints@alm.com

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.