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Monday, November 02, 2009

The Supremes Ponder Oakmark

News summary by MFWire's editors

The Jones v. Harris Associates case, in which share-holders of Oakmark Funds sued fund-advisor Harris Associates over a discrepancy between fees charged to mutual fund investors and institutional investors, made its first appearance in front of the Supreme Court today. So which way will the justices rule?

During the oral arguments, Justices interrogated attorneys representing Oakmark shareholders, who claimed that the fund advisor had abandoned its "fiduciary duty" by charging institutional clients only half as much as mutual fund shareholders for the same money management.

Investors who object to a fee “can go look at another fund,” said Chief Justice John Roberts, according to Bloomberg. “It takes 30 seconds.”

The Wall Street Journal reports that Roberts added that "companies change who they invest with for 401(k) plans all the time."

New Associate Justice Sonia Sotomayor weighed in as well, saying, according to the WSJ, "so let's assume all independent board members vote for a fee negotiated by an insider who does the evaluation and says 'I think this is a great deal, guys.' Is that a process that would constitute an arms-length deal?"

The suit was originally filed in an Illinois federal district court and dismissed before it came to trial in 2007. The next year, the case went to the Court of Appeals for the Seventh circuit, where the original ruling was upheld.

The Supreme Court is expected to issue an opinion by June. 

Edited by: Daniel Tovrov

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