Jones v. Harris Oral Arguments

• Jones v. Harris Oral Arguments Back when the 1970 amendments to the Investment Company Act were written, a divided Congress said investors could sue funds over fees but didn't say much that made sense about adequate grounds for bringing suit. The Securities and Exchange Commission wanted the right to sue to be in the bill. Industry people wanted to make it as hard as possible to do so--and they succeeded. Supreme Court justices, as they listened to oral arguments in the case of Jones v. Harris Associates, tried to figure out what to do about section 36b of the ICA, which creates a fiduciary duty on the part of fund advisors “with respect to the receipt of compensation for services.” After the oral arguments, Nov. 2, the guessing was that, rather than plunge 8,000 fund firms into litigation, the high court would go 6-3 for continuing the Gartenberg standard. But some lawyers thought the Court could come up with a change to add to Gartenberg, directing that district courts must, in the future, make a determination as to whether or not it is valid to compare the fees an advisor charges to funds under its control to the amounts it charges independent clients. For a full transcript from the Jones v. Harris Supreme Court oral arguments, click here.