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An Empirical Study of Mutual Fund Excessive Fee Litigation: Do the Merits Matter?

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  • Quinn Curtis
  • John Morley

Abstract

Building on the US Supreme Court’s recent decision in Jones v. Harris Associates, this article presents the first comprehensive empirical study of mutual fund excessive fee liability under Section 36(b) of the Investment Company Act. We use a hand-collected data set of nearly all excessive fee complaints filed between 2000 and 2009 to investigate several topics, including the relationship between fee levels and the odds that funds would be targeted by excessive fee suits, the relationship between fee levels and suit outcomes, the relationship between excessive fee suits and subsequent fee changes, and the relationship between excessive fee suits and subsequent asset flows. Our most basic finding is that although fees had some ability to predict which funds would be targeted, the strongest predictor of targeting was family size: funds in larger families were much more likely to be targeted than funds in smaller families. (JEL G18, G2, K22, K23)

Suggested Citation

  • Quinn Curtis & John Morley, 2014. "An Empirical Study of Mutual Fund Excessive Fee Litigation: Do the Merits Matter?," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(2), pages 275-305.
    • Handle: RePEc:oup:jleorg:v:30:y:2014:i:2:p:275-305.
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    File URL: http://hdl.handle.net/10.1093/jleo/ews037
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    Cited by:

    1. Kryzanowski, Lawrence & Mohebshahedin, Mahmood, 2020. "Transparency and fund governance efficacy: The effect of the SEC'S disclosure rule on advisory contracts," Journal of Corporate Finance, Elsevier, vol. 62(C).
    2. deHaan, Ed & Song, Yang & Xie, Chloe & Zhu, Christina, 2021. "Obfuscation in mutual funds," Journal of Accounting and Economics, Elsevier, vol. 72(2).

    More about this item

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G2 - Financial Economics - - Financial Institutions and Services
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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