Building on the U.S. Supreme Court’s recent decision in Jones v. Harris Associates, this paper 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 dataset of 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 case 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.
Citation
Quinn Curtis & John D. Morley, An Empirical Study of Mutual Fund Excessive Fee Litigation: Do the Merits Matter?, 30 Journal of Law, Economics, & Organization 275–305 (2014).