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

摘要

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.