The High Court on Fees

The ruling maintains the status quo, so investors should seek out low-cost funds and let fund companies that overcharge feel it in the pocketbook.

When it comes to mutual fund fees, the Supreme Court has essentially chosen to maintain the status quo. That means a fund's board of directors will continue to have wide latitude on setting fees charged to investors. It also means that investors who are unhappy with the fees should switch funds rather than sue in hopes of forcing a fund company to lower them.

The high court made the ruling recently in a case involving management fees charged by Harris Associates, which runs the Oakmark funds. In the case, some shareholders argued that the fees Oakmark mutual funds charged individual investors should be in line with the lower fees Harris charged institutional clients. An appellate court had earlier ruled that shareholders who sue over excessive fees must show that the fund's board had been misled. But the Supreme Court unanimously disagreed and sent the case back to the lower court for another look.

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Russel Kinnel
Contributing Editor, Kiplinger's Personal Finance