That question is at the heart of Jones v. Harris Associates, an appeal from a May 2008 ruling from the 7 th U.S. Circuit Court of Appeals, which had thrown out the lawsuit by investors in the Oakmark funds who claimed the fees of adviser Harris Associates weretoo high and that Harris did not disclose certain information about its pricing process. Plaintiffs in the case areJerry N. Jones, Mary F. Jones and Arline Winerman.
The high court announced on Monday that it would hear the case.
In upholding a lower court decision in favor of Harris, the 7 th Circuit asserted that while the fees of fund family advisers should be properly disclosed, their level should be regulated by a free market in which dissatisfied investors can take their business elsewhere (See Adviser Fees Not for Courts to Decide ).
“The trustees (and in the end investors, who vote with their feet and dollars), rather than a judge or jury, determine how much advisory services are worth,” wrote Chief Circuit Judge Frank Easterbrook, in the 7 th Circuit decision.
The plaintiffs argued in their appeal that other U.S. Appeals Courts use a standard that says investment advisers violate federal law when their fees are so disproportionately high they bear “no reasonable relationship to the services rendered.”
The pending U.S. Supreme Court case is Jones v. Harris Associates, 08-586. The 7th Circuit opinion is available here .