Today the U.S. Supreme Court upheld the Gartenberg standard articulated by a U.S. Court of Appeals in 1982 whereby "to face liability [for excessive fees] under § 36(b) [of the Investment Company Act of 1940], an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining." [Editor's note: a preview of the case was the subject of the August 17, 2009 post.]
A full analysis of today's decision, prior jurisprudence, and nuances, could fill volumes. And discourse about whether today's decision will help or hurt investors, lead to more or less litigation over excessive fees, and affect prevailing fee levels, could fill volumes, too. But here's the short version: absent egregiously avaricious circumstances the courts will not provide a practical remedy - i.e., investor protection - against investment adviser fee excesses. Neither of the other two branches of government will provide a practical remedy, either. Caveat emptor. As with many matters, one receives what one can negotiate. Regarding investment costs and fees: discern, negotiate, and protect yourself accordingly.