Supreme Court clarifies fiduciary duty of investment advisers

The Supreme Court resolved the split by returning to Gartenberg as the correct fiduciary duty standard. The Court noted that the 1940 Act does not require the courts to precisely calculate fees that would result from arm's-length negotiations between the adviser and the mutual fund's board of trustees. Moreover, comparisons with the fees that other investment advisors charge similar mutual funds for advisory services are not probative because there is no evidence that such fee arrangements are set by arm's-length negotiations. Finally, because the 1940 Act requires a fund's board of trustees to annually review and approve advisers' contracts with and compensation charged to the fund, courts should not second guess the informed decisions of a mutual fund's board of trustees.