Abstract

http://ssrn.com/abstract=885970
 


 



Private Litigation to Enforce Fiduciary Duties in Mutual Funds: Derivative Suits, Disinterested Directors and the Ideology of Investor Sovereignty


Donald C. Langevoort


Georgetown University Law Center

February 2006

ECGI - Law Working Paper No. 61/2006

Abstract:     
The recent mutual fund scandals in the United States have generated both public and private litigation, forcing renewed attention to the nature and scope of private remedies that seek compensation for fiduciary misbehavior. This paper analyzes the difficulties in pursuing such claims as derivative action, insofar as the courts have given the fund's independent directors considerable discretion to recommend the termination of such suits. It criticizes this move as a misapplication of corporate law theory generally, showing that corporate governance in mutual funds cannot be viewed through the same lens as with respect to other kinds of firms. It also argues that an ideology of consumer sovereignty displaces fiduciary responsibility with respect to many agency cost problems in the fund industry. To the extent that independent directors adopt that ideology (or are selected because they have already adopted it), they will be suboptimal shareholder representatives.

Number of Pages in PDF File: 34

Keywords: Mutual fund scandals, compensation, fiduciary responsibility, derivative actions

JEL Classification: K41, K42

working papers series


Download This Paper

Date posted: March 3, 2006  

Suggested Citation

Langevoort, Donald C., Private Litigation to Enforce Fiduciary Duties in Mutual Funds: Derivative Suits, Disinterested Directors and the Ideology of Investor Sovereignty (February 2006). ECGI - Law Working Paper No. 61/2006. Available at SSRN: http://ssrn.com/abstract=885970 or http://dx.doi.org/10.2139/ssrn.885970

Contact Information

Donald C. Langevoort (Contact Author)
Georgetown University Law Center ( email )
600 New Jersey Avenue, NW
Washington, DC 20001
United States
202-662-9832 (Phone)
202-662-9412 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 2,920
Downloads: 627
Download Rank: 21,380

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.500 seconds