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Gartenberg, Jones, and the Meaning of Fiduciary: A Legislative Investigation of Section 36(b)

35 Pages Posted: 25 Feb 2010  

Amy Yeung

ZeniMax Media Inc.

Kristen J. Freeman

affiliation not provided to SSRN

Date Written: February 22, 2010

Abstract

Section 36(b) of the Investment Company Act of 1940 creates a “fiduciary duty” on the part of an investment adviser with respect to the receipts of compensation for services or of payments of a material nature. The term “fiduciary,” however, conveys a range of obligations, the breadth of which comes before the Supreme Court in Jones v. Harris, as two circuits diverge on the meaning of fiduciary duty under Section 36(b), and by doing so, call into question whether a fund’s investment adviser breached its fiduciary duty by charging an excessive fee.

Notably absent from the language of Section 36(b) is any description of substantive or procedural application of the term “fiduciary.” Justice Kennedy pressed for such analysis in the Jones oral arguments: “Is Harris a fiduciary in the same sense as a corporate officer and a corporate director? Or does his fiduciary duty differ?” This article provides a comprehensive review of the legislative history creating the “fiduciary” obligation under Section 36(b) of the Investment Company Act. It identifies key Congressional and industry themes, and draws conclusions on the legislative intent of Section 36(b), in an attempt to clarify the use of “fiduciary.”

Keywords: Delaware, Journal, Corporate, Law, Section 36(b), Investment Company Act, Investment Company Act of 1940, Fiduciary, investment adviser, investment advisor, Jones v. Harris, legislative history

Suggested Citation

Yeung, Amy and Freeman, Kristen J., Gartenberg, Jones, and the Meaning of Fiduciary: A Legislative Investigation of Section 36(b) (February 22, 2010). Delaware Journal of Corporate Law (DJCL), Vol. 35, No. 2, 2010. Available at SSRN: https://ssrn.com/abstract=1557349

Amy Yeung (Contact Author)

ZeniMax Media Inc. ( email )

1370 Piccard Drive
Suite 120
Rockville, MD 20850
United States

Kristen J. Freeman

affiliation not provided to SSRN ( email )

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