Definition of Section 36(b)

A part of the U.S. Investment Company Act of 1940, Section 36(b) was adopted in 1970 to allow mutual fund investors and the Securities and Exchange Commission (SEC) to seek restitution for alleged excessive fees charged by an advisor.

Under Section 36(b), both the fund’s adviser and the board are deemed to have a fiduciary duty in regard to fees charged to investors. Traditionally, the courts have looked to the Gartenberg Standard and a more recent court ruling (Jones v. Harris) has further clarified the standard.  [1]

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