This educational guide is based on the linked primary sources. It is not a Court publication, is not affiliated with the Court, and is not legal advice.
In brief
Overview
Harris charged twice as much in percentage terms for providing virtually identical advisory services in arm's‑length transactions with institutional investors.
According to Petitioners, petitioners allege that Harris made misrepresentations about profitability, leading to an inflated fee calculation.
The Court noted that any recovery would benefit all investors.
Background and question before the Court
According to David C. Frederick, in 1970 Congress amended the Investment Company Act to create a cause of action for fiduciary breaches related to compensation.
Harris charged twice the percentage fee for providing virtually identical advisory services to institutional investors.
Petitioners claim that Harris made misrepresentations about profitability and cost accounting, leading to an inflated fee.
During oral argument, Justice Scalia asked whether the SEC was aware of the divergence between fees charged to institutional investors and other clients.
According to Justice Scalia, justice Scalia requested citations from the record to determine whether a remand was necessary for fee comparisons.
What each side argues
Petitioners' Arguments
According to David C. Frederick, david C. Frederick noted that the 1970 amendment to the Investment Company Act provides a cause of action for fiduciary breaches related to compensation.
Respondent's Arguments
Source-limited. The record does not yet support a complete account.
Amicus (Curtis E. Gannon)
According to Mr. Gannon, the SEC has authority to file suits under section 36(b).
Amicus (John Bogel)
According to John Bogel, a 1969 SEC memorandum suggests that fee comparisons are relevant to show that an adviser’s fees are excessive.
Solicitor General
The Solicitor General argues that the appropriate standard for evaluating fees is the Gartenberg approach.
What happened at oral argument
The oral argument began at 10:04 a.m. before the Supreme Court.
Justice Scalia asked whether the SEC was aware of the divergence between fees charged to institutional investors and other clients.
Justice Ginsburg asked whether the Gartenberg case was relevant to the issues being considered.
Justice Ginsburg asked about the petitioners' allegation that the investment adviser did not provide full and accurate information regarding economies of scale, profitability, and other matters.
The Court noted that less formal mechanisms have been used in examinations and investigations.
After argument, the case was submitted to the Court.
- [1] 8a13ac9f961946e2fa50-r1-bc586594721bd7bd.pdf, p. 1
- [2] 8a13ac9f961946e2fa50-r1-bc586594721bd7bd.pdf, p. 21
- [3] 8a13ac9f961946e2fa50-r1-bc586594721bd7bd.pdf, p. 22
- [4] 8a13ac9f961946e2fa50-r1-bc586594721bd7bd.pdf, p. 45
- [5] 8a13ac9f961946e2fa50-r1-bc586594721bd7bd.pdf, p. 21
- [6] 8a13ac9f961946e2fa50-r1-bc586594721bd7bd.pdf, p. 50
What the Court decided
Why it matters
If excessive fees are found to be a breach, any recovery benefits all investors in the fund.
According to Solicitor General, identifying the appropriate analytical standard (e.g., the Gartenberg approach) guides future fee assessments.
Terms to know
No glossary terms are available for this guide.
Primary sources
Read the source materials on the official site or open the immutable repository copy used for this guide.
- 8a13ac9f961946e2fa50-r1-bc586594721bd7bd.pdforal argument transcript
Guide generated September 23, 2026. Automated validation accepted this version.