Recent Scrutiny of Advisory Arrangements

This article by Philadelphia partner Josh Deringer and associate Lisa Whittaker discusses the increasing scrutiny of investment company boards’ consideration of advisory agreements, and the fees paid to investment advisers. It examines the ways in which increased inspection has manifested: lawsuits under Section 36(b) of the Investment Company Act of 1940, as amended; SEC enforcement actions; and shareholder proposals seeking to influence board decision-making. The authors conclude that “the specific effects of each of these developments remain to be seen,” however, “it is clear that shareholders, courts and the SEC are paying increased attention to the considerations of investment company boards in the context of retaining an investment adviser.”