The AXA Decision and Excessive Fee Litigation: Takeaways for the Investment Management Community

In this video, Rob Skinner, Ropes & Gray business & securities litigation partner, examines the decision in AXA’s excessive fee litigation, its impact on pending and future 36(b) cases, and key takeaways from the AXA decision for fund boards and advisors. In the AXA decision, the court rejected the plaintiff’s theory that advisory fees should be no higher than the fees that the advisor pays sub-advisors to handle a portion of the services provided to the funds. “The AXA case reminds us that the best defense to this theory is a robust board process, a fully informed board, and a candid discussion about those services differentials and why it is that the advisory fee and the sub-advisory fee are, of course, not the same,” said Mr. Skinner. While the AXA decision does not create any new law or provide a checklist for boards to follow, it is a prime example of how important a robust process combined with a fully informed board can be in order for fees to “pass muster” in the event of litigation, according to Mr. Skinner.