Court hears mutual fund fees case

WASHINGTON, Nov. 2 (UPI) -- The U.S. Supreme Court heard argument Monday on whether the 91 million Americans invested in mutual funds can sue if they think fees are too high.

Mutual funds are usually created by financial advisers, but the two entities are separate and some investors claim a conflict of interest. Many 401(k) plans are invested in them.

Several investors filed suit in 2004 against a Chicago financial adviser, Harris Associates, saying the fees charged in a mutual fund were "excessive" and Harris had failed to provide accurate information about executive compensation.

A 1940 federal law, amended in 1970, says financial advisers have a "fiduciary" duty to investors -- they should be acting in the best interests of investors.

The lower courts have dismissed the suit, but the U.S. Supreme Court agreed to review. The investors are supported by the Obama administration.

Monday, Chief Justice John Roberts and Justice Antonin Scalia said from the bench that investors could easily check fees and take their business elsewhere if they don't like them, the Los Angeles Times reported. The two justices also questioned whether judges should be involved in deciding whether fees are "excessive."

But Justices Sonia Sotomayor and Stephen Breyer questioned whether the fees can be properly monitored by the free market, the Times said.

A ruling in the case should be handed down sometime next year.