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ARTICLE · 08 SEPTEMBER 2015

Life and Annuity Series: Excessive Fee Cases

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Below is an update on the "excessive fee" cases under section 36(b) of the Investment Company Act of 1940.

United StatesInsurance
Charles C. Platt
Charles C. Platt
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Below is an update on the "excessive fee" cases under section 36(b) of the Investment Company Act of 1940.

Most of these complaints are now proceeding on the "sub-adviser" theory: that annuity contract-holders pay "excessive fees" in violation of the' 40 Act when the insurer (or its affiliate) acts as the "adviser" for the investment options in the contracts, and delegates investment advisory and portfolio management services to an unaffiliated "subadviser." According to the complaints, these sub-adviser arrangements essentially result in an overall "excessive fee" (i.e., one that bears no reasonable relationship to the value of the services rendered) because the insurer (or its affiliate) is paid a large fee for doing little work.

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