T. Rowe Price Group, Inc.TROW has been slammed with a lawsuit for allegedly charging investors $388 million in excessive fees. The lawsuit was filed on last Wednesday in the U.S. District Court in Oakland, California, by a group of investors in T. Rowe Price mutual funds.
The suit focuses on some of the Maryland-based asset manager's well known funds, including its Blue Chip Growth Fund. For instance, the company is accused of charging up to 69% higher management fees on its Blue Chip Growth Fund compared to its charges as a sub-adviser on equivalent funds for other asset managers.
Apparently, T. Rowe Price has been providing similar services for its branded and subadvised funds, but charging considerably different fees. According to the complaint, T. Rowe Price "breached its fiduciary duty by receiving investment management fees from each fund that are so disproportionately large that they bear no reasonable relationship to the value of the services provided... and could not have been the product of arm's-length bargaining."
Investors also stated, "The board has approved the [investment management agreements] each year without devoting the time and attention necessary to independently assess the investment management fee rate paid by each fund or to effectively represent the interests of fund shareholders."
T. Rowe Price, in its response, stated, "We believe the claims are without merit, and will aggressively defend against the suit."
Though the company remains committed in countering the issue, we believe it exposes T. Rowe Price to any potential high legal expenses stemming from the case.
T. Rowe Price currently carries a Zacks Rank #2 (Buy). Some other well placed stocks in the investment management space includes Cohen & Steers Inc. CNS , Eagle Point Credit Company Inc. ECC and GAMCO Investors, Inc. GBL , each sporting a Zacks Rank #1 (Strong Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
