Moses v. Burgin
United States Court of Appeals for the First Circuit
445 F.2d 369 (1971)
- Written by Matthew Celestin, JD
Facts
Fidelity Fund, Inc. (Fund) (defendant) was a mutual fund with thousands of shareholders. Fidelity Management and Research Company (Management) (defendant) was Fund’s investment adviser, and Crosby Corporation (defendant) was Management’s subsidiary and an underwriter of Fund shares. In order to stimulate sales of Fund’s shares, Fund instructed—on Management’s advice—that give-ups be given to brokers who sold Fund shares acquired from Crosby. This give-up policy, in turn, increased Management’s advisory fees and Crosby’s commissions. Rose Moses (plaintiff), a shareholder of Fund, filed a derivative suit. Moses alleged, in part, that Management and its directors had used Fund’s assets to their advantage through the give-up policy and withheld information related to the give-up policy from Fund’s unaffiliated directors, which eliminated the unaffiliated directors’ ability to properly consider the policy. Section 10(a) of the Investment Advisers Act requires an investment company, such as a mutual fund, to maintain directors on its board who are unaffiliated with the company’s management or advisers.
Rule of Law
Issue
Holding and Reasoning (Aldrich, C.J.)
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