Timothy C. Davidson, a Florida investment adviser, is suing BlackRock (BLK). He says the money manager and other defendants breached their fiduciary duty by charging disproportionately high investment advisory fees for the BlackRock Global Allocation Fund (MDLOX). He says that the excessive fees had “no reasonable relationship” to the services that the firm provided.
Because of the alleged wrongdoing, Davidson contends, BlackRock Advisors was able to keep most of the benefits that stemmed from a growth in assets that were under management without properly sharing these with the fund or shareholders. The investment advisor also says that the fund’s board did not behave “conscientiously” when it approved markups and fees and this breaches certain obligations under the Investment Company Act of 1940.
The BlackRock Global Allocation Fund manages about $60 billion. Davidson said that a trust he helped establish owned $1 million of shares in the fund’s institutional share class. (David helped form the trust after he bought a lottery ticket that won the Powerball in 2011.)
Courthouse News Service says that Davidson’s lawsuit is now part of a class action securities fraud case. BlackRock had been dealing with three other claims that make similar accusations, and this week, a district judge consolidated them into one proceeding. BlackRock says that the securities fraud cases lack merit. The class action claim believes that BlackRock Advisors cost shareholders to spend hundreds of millions of dollars in the form of these excess fees.
BlackRock is not the only fund company to deal with accusations of excessive advisory fees. According to the Coalition of Mutual Fund Investors, Ameriprise Financial (AMP), ING Investments, Hartford Investment Financial Services, Axa Equitable Life Insurance Co. and others have faced similar claims.
Securities Cases
Excessive advisory fees hurt investors while allowing firms to profit. If you feel that you have sustained losses because of fee markups or other inappropriate fees charged to you by an investment advisory firm or a broker-dealer, you may have grounds for a securities case. Please contact The SSEK Partners Group today.
BlackRock faces lawsuits over “disproportionately large” fees, InvestmentNews, May 8, 2014
Class Sues Blackrock for ‘Hundreds of Millions’, Courthouse News Service, May 8, 2014
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