With Zero-Fee Funds, What's a Board to Do at 15(C) Time?

April 11, 2017

Media Coverage

Fidelity launched almost 20 no-fee funds recently that elicited intense questioning from regulators about their structure and disclosures. The funds, some say, have the potential to upend a board’s traditional 15(c) contract renewal process.


Thomas Westle, a partner at Blank Rome, likens the no-fee structure to that of funds with a unitary fee, where shareholders pay a single fee for all services. In Fidelity’s case, the advisory fee is part of the wrap fee, and the firm said in its SEC response letter that, while the wrap fee may vary by plan, the part that is considered a management fee for advising the Flex Funds will be consistent across plans.

Directors should ask for a thorough Gartenberg analysis including profitability at the wrap-fee level, Westle says. “I would say to [the adviser], ‘Figure out a way to break it down,’” he says.

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"With Zero-Fee Funds, What's a Board to Do at 15(C) Time?," by Greg Saitz was published in BoardIQ on April 11, 2017.