Excessive Fees at T. Rowe Price, Investors Say

SAN FRANCISCO (CN) — Investment management firm T. Rowe Price overcharged hundreds of millions of dollars for its services during the 2015 fiscal year, seven investors claim in Federal Court.

Lead plaintiff Christopher Zoidis and six others claim the Baltimore-based company took investment management fees from certain funds it managed that were "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."

According to the lawsuit filed Wednesday, the fee rates charged to the plaintiffs' funds are as much as 73 percent higher than the rates T. Rowe Price negotiated with other clients for the same services.

The funds resultantly pay the firm as much as $388 million more in fees each year, and the high rates have enabled the company "to retain for itself the benefits of economies of scale resulting from increases in each of the funds' assets under management during recent years, without appropriately sharing those benefits with the funds," according to the complaint.

Furthermore, the aggregate amount of investment management fees paid by the plaintiffs' funds has increased by more than 108 percent in recent years, from less than $487 million in the 2008 fiscal year to more than $1 billion in the 2015 fiscal year, the lawsuit alleges.

The plaintiffs say the firm's actions violate securities law and the Investment Company Act. They seek declaratory relief, compensatory damages and attorneys' fees, and are represented by J. Michael Hennigan of McKool Smith Hennigan in Redwood Shores, Calif.

A T. Rowe Price spokesperson told Courthouse News via email that the claims are without merit and the firm "will aggressively defend against the suit."

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