What is the unique procedure available to fund shareholders for challenging a fund adviser’s management fees as excessive? What factors do courts use in determining excessive fees? Solution The 1960s were a boom time for the mutual fund industry with assets under management increasing significantly. With this burst of success, however, elected officials and fund shareholders began questioning whether fund advisers had an obligation to share that success with shareholders through lower fees. The more intense scrutiny reflected the suspicion that investment advisers’ control and influence over their sponsored funds was nearly total and reflected a relationship of “business incest.†Thus, during the time leading up to the 1970 amendments, elected officials and fund shareholders raised concerns that mutual funds’ management structure promoted excessive advisory fees that needed to be addressed. A key point in this movement happened in 1966, when the SEC issued a policy report citing three factors that contributed to the failure of competitive forces influencing the advisory contract and fee approval process: (1) dependence of independent directors upon affiliated directors for guidance on fund policy matters; (2) lack of time and pay attributed to directorduties and lack of receipt of sufficient information from affiliated directors, especially on fundamental fund matters such as the advisory contract and fee; and (3) the practical inability to terminate or even to threaten to terminate the advisory contract. In sum, at least up until 1970, the advisory contract approval process could not be characterized as “bid-and-ask.†Factors to Be Considered in Determining Reasonable Fees and Costs. .