On January 29, 2016, three shareholders in the Great-West Funds filed a 36(b) excessive fee lawsuit against Great-West Capital Management in U.S. District Court for the District of Colorado.
The plaintiffs' complaint alleges that Great-West retained more than two-thirds of its advisory fees for 21 retail mutual funds, while delegating substantially all of the investment advisory services to third-party sub-advisers.
As an example, Great-West collected $25.3 million in advisory fees for four index funds in 2014. Great-West then paid approximately $973,000 to sub-advisers to provide the actual advisory services, while retaining $24.3 million to supervise the sub-advisers. During the same year, Great-West received $73.6 million in advisory fees for 17 mutual funds that are actively managed. Great-West paid $24.7 million in fees to multiple sub-advisers and retained $48.9 million to supervise the sub-advisers.
On May 2, 2016, Great-West filed a motion to dismiss the case. The plaintiffs responded with an opposition brief and Great-West filed a reply brief.
The case is in discovery while the motion to dismiss is pending. On April 3, 2017, the plaintiffs filed a second amended complaint.