Fidelity wins dismissal of money market fund fee case
A US judge dismissed a lawsuit accusing Fidelity of overcharging investors in its money market fund. The court found Fidelity disclosed its conversion rules.
A federal judge in the United States has dismissed a lawsuit accusing mutual fund giant Fidelity of overcharging investors in its $439.1 billion Fidelity Government Money Market Fund. The legal action claimed the firm failed to transition eligible investors into lower-cost share classes, allegedly resulting in millions of dollars in unnecessary fees.
U.S. District Judge Margaret Garnett in Manhattan rejected the allegations that the firm's board and investment managers breached their fiduciary duties. The plaintiffs argued that retail class shares should have been automatically converted into premium class shares once balances hit $100,000 in non-retirement accounts or $10,000 in retirement accounts. While retail investors paid fees and expenses of up to 0.42%, the premium class shares carried a lower rate of up to 0.32%.
In her ruling, Garnett stated that the firm had fully disclosed the economic consequences of the share structures. She noted that investors failed to show the disclosures were misleading or that they were prevented from manually converting their shares.
"Against this backdrop, it was not outside the bounds of reason for defendants to design the fund without an automatic conversion feature," Garnett said.
The court distinguished this dismissal from a previous case involving Vanguard, which settled for approximately $158 million last year. That litigation centered on unexpected tax bills for retail investors following a shift of institutional assets, a move that Garnett noted gave retail participants no prior notice or say. In the Fidelity case, the judge found the circumstances regarding share conversion were transparent and accessible to the account holders.
As of late February, approximately $406.4 billion of the money market fund's total assets remained in the retail share class. Fidelity reported managing $7.1 trillion in total assets at the conclusion of 2025.
