Yearly Archives: 2025

On June 30, the U.S. Supreme Court agreed to hear a case that will determine whether Section 47(b) of the Investment Company Act of 1940 (ICA) creates a private right of action for shareholders of registered investment companies to bring lawsuits for alleged violations of the statute. The Second Circuit Court of Appeals has recognized such a right of action since 2019, opening a back door to litigation claims by private plaintiffs for alleged ICA violations, despite Congress having granted the Securities and Exchange Commission (SEC) sole regulatory authority to enforce the ICA. Other circuit courts of appeal have rejected a Section 47(b) private right of action. This week, the Supreme Court granted certiorari in FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd. to resolve the circuit split. The outcome of the appeal, to be heard in the Court’s October 2025 term, will have broad implications for registered funds governed by the ICA (including mutual funds, exchange-traded funds (ETFs) and closed-end funds), as the litigation door opened by the Second Circuit risks upending the long-established regulatory structure that is the fund industry’s bedrock.

In the ICA, Congress granted fund shareholders a single express private right of action to bring lawsuits – namely, a claim for allegedly excessive advisory fees under Section 36(b), which was added to the statute by amendment in 1970. Applying key Supreme Court precedent from 2001, lower courts have uniformly declined to read into the statutory language implied private rights of action to enforce other ICA provisions. The sole outlier was the Second Circuit’s 2019 decision in Oxford University Bank v. Lansuppe Feeder, LLC, recognizing an implied private right of action under Section 47(b). This provision states that a contract “whose performance involves … a violation of” the ICA cannot be enforced by any party to the contract. The Second Circuit panel concluded in Oxford University Bank that this language implied Congress’ intent to provide a private right of action to sue for “rescission” of a contract involving an alleged violation of another provision of the ICA.

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