Supreme Court to Hear CEF Private Right of Action Case

On June 30, the U.S. Supreme Court agreed to hear a Second Circuit case that examines whether Section 47(b) of the Investment Company Act of 1940 creates a private right of action for fund shareholders to sue registered investment companies. The Supreme Court, in part, agreed to take up the case in order to resolve a split between Circuit Courts on the interpretation of Section 47(b). The case, FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd., where activist investor Saba sued FS Credit Opportunities Corporation (a registered investment company) using Section 47(b). According to a Ropes & Gray client alert, the outcome of the Supreme Court case “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.” The case is scheduled to be heard in October 2025.

Click here to read a client alert from Ropes & Gray covering the background of the CEF private right of action case.