FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd. (Implied Rights of Action)

Send us Fan MailIn a 6–3 decision, the Supreme Court held that Section 47(b) of the Investment Company Act does not create an implied private right of action allowing investors or other private parties to sue for rescission of contracts that allegedly violate the Act. The case arose when activist investor Saba Capital challenged voting-right restrictions adopted by several closed-end mutual funds and sought rescission under Section 47(b). Writing for the Court, Justice Barrett explained that Congress, not the courts, determines who may enforce federal statutes, and Section 47(b)’s language is directed at courts’ remedial authority once parties are already before them rather than at creating enforceable rights for a particular class of individuals. The Court emphasized that the ICA establishes a comprehensive enforcement scheme centered on the Securities and Exchange Commission and expressly authorizes private suits in only limited circumstances, making it unlikely that Congress intended an additional implied cause of action. The Court also rejected reliance on Transamerica Mortgage Advisors v. Lewis, noting that Congress amended Section 47(b) in 1980 to remove the “shall be void” language that supported an implied remedy in that case. Accordingly, the Court reversed the Second Circuit and held that Saba could not use Section 47(b) as a standalone basis to seek rescission of contracts allegedly violating the ICA.Support the show