Supreme Court Limits Private Lawsuits Under Investment Company Act

On June 11, 2026 the Supreme Court issued a 6-3 opinion in FS Credit Opportunities Corp. v. Saba Capital Master Fund, holding that Section 47(b) of the Investment Company Act of 1940 does not create an implied private right of action to rescind fund bylaws. The majority, authored by Justice Amy Coney Barrett, reversed lower-court rulings that had allowed activist hedge fund Saba Capital to sue eleven closed-end funds for restricting the voting power of large shareholders.

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Saba Capital, led by founder Boaz Weinstein, challenged bylaws adopted by BlackRock-affiliated funds—including FS Credit Opportunities, Adams Diversified Equity Fund, Adams Natural Resources Fund, and Royce Global Trust—arguing that the provisions violated the Act’s equal-voting requirement. The Trump administration filed an amicus brief supporting the funds. The Court’s split reflected a conservative majority and a liberal dissent.

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The ruling eliminates a key litigation avenue for activist investors seeking to enforce voting-right provisions. Enforcement now rests primarily with the Securities and Exchange Commission, shifting future governance disputes from federal courts to regulators. Observers note that the decision may affect other statutes that rely on private enforcement mechanisms.

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Weinstein said the decision places the enforcement responsibility on the SEC and that shareholder harm is evident. Stephen Sypherd, general counsel of Future Standard, called the outcome a clear win for investors, allowing closed-end funds to operate in the best interests of long-term shareholders. The Trump administration’s brief argued that the challenged bylaws were consistent with existing regulatory frameworks.

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Justice Ketanji Brown Jackson warned that the majority’s reasoning shows “contempt for Congress” and could weaken investor protections. Barrett’s opinion rebuked the dissent for relying on “a fictional premise” that legislators shared a unified view of the statute’s purpose.

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• “In sum, nothing in the text or structure of the ICA indicates that Congress authorized private parties to enforce virtually every provision in the statute,” — Justice Amy Coney Barrett

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• “The evidence of shareholder harm is overwhelming,” — Boaz Weinstein, Founder and CIO, Saba Capital

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• “to continue operating in the best interests of long-term shareholders.” — Stephen Sypherd, General Counsel, Future Standard

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The decision directs future challenges toward the SEC, which may face increased pressure to police control-share bylaws. The Court’s reasoning could also shape pending cases involving private rights of action under statutes such as the Voting Rights Act.

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