Supreme Court Rejects Private Investor Suits Under the Investment Company Act

On June 12 2026 the Supreme Court ruled in *FS Credit Opportunities Corp. v. Saba Capital Master Fund* that investors lack a private right to sue for rescission of contracts alleged to violate the Investment Company Act of 1940. The six-justice majority held that only the Securities and Exchange Commission may enforce the statute.

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The 1940 Act designates the SEC as the primary enforcer and permits shareholders and issuers to enforce two specific provisions. Earlier case law, notably *Transamerica Mortgage Advisors v. Lewis* (1979), recognized a private right of action in a companion statute, but the Court noted that later amendments changed the Act’s meaning.

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Justice Amy Coney Barrett authored the majority opinion. Justice Ketanji Brown Jackson wrote the dissent, joined by Justices Sonia Sotomayor and Elena Kagan. The litigants were FS Credit Opportunities Corp. and Saba Capital Master Fund. The SEC remains the statutory enforcer.

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Barrett stressed that “Congress, not the Judiciary, decides who may enforce the law,” and that the Act “designates the [SEC] as its primary enforcer.” She described the statute as “a mandate directed to courts, rather than a provision that confers a right on a specified class of persons,” concluding it “does not create a cause of action.” The majority framed the issue as a distinction between remedial power and a private right to sue.

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Jackson argued the majority “misread the text and structure of the statute” and that “the relevant legislative history makes it clear that Congress contemplated a private right of action.” The dissent warned that barring private enforcement leaves investors without meaningful recourse.

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• “Congress, not the Judiciary, decides who may enforce the law.” — Justice Amy Coney Barrett

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• “’” Notably, “[t]he key actor is ‘a court,’ not an individual.” — Justice Amy Coney Barrett

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• “‘a mandate directed to courts,’ rather than a provision that ‘confers a right on a specified class of persons.’” rather than a provision that “confers a right on a specified class of persons.” — Justice Amy Coney Barrett

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The decision was “sharply divided,” with six justices joining the majority and three dissenting. The Court’s analysis focused on statutory text rather than legislative intent.

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The ruling provides relief to investment companies that would otherwise face greater litigation from the SEC. By limiting enforcement to the agency, the Court reduces the prospect of private lawsuits while narrowing investors’ avenues for redress.

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The majority and dissent disagree on whether the Act’s language and legislative history support a private right of action, leaving the precise scope of investor protection unsettled.

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