Amicus Curiae Brief — FS Credit Opportunities Corp., et al., Petitioners v. Saba Capital Master Fund, Ltd., et al.
Supreme Court briefSep 3, 2025
Ask Donna
What actually matters in this document.
Text
No. 24-345
In the Supreme Court of the United States
FS CREDIT OPPORTUNITIES CORP., ET AL., PETITIONERS
v.
SABA CAPITAL MASTER FUND, LTD., ET AL.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
BRIEF FOR THE INVESTMENT COMPANY INSTITUTE
AND THE ASSET MANAGEMENT GROUP OF THE
SECURITIES INDUSTRY AND FINANCIAL MARKETS
ASSOCIATION AS AMICI CURIAE IN SUPPORT OF
PETITIONERS
AMY D. ROY
ROBERT A. SKINNER
ROPES & GRAY LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199
PAUL G. CELLUPICA
MATTHEW THORNTON
KEVIN ERCOLINE
THE INVESTMENT
COMPANY INSTITUTE
1401 H Street, NW
Washington, DC 20005
DOUGLAS HALLWARD-DRIEMEIER
Counsel of Record
ROPES & GRAY LLP
2099 Pennsylvania Avenue, NW
Washington, DC 20006
(202) 508-4600
Douglas.Hallward-Driemeier
@ropesgray.com
LINDSEY WEBER KELJO
THE ASSET MANAGEMENT GROUP
OF THE SECURITIES INDUSTRY
AND FINANCIAL MARKETS
ASSOCIATION
1099 New York Avenue, NW
6th Floor
Washington, DC 20001
TABLE OF CONTENTS
Page
Interest of amici................................................................ 1
Summary of the argument .............................................. 2
Argument:
I.
The ICA has provided a stable regulatory
framework enabling the growth of registered
funds, giving shareholders ready access to
financial security through low-cost diversified
professional portfolio management....................... 9
A. The ICA’s requirements for the governance
and operations of registered funds are
vigorously examined and enforced by the
SEC................................................................. 14
B. Oversight of registered funds is further
strengthened by independent fund
directors, the “watch dogs” under the
ICA’s governance structure ....................... 15
II. A private right of action under Section 47(b)
opens a back door for private suits over other
provisions of the ICA ............................................ 17
A. “Activist” challenges to closed-end fund
governance measures................................... 18
B. Claims seeking “rescission” of fund service
agreements .................................................... 21
C. The resulting uncertainty over applicable
regulatory standards, coupled with
litigation expense, would harm fund
shareholders and their savings goals ........ 24
Conclusion........................................................................ 29
(I)
II
TABLE OF AUTHORITIES
Page(s)
Cases:
Alexander v. Sandoval, 532 U.S. 275
(2001) ............................................................ 3, 6, 15, 26
Blatt v. Merrill Lynch, Pierce, Fenner & Smith
Inc., 916 F. Supp. 1343 (D.N.J. 1996) ..................... 23
Burks v. Lasker, 441 U.S. 471 (1979) ....................... 9, 16
Daily Income Fund, Inc. v. Fox, 464 U.S. 523
(1984) ............................................................................ 9
Eaton Vance Senior Income Tr. v. Saba Cap.
Master Fund, Ltd., No. 2084CV01533-BLS2,
2023 WL 1872102 (Mass. Super. Ct. Jan. 21,
2023)............................................................................ 19
Eaton Vance Senior Income Tr. v. Saba Cap.
Master Fund, Ltd., No. 2084CV01533-BLS2,
slip op. (Mass. Super. Ct. Oct. 21, 2024) ................ 19
Hamilton v. Allen, 396 F. Supp. 2d 545 (E.D. Pa.
2005)............................................................................ 23
Santomenno ex rel. John Hancock Tr. v. John
Hancock Life Ins. (U.S.A.), 677 F.3d 178 (3d
Cir. 2013) .................................................................... 20
Jones v. Harris Assocs. LP, 559 U.S. 335 (2010) ... 9, 15
Kisor v. Wilkie, 588 U.S. 558 (2019)............................. 26
Mathers Fund, Inc. v. Colwell Co., 564 F.2d 780
(7th Cir. 1977) ............................................................ 23
Mutchka v. Harris, 373 F. Supp. 2d 1021 (C.D. Cal.
2005)............................................................................ 23
III
Cases—Continued:
Page(s)
Northstar Fin. Advisors Inc. v. Schwab Invs., 779
F.3d 1036 (9th Cir. 2015).......................................... 23
Oxford University Bank v. Lansuppe Feeder,
LLC, 933 F.3d 99 (2d Cir. 2019) .......... 6, 7, 15, 20, 28
In re Regions Morgan Keegan Secs., Derivative, &
ERISA Litig., 743 F. Supp. 2d 744 (W.D. Tenn.
2010)............................................................................ 23
Smith v. Oppenheimer Funds Distrib., Inc., 824 F.
Supp. 2d 511 (S.D.N.Y. 2011) .................................. 23
Transamerica Mortg. Advisors, Inc. v. Lewis, 444
U.S. 11 (1979)....................................................... 26, 27
UFCW Loc. 1500 Pension Fund v. Mayer, 895
F.3d 695 (9th Cir. 2018)................................ 14, 23, 24
Statutes and regulations:
Investment Advisers Act of 1940,
15 U.S.C. 80b-1 et seq. ....................................... 4, 26, 27
15 U.S.C. 80b-15(b) ................................................... 26
Investment Company Act of 1940,
15 U.S.C. 80a-1 et seq. ........................... 2-12, 14-17, 19,
21-24, 26-27, 29
15 U.S.C. 80a-6(c)...................................................... 11
15 U.S.C. 80a-8(b) ....................................................... 4
15 U.S.C. 80a-8(c)........................................................ 4
15 U.S.C. 80a-11(a) ................................................... 10
15 U.S.C. 80a-12(a) ................................................... 10
15 U.S.C. 80a-12(b) ................................................... 10
15 U.S.C. 80a-12(d) ................................................... 10
IV
Statutes and regulations—Continued:
Page(s)
15 U.S.C. 80a-12(d)(1) .............................................. 21
15 U.S.C. 80a-13(a) ................................................... 10
15 U.S.C. 80a-15(c).................................................... 16
15 U.S.C. 80a-16(b) ................................................... 16
15 U.S.C. 80a-17 .................................................. 10, 11
15 U.S.C. 80a-17(a) ................................................... 11
15 U.S.C. 80a-17(a)(2)............................................... 23
15 U.S.C. 80a-17(f) .................................................... 10
15 U.S.C. 80a-18(i) .................................................... 10
15 U.S.C. 80a-18(f) .................................................... 10
15 U.S.C. 80a-19(a) ................................................... 10
15 U.S.C. 80a-29(h) ................................................. 3, 5
15 U.S.C. 80a-31(a) ................................................... 16
15 U.S.C. 80a-35(b) ................................. 3, 6, 8, 15, 28
15 U.S.C. 80a-41 ........................................................ 14
15 U.S.C. 80a-46(b) .......................................3, 6-8, 15,
17, 19, 21, 23-29
Securities Act of 1933, 15 U.S.C. 77a et. seq. ............ 4, 8
Securities Exchange Act of 1934,
15 U.S.C. 78a et seq.................................................... 4, 8
15 U.S.C. 78b(b) .................................................... 6, 15
17 C.F.R.:
Section 270.0-1 .......................................................... 16
Section 270.2a-5 ........................................................ 17
Section 270.2a-7 ........................................................ 13
Section 270.6c-11 ....................................................... 13
V
Regulations—Continued:
Page(s)
Section 270.12b-1 ...................................................... 10
Section 270.17a-7 ...................................................... 11
Section 270.17a-8 ...................................................... 11
Section 270.38a-1(a)(2) ............................................. 17
Section 270.38a-1(a)(4) ............................................. 17
Miscellaneous:
Quinn Curtis & John Morley, An Empirical Study
of Mutual Fund Excessive Fee Litigation: Do
the Merits Matter? (Sept. 18, 2012), https://
law.yale.edu/sites/ default/files/area/workshop
/leo/document/Morley_MutualFundExcessiveF
eeLitigation.pdf ........................................................ 28
H.R. 279, 76th Cong. (1939); 15 U.S.C. 80a-1(b) ......... 19
ICI:
2025 Investment Company Fact Book (2025),
https://www.icifactbook.org/pdf/2025factbook.pdf ..................................................... 2, 13
Characteristics of Mutual Fund Investors, 2024,
ICI Rsch. Perspective (Oct. 2024),
https://ww w.ici.org/system/files/202410/per30-09.pdf .................................................... 13
Closed-End Fund Activism (2025), https://www.
ici.org/system/files/2024-05/cef-activism.pdf .. 21
Recommendations Regarding the Availability
of Closed-End Fund Takeover Defenses
(2020), https://www.ici.org/docserver/pdf%3A20 _ltr_cef.pdf ........................... 18
VI
Miscellaneous—Continued:
Page(s)
Trends in the Expenses and Fees of Funds,
2024, ICI Rsch. Perspective (Mar. 2025),
https://www.ici.org/system/files/202503/per31-01.pdf .................................................... 13
ICI Mutual, Claims Trends: A Review of Claims
Activity in the Mutual Fund Industry (Apr.
2024), https://www.icimutual.com/wpcontent/uploads/Claims-Trends-2023-2024.pdf .... 28
IDC & ICI, Overview of Fund Governance
Practices, 1994-2022 (Oct. 2023),
https://www.ici.org/system/files/2023-10/23fund-governance-practices.pdf ............................... 16
Press Release, SEC, SEC Announces Enforcement
Results for Fiscal year 2024 (Nov. 22, 2024),
https://www.sec.gov/newsroom/pressreleases/2024-186 ...................................................... 15
SEC:
Control Share Acquisition Statutes Staff
Statement (May 27, 2020), https://www.
sec.gov/investment ............................................. 20
Fiscal Year 2025 Examination Priorities,
https://www.sec.gov/files/2025-exampriorities.pdf ........................................................ 14
No Action Letters, https://www.investor.gov/
introduction-investing/investing-basics/
glossary/no-action-letters.................................. 12
In the Supreme Court of the United States
NO. 24-345
FS CREDIT OPPORTUNITIES CORP., ET AL., PETITIONERS
v.
SABA CAPITAL MASTER FUND, LTD., ET AL.
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
BRIEF FOR THE INVESTMENT COMPANY
INSTITUTE AND THE ASSET MANAGEMENT
GROUP OF THE SECURITIES INDUSTRY AND
FINANCIAL MARKETS ASSOCIATION AS
AMICI CURIAE IN SUPPORT OF
PETITIONERS
INTEREST OF AMICI *
The Investment Company Institute (ICI) is the
leading association representing regulated funds globally, including mutual funds, exchange-traded funds
(ETFs), closed-end funds, and unit investment trusts in
the United States. ICI seeks to strengthen the foundation of the asset management industry for the ultimate
All parties have been informed of the filing of this amici curiae
brief. No counsel for any party authored this brief in whole or in
part, and no person or entity, other than amici curiae or their counsel made a monetary contribution intended to fund the preparation
or submission of this brief.
*
(1)
2
benefit of the long-term individual investor. ICI’s members manage $40.5 trillion invested in funds registered
under the Investment Company Act of 1940 (ICA), 15
U.S.C. 80a-1 et seq., serving over 120 million United
States investors, and they manage an additional $9.5 trillion in regulated fund assets outside the United States.
ICI works to protect and advance the interests of
fund shareholders through advocacy directed at ensuring a sound legal and regulatory framework. ICI’s extensive research enhances its advocacy, and its regular
research reports include, for example, an annual empirical review of trends and activities in the fund industry.
See ICI, 2025 Investment Company Fact Book (2025),
https://www.icifactbook.org/pdf/2025-factbook.pdf.
The Asset Management Group of the Securities Industry and Financial Markets Association (SIFMA
AMG) represents a wide range of asset management
firms, providing views on U.S. and global policy and creating industry best practices. SIFMA AMG’s members
represent U.S. and global asset management firms—
both independent and broker-dealer affiliated—that
manage more than 50% of global assets under management. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments,
public and private pension funds, and private funds.
ICI and SIFMA AMG submit this brief as amici curiae to urge the Court to reverse.
SUMMARY OF THE ARGUMENT
Petitioners’ opening brief sets forth compelling reasons why the text and structure of the ICA cannot be
read to provide an implied private right of action for
3
rescission of contracts under Section 47(b), 15
U.S.C. 80a-46(b). In erroneously holding otherwise, the
Second Circuit disregarded the principles of Alexander
v. Sandoval, 532 U.S. 275 (2001), and thus looked past
the clear evidence of Congress’s intent in the statute’s
language—including in particular the provision of two
express private rights of action in Sections 30(h) and
36(b) of the ICA, the absence of any rights-creating language in Section 47(b), and the broad mandate for the
SEC alone to enforce the ICA. To supplement these cogent textual arguments, undersigned amici respectfully
submit this brief to provide additional context regarding
the harm to fund shareholder interests threatened by
the recognition of private rights of action under Section
47(b). Such negative consequences further illustrate
why there is no basis to infer Congressional intent to
deputize shareholders to enforce the provisions of the
ICA in contravention of the SEC’s express and nearly
exclusive authority.
Registered funds governed by the ICA—including
mutual funds, ETFs, and closed-end funds—are a critical
means for tens of millions of U.S. households to meet
their retirement savings and other financial goals. The
regulatory and governance structure created by the
ICA is the bedrock of this key sector of the U.S. economy, fostering dramatic growth and innovation of investment products that provide retail investors with
low-cost access to financial security through diversified
professional portfolio management. The availability of
an unintended private right of action under Section 47(b)
risks upending this critical framework, causing significant regulatory uncertainty and wasteful litigation to
the ultimate detriment of fund shareholders.
4
Registered funds are among the most highly regulated financial products in the market. The ICA and
rules promulgated thereunder by the SEC set forth detailed requirements for a fund’s governance, capital
structure, and daily operations. These substantive requirements are in addition to a number of ICA-specific
disclosure and reporting requirements, 15 U.S.C. 80a8(b), as well as the disclosure obligations imposed on
public companies generally under other securities laws,
which likewise apply to registered funds, 15 U.S.C. 80a8(c). 1 The cornerstone of registered fund governance is
oversight by independent directors who are unaffiliated
with the fund’s investment adviser. Directors are assigned both plenary supervisory authority and many
specific oversight responsibilities—including approving
and monitoring the service agreements between funds
and their investment advisers (and other services providers). Because fund management and operations are
nearly always fully externalized (i.e., funds almost never
have dedicated employees of their own), these service
agreements cover essentially every action required to
create and operate a fund. The ICA further imposes specific substantive requirements on the operations and
management of funds, including limits on the use of leverage; strict custody of fund assets separate from the
In addition to the ICA, registered funds are subject to many other
provisions of the securities laws, including extensive securities registration and disclosure requirements under the Securities Act of
1933 (Securities Act), 15 U.S.C. 77a et. seq. The Securities Exchange
Act of 1934 (Exchange Act), 15 U.S.C. 78a et seq., governs proxy
solicitations in funds, funds’ trading activities in portfolio securities,
and broker-dealers’ distribution of fund shares, among other areas,
while investment advisers to funds are governed by the Investment
Advisers Act of 1940 (IAA), 15 U.S.C. 80b-1 et seq.
1
5
adviser’s assets; and prohibitions on transactions with
affiliates—all designed to protect fund shareholders. By
contrast, public operating companies and their boards
and managers, though subject to the disclosure obligations under the securities laws, do not face analogous
substantive mandates regarding corporate governance,
capital structure, and daily operations. In this regard,
the ICA is fundamentally different from other securities
laws, and registered funds are governed and regulated
in a fundamentally different way than other public companies.
Congress granted sole regulatory authority to enforce the ICA to the SEC, which devotes significant resources to the regular examination of registered funds
and their advisers to assess compliance, as well as the
investigation of potential violations by the SEC’s Division of Enforcement. At the same time, the ICA also
grants the SEC authority to define exemptions to the
statute’s requirements, which has resulted in a series of
crucial exemptive rules and orders allowing innovative
fund products and practices that would otherwise be
prohibited by the statute’s broad proscriptions, including such widely utilized products as ETFs and money
market funds. In addition to its formal exemptive authority, the SEC and its staff frequently issue interpretative guidance to the industry (including via staff “noaction” letters) regarding compliance with the ICA’s
provisions. Unsurprisingly, given the central role of the
SEC in this framework, the ICA contains only two express private rights of action. First, under Section 30(h)
(originally Section 30(f) as adopted in 1940, now codified
at 15 U.S.C. 80a-29(h)), Congress authorized private
suits for damages against certain insider defendants
profiting from short-swing trading by incorporating the
6
private right of action in Section 16(b) of the Securities
Exchange Act, 15 U.S.C. 78b(b). Second, under Section
36(b), Congress explicitly allowed shareholders to bring
private claims for excessive fees paid by a fund to its investment adviser. Following Alexander, courts have
consistently declined to read implied private rights of action into the ICA, including under Section 47(b)—until
the Second Circuit’s ill-considered decision in Oxford
University Bank v. Lansuppe Feeder, LLC, 933 F.3d 99
(2019), at issue here.
The availability of a private right of action under
Section 47(b) of the ICA, as inferred by the court in Oxford University Bank, threatens to disrupt the stable
and well-developed regulatory framework relied upon
by funds and their boards and advisers in serving U.S.
retail investors. Authorizing fund shareholders—whose
interests may diverge from one another—to sue for “rescission” of a contract “whose performance involves
* * * a violation of” the ICA would open a back door for
private suits alleging violations of the statute’s many
other substantive provisions, whose enforcement is the
sole province of the SEC. See, e.g., Oxford Univ. Bank,
933 F.3d at 107. Virtually any alleged misstep under the
ICA might be construed by plaintiffs as being part of the
“performance” of a contract, thus giving rise to an ostensible action for rescission of the entire contract. Handing
such a skeleton key to shareholders and the plaintiffs’
bar would in effect invite them to assume the role of private attorneys general to enforce the substantive provisions of the ICA alongside the SEC and to second-guess
the judgments of the independent directors Congress
identified as the first-line protectors of shareholder interests. There is no statutory basis to believe Congress
intended this result under the ICA’s unique structure.
7
One example of this back door scenario is presented
by the current litigation. Because the by-laws and other
governing documents of a fund are treated by many
states’ laws as contracts between a fund and its shareholders, so-called “activist” investors like respondents
Saba Capital Master Fund, Ltd. and Saba Capital Management, L.P. (together, Saba) have in numerous cases
since the Second Circuit’s decision in Oxford University
Bank seized upon Section 47(b) as an entry point to challenge closed-end fund by-laws as violating other provisions of the ICA regarding fund capital structure and
board elections. Saba’s transparent agenda in asserting
these claims is to further its closed-end fund “arbitrage
strategy,” seeking to dismantle funds to obtain shortterm profits at the expense of other shareholders—often
retirees with long-term investment goals who desire a
steady income stream and are less concerned about
short-term price swings. Tellingly, the SEC has not
taken any enforcement action to embrace Saba’s theories and challenge the by-laws in question as violating
the ICA.
But the back door threat posed by a Section 47(b)
private right of action extends well beyond the closedend fund “activist” context. Given the fully externalized
management of nearly all registered funds, virtually
every task involved in sponsoring and managing a fund
and distributing its shares is undertaken by the investment adviser or other service providers pursuant to a
written agreement with the fund in exchange for a fee.
If fund shareholders can assert derivative or direct
claims for “rescission” of such service agreements—and
disgorgement of the fees—based on alleged violations of
other ICA provisions in the “performance” of the contracts (regardless of whether the SEC considers the
8
statute or a rule to have been violated), the potential
claims contrived by the private plaintiffs’ bar are almost
limitless in scope. And given the large dollar amounts at
stake in many fund agreements, the incentive to assert
such claims would be substantial. The extensive history
of private litigation involving the registered fund industry bears this out. Funds and their advisers and boards
have been targeted for decades by class action plaintiffs’
lawyers, motivated by the desire to score a large attorney fee from perceived “deep pocket” defendants. 2 Recognizing a Section 47(b) private right of action could be
tantamount to declaring open season on the SEC’s interpretation of the ICA’s substantive provisions (and funds’
reliance on it), leading the plaintiffs’ bar to press its own
interpretations in pursuit of a payday. A flood of new litigation could risk contradictory interpretations and regulatory uncertainty, and would certainly impose massive
litigation costs and distraction, all to the ultimate detriment of registered fund shareholders.
The Second Circuit’s decision should be reversed.
The litigation faced by registered funds and their advisers and
boards has included many claims alleging excessive advisory fees
under Section 36(b) of the ICA and claims of misleading disclosures
under the Securities Act and Exchange Act. Such actions are
brought under recognized express private rights of action, and their
availability will be unaffected by the Court’s decision regarding the
availability of an implied right of action under Section 47(b).
2
9
ARGUMENT
I.
THE ICA HAS PROVIDED A STABLE REGULATORY
FRAMEWORK ENABLING THE GROWTH OF REGISTERED FUNDS, GIVING SHAREHOLDERS READY
ACCESS TO FINANCIAL SECURITY THROUGH LOWCOST DIVERSIFIED PROFESSIONAL PORTFOLIO
MANAGEMENT
“Congress adopted the [ICA] because of its concern
with ‘the potential for abuse inherent in the structure of
investment companies.’ Unlike most corporations, an investment company is typically created and managed by
a preexisting external organization known as an investment adviser.” Daily Income Fund, Inc. v. Fox, 464 U.S.
523, 536 (1984) (quoting Burks v. Lasker, 441 U.S. 471,
480 (1979)). “Recognizing that the relationship between
a fund and its investment adviser was ‘fraught with potential conflicts of interest,’ the [ICA] created protections for mutual fund shareholders.” Jones v. Harris Assocs. LP, 559 U.S. 335, 339 (2010) (quoting Daily Income
Fund, 464 U.S. at 536-538, Burks, 441 U.S. at 481-82).
In order to minimize such conflicts of interests,
Congress established a scheme that regulates most
transactions between investment companies and
their advisers, 15 U.S.C. § 80a-17; limits the number of persons affiliated with the adviser who may
serve on the fund’s board of directors, § 80a-10; and
requires that fees for investment advice * * * be
governed by a written contract approved by both
the directors and the shareholders of the fund,
§ 80a-15.
Daily Income Fund, 464 U.S. at 536-537.
10
The ICA provides additional shareholder protections through specific substantive requirements touching virtually every aspect of the structure, governance,
and operations of registered funds, including for example: imposing limits on the use of leverage in portfolio
management, 15 U.S.C. 80a-18(f); mandating strict custody of fund assets separate from the adviser’s assets, 15
U.S.C. 80a-17(f); barring capital structures that concentrate voting power in the hands of selected shareholders,
15 U.S.C. 80a-18(i); requiring shareholder approval of
changes to a fund’s fundamental investment policies, 15
U.S.C. 80a-13(a); barring funds from purchasing securities on margin or effecting short sales, 15 U.S.C. 80a12(a); limiting the use of fund assets for purposes of marketing the fund’s shares to new investors and thereby
increasing the adviser’s revenues, 15 U.S.C. 80a-12(b),
17 C.F.R. 270.12b-1; delimiting the terms on which funds
may offer to exchange their shares for those of other
funds, 15 U.S.C. 80a-11(a); restricting the ability of funds
to purchase the shares of other registered funds, insurance companies, and brokerage firms, 15 U.S.C. 80a12(d); limiting the basis and frequency of funds’ distributions of dividends and net capital gains to shareholders,
15 U.S.C. 80a-19(a); and prohibiting certain transactions
between registered funds and their affiliates, 15 U.S.C.
80a-17.
At the same time, Congress also recognized that the
ICA’s broad requirements and prohibitions might be unnecessarily rigid in certain situations, potentially stifling
shareholder-friendly innovation consistent with the
statute’s policy goals. Congress thus gave the SEC
broad authority to grant exemptions to the statutory
provisions “if and to the extent that such exemption is
necessary or appropriate in the public interest and
11
consistent with the protection of investors and the purposes fairly intended by the policy and provisions of [the
ICA].” 15 U.S.C. 80a-6(c). The SEC has exercised this
authority to adopt various exemptive rules authorizing
transactions and structures that would otherwise be
prohibited by the ICA upon the satisfaction of specified
conditions—which often include a determination by a
fund’s board that the action is in the fund’s best interests. For example, Section 17(a) of the ICA generally
prohibits transactions between a registered fund and its
affiliated persons (e.g., the adviser) to protect funds and
their shareholders from potential self-dealing and overreaching by affiliated persons or entities. 15 U.S.C. 80a17. However, recognizing that certain transactions with
an affiliate may in fact benefit fund shareholders, the
SEC has granted express authority to engage in such
transactions when certain protective conditions are met
(e.g., securities are bought and sold at “current market
price”). See 17 C.F.R. 270.17a-7. Similarly, whereas a
merger of a fund into an affiliated fund would otherwise
be barred by Section 17(a), the SEC has authorized such
mergers conditioned on a board finding that the merger
is in the best interests of the fund and will not dilute the
interests of the merging fund’s holders. 17 C.F.R.
270.17a-8.
The SEC also exercises its authority to grant exemptive orders upon the application of a given fund
and/or adviser, based upon the applicant’s representations in its request and frequently upon conditions set
forth in the application or order. Orders are compiled
and published on the SEC’s website and provide market
participants with clarity about the SEC’s policy views.
12
In addition to formal exemptive relief, the SEC staff
also provides “no action” guidance where an individual
or entity “is not certain whether a particular product,
service or action would constitute a violation of the securities laws.” SEC, No Action Letters, https://www.investor.gov/introduction-investing/investing-basics/glossary/no-action-letters. If the staff grants the request for
relief, it provides a letter concluding “that the SEC staff
would not recommend that the Commission take enforcement action against the requester based on the
facts and representations described in the individual’s or
entity’s request.” Ibid. The SEC publishes a compilation
of the no-action letters on its website and explains: “In
some cases, the SEC staff may permit parties other than
the requestor to rely on the no-action relief to the extent
that the third party’s facts and circumstances are substantially similar to those described in the underlying request.” Ibid. Industry participants frequently rely on noaction letters issued to others as indicative of what conduct will not result in enforcement proceedings.
The explosive growth of the registered fund industry since 1940 is testament to the effectiveness of the
ICA’s balanced regulatory framework in cultivating investor confidence through shareholder protections,
while also allowing sufficient flexibility for innovation to
respond to investors’ evolving goals. Prime examples of
consequential investment innovations that emerged under the SEC’s broad powers without the need for legislative amendments to the ICA are the development of
money market funds beginning in the 1970s and ETFs in
the 1990s. Neither of these products would be legal under a facial reading of the ICA’s provisions, and both owe
their existence to the SEC’s discretionary exercise of its
exemptive authority. In each instance, the SEC initially
13
issued a series of exemptive orders allowing individual
firms to engage in otherwise-violative conduct necessary to launch and operate the products, which orders
were ultimately replaced by a comprehensive rule setting forth the protective conditions to qualify for the exemption. 17 C.F.R. 270.2a-7 (money market funds), 17
C.F.R. 270.6c-11 (exchange-traded funds).
The success of the ICA’s flexible regulatory structure in fostering the registered funds marketplace is
manifest. At year-end 2024, there was over $39 trillion
invested in US registered funds, held by 74 million
households (or 56.0% of all US households) and 126.8 million individuals. ICI, 2025 Investment Company Fact
Book, supra. In 2024, nearly two-thirds of mutual fundowning households had more than half of their household
financial assets invested in mutual funds. ICI, Characteristics of Mutual Fund Investors, 2024, ICI Rsch. Perspective (Oct. 2024), https://www.ici.org/system/files/
2024-10/per30-09.pdf. What’s more, the cost of investing
in registered funds has significantly declined over the
course of decades. See ICI, Trends in the Expenses and
Fees of Funds, 2024, ICI Rsch. Perspective 1 (Mar.
2025), https://www.ici.org/system/files/2025-03/per3101.pdf (“From 1996 to 2024, the average expense ratio
for equity mutual funds dropped by 62 percent and the
average expense ratio for bond mutual funds dropped by
55 percent.”). Through registered funds, U.S. retail investors with relatively modest amounts to invest can
gain unparalleled access to financial security through
low-cost diversified professional portfolio management
that might otherwise be unavailable to them.
14
A. The ICA’s requirements for the governance
and operations of registered funds are vigorously examined and enforced by the SEC
In addition to the SEC’s exemptive authority, both
registered funds and their advisers are subject to regular examination by the staff of the SEC’s Division of Examinations. This Division—the SEC’s “eyes and ears”—
publishes an annual list of its examination priorities, including those provisions of the ICA of particular focus.
The most recent edition explained, “[t]he Division continues to prioritize examinations of registered investment companies (RICs or funds), including mutual funds
and [ETFs], due to their importance to retail investors,
particularly those saving for retirement.” SEC, Fiscal
Year 2025 Examination Priorities 7, https://www.
sec.gov/files/2025-exam-priorities.pdf. Examiners regularly issue “deficiency” letters to funds and/or their advisers, reflecting the staff’s finding that provisions of the
ICA have not been fully complied with. The staff typically identifies what steps it expects to be taken to address any deficiencies—steps that do not typically include rescission of service agreements.
Moreover, the Examinations staff can and regularly
does refer matters to the Division of Enforcement for
further investigation and potential formal claims. Section 42 of the ICA empowers the agency to enforce all
the provisions of the statute by granting it broad authority to investigate suspected violations and initiate actions in federal court for injunctive relief and other financial remedies. See 15 U.S.C. 80a-41; UFCW Loc. 1500
Pension Fund v. Mayer, 895 F.3d 695, 701 (9th Cir.
2018). The SEC’s Enforcement staff deploys significant
resources in fulfilling this responsibility, with an
15
extremely active emphasis on the investigation of potential violations of the ICA by funds and advisers. See
Press Release, SEC, SEC Announces Enforcement Results for Fiscal year 2024 (Nov. 22, 2024), https://
www.sec.gov/newsroom/press-releases/2024-186
(reflecting 135 enforcement actions against investment advisers and/or investment companies during FY24).
Given that Congress delegated comprehensive examination and enforcement authority over the ICA to
the SEC—paired with the power to exercise its judgment to grant exemptions and guidance regarding the
statute’s many technical provisions—it is hardly a surprise that Congress did not also see fit to deputize shareholders to pursue their own potentially disparate enforcement agendas of the statute’s provisions. Congress
has adopted only two express private rights of action.
Under Section 30(h), Congress authorized private suits
for damages against certain defendants by incorporating
the private right of action in Section 16(b) of the Securities Exchange Act, 15 U.S.C. 78b(b). In adding Section
36(b) by amendment in 1970, Congress provided a direct
shareholder claim for allegedly excessive fees. 15 U.S.C.
80a-35(b). Since Alexander, courts have consistently declined to read implied private rights of action into the
ICA, including under Section 47(b)—until the Second
Circuit’s decision in Oxford University Bank in 2019.
B. Oversight of registered funds is further
strengthened by independent fund directors,
the “watch dogs” under the ICA’s governance
structure
As a further check, the ICA “interposes disinterested directors as ‘independent watchdogs’ of the relationship between a mutual fund and its adviser.” Jones,
16
559 U.S. at 348 (quoting Burks, 441 U.S. at 484). “The
cornerstone of the ICA’s effort to control conflicts of interest within mutual funds is the requirement that at
least 40% of a fund’s board be composed of independent
outside directors. 15 U.S.C. § 80a-10(a).” Burks, 441 U.S.
at 482 (footnote omitted). The minimum number of independent directors is for practical purposes 50%, because
a majority is required for funds to qualify for the SEC
exemptive rules discussed above. 17 C.F.R. 270.0-1. And
in practice, independent directors typically comprise
more than 75% of today’s fund boards. IDC & ICI, Overview of Fund Governance Practices, 1994-2022, at 6 (Oct.
2023), https://www.ici.org/system/files/2023-10/23-fundgovernance-practices.pdf (finding 89% of fund boards
are comprised of 75% or more independent directors).
Like directors of operating companies, independent
fund directors have a general fiduciary duty to represent
the interests of the funds. But they also have specific
statutory and regulatory responsibilities under the ICA
beyond the duties required of other types of directors.
“To these statutorily disinterested directors, the [ICA]
assigns a host of special responsibilities involving supervision of management and financial auditing.” Burks, 441
U.S. at 482-483. For example, they have the statutory
duty to review and approve the contracts of the investment adviser and the principal underwriter, 15 U.S.C.
80a-15(c), to appoint other disinterested directors to fill
board vacancies, 15 U.S.C. 80a-16(b), and to select the
independent public accountants who certify the fund’s financial statements, 15 U.S.C. 80a-31(a). SEC rules
promulgated pursuant to the ICA likewise require fund
board action with respect to various matters, including
annual review and approval of the fund’s compliance policies and procedures as reasonably designed to prevent
17
violations of the securities laws, 17 C.F.R. 270.38a1(a)(2); approval of the appointment, compensation and
removal of the fund’s chief compliance officer, 17 C.F.R.
270.38a-1(a)(4); and valuation oversight, 17 C.F.R.
270.2a-5, among others.
II. A PRIVATE RIGHT OF ACTION UNDER SECTION
47(B) OPENS A BACK DOOR FOR PRIVATE SUITS
OVER OTHER PROVISIONS OF THE ICA
The availability of a private right of action under
Section 47(b) would disrupt the established regulatory
framework that guides the daily actions of funds and
their boards, advisers, and other service providers. This
framework depends on a series of contracts consistent
with the requirements of the ICA, and frequently also
exemptive rules and orders thereunder, which are subject to approval by independent directors and review by
SEC staff.
Allowing shareholders a claim for “rescission” of
contracts whose “performance” the shareholder believes
involve a “violation” of the ICA opens a back door to private suits over essentially every other provision of the
ICA. Such suits would inevitably involve plaintiffs second-guessing the interlocking judgments of both the
SEC and independent directors often required in approval of many common investment actions—for example, the SEC’s crafting of an exemptive rule or order, the
SEC’s requirements and guidance for compliance with
that rule or order, and the independent directors’ approval of the action as complying with the SEC requirements. This litigation back door would promote significant regulatory uncertainty, as well as wasteful litigation expense. This uncertainty could discourage fund
sponsors from creating new funds or seeking innovative
18
forms of exemptive relief, thereby potentially reducing
the types of investments available to prospective investors.
A. “Activist” challenges to closed-end fund governance measures
One example of such back door litigation is presented by the current litigation involving “activist”
hedge fund investor Saba. Saba engages in what it calls
a closed-end fund “arbitrage strategy,” acquiring large
numbers of shares of closed-end funds and frequently using its concentrated voting power to force transformational changes in the fund—which in turn provide Saba
the ability to sell its shares at above-market prices,
yielding short-term arbitrage profits. These actions usually include disruptive changes, such as large tender offers (prompting significant asset liquidation), merger of
a fund, or outright liquidation, that harm ordinary longterm shareholders. ICI, Recommendations Regarding
the Availability of Closed-End Fund Takeover Defenses
5-6 (2020), https://www.ici.org/doc-server/pdf%3A20_
ltr_cef.pdf. Because these changes benefiting Saba come
at the expense of ordinary shareholders in the funds,
who typically seek long-term income streams from these
investments, closed-end fund boards have adopted various measures seeking to ensure that such transformative and potentially harmful fund changes only occur if
they have the support of a large portion of all fund shareholders—not just concentrated minority holders. Id. at
11-16. At least one court has already recognized the legitimate interest of fund boards in considering such
measures to protect long-term shareholders from the potential harm caused by the “activist” arbitrage
19
strategy. 3 Among the identified abuses Congress sought
to address expressly in the ICA were harms caused by
concentrated minority holders acting in ways that hurt
ordinary shareholders with different interests. H.R. 279,
76th Cong. (1939); 15 U.S.C. 80a-1(b).
Saba has seized on the fact that the by-laws and
other governing documents of a fund are treated by
many states’ laws as contracts between the fund and its
shareholders, and it has been invoking Section 47(b) to
seek “rescission” of board actions adopting defensive
measures that might hamper its arbitrage strategy. The
underlying basis for these rescission claims is alleged violations of other provisions of the ICA that are otherwise within the enforcement authority of the SEC. In
In granting partial summary judgment against Saba in connection
with its claim for breach of fiduciary duty against certain Eaton
Vance closed-end funds and their independent trustees, a Massachusetts Superior Court found that the “Trustees had a legitimate
business reason for their action * * * that the purpose of the Bylaw
Amendments was to protect Funds’ retail shareholders from the
harm they perceived that activist hedge funds like Saba could cause
if they gained a concentrated minority of shares, forced short-term
liquidity events, and thereby threatened retail investors’ interest in
the Funds and the Funds’ viability” as long-term investment vehicles. Eaton Vance Senior Income Tr. v. Saba Cap. Master Fund,
Ltd., No. 2084CV01533-BLS2, 2023 WL 1872102, at *11 (Mass. Super. Ct. Jan. 21, 2023). In its trial ruling rejecting Saba’s challenge
to a majority-of-outstanding-shares voting standard, the court
found that “Saba’s activist objectives are generally inconsistent
with the Funds’ investment objectives. The goal of monetizing the
discount to [net asset value] differs from the goal of managing a stable pool of assets for a steady income stream over a long period of
time.” Findings of Fact, Conclusions of Law, and Order for Judgment, Eaton Vance Senior Income Tr. v. Saba Cap. Master Fund,
Ltd., No. 2084CV01533-BLS2, slip op. at 13 (Mass. Super. Ct. Oct.
21, 2024).
3
20
the present case, the provision at issue is Section 18(i),
part of the “Capital Structure” section of the statute, requiring that all fund shares issued be voting securities
that have “equal voting rights” with all other shares. In
its most recent guidance on this question, the SEC staff
issued a statement in May 2020 that it would not recommend enforcement action for violation of Section 18(i) in
the event a fund opted into the Maryland Control Share
Acquisition Act. See SEC, Control Share Acquisition
Statutes Staff Statement (May 27, 2020), https://
www.sec.gov/investment/control-share-acquisitionstatutes (recognizing, both expressly and implicitly, the
legitimacy of actions taken by boards of closed-end funds
to respond to activist investors). Nevertheless, Saba
brought the present lawsuit to challenge the actions of
multiple fund boards as violating Section 18(i), alleging
that the SEC staff’s views on the provision were of no
relevance for the court in adjudicating Saba’s claims.
Despite the fact that all of the funds at issue were
organized under Maryland law, Saba asserted the actions within the Second Circuit, transparently to take
advantage of Oxford University Bank. The Third Circuit has ruled to the contrary. Santomenno ex rel. John
Hancock Tr. v. John Hancock Life Ins. (U.S.A.), 677
F.3d 178 (2013). Several of the funds were dismissed by
the district court based on by-laws requiring them to be
sued in Maryland.
In separate litigations, Saba challenges other types
of closed-end fund board actions, including the adoption
of a voting standard requiring the support of a majority
of outstanding shares to elect trustees and the implementation of a shareholder rights plan (often referred to
as a “poison pill”). Here again, the SEC has not taken
21
any enforcement action or suggested in guidance that
such measures violate the ICA provisions that Saba invokes via the Section 47(b) back door opened by the Second Circuit.
The uncertainty created by the repeated attacks of
Saba and other “activists” against multiple closed-end
funds is having a demonstrated negative effect on the
availability of listed closed-end funds to investors in the
market. ICI data show that, as the number of funds targeted by “activists” has continued to grow, the number
of listed closed-end funds available to investors in the
market has contracted significantly. ICI, Closed-End
Fund Activism (2025), https://www.ici.org/system/files/
2024-05/cef-activism.pdf (“The activist presence discourages new listed [closed-end fund] entry into the market
and is an important reason for the 43 percent drop in the
number of listed [closed-end funds] since 2007.”). As of
the end of 2024, Saba alone held positions in fully onequarter of all closed-end funds in the market. Ibid. 4
B. Claims seeking “rescission” of fund service
agreements
The back door litigation threat posed by a Section
47(b) private right of action reaches well beyond the
closed-end fund activist context. Under the prevalent
In pursuing its “arbitrage strategy” to force transformational
changes at closed-end funds, Saba regularly accumulates positions
of 15-20% or more of a fund’s outstanding shares. In doing so, Saba
evades the ICA’s 3% limit on the number of shares of a registered
fund that may be held by another investment company—including
by unregistered hedge funds like Saba’s. 15 U.S.C. 80a-12(d)(1).
Saba claims to be able to exceed the 3% cap via the fig leaf of spreading its large holdings across multiple indistinguishable funds pursuing the same strategy, none of which exceeds 3% on its own.
4
22
externalized management model, virtually every task
required to operate a registered fund and offer it to investors is undertaken by a service provider pursuant to
a written agreement with the fund in exchange for a fee.
In a typical structure, the adviser manages the fund’s
portfolio in accordance with its investment strategy, engages with third-party brokers who execute portfolio
transactions, facilitates the creation of required fund disclosures, and coordinates the efforts of the other service
providers. Separately, the underwriter markets and distributes the fund’s shares in a broker-dealer capacity;
the custodian bank maintains custody of the fund’s portfolio holdings; the transfer agent conducts the execution
and recordkeeping of transactions in the fund’s shares;
the administrator prepares the fund’s financial statements and other detailed SEC filings and calculates the
fund’s daily net asset value; and a public auditing firm
audits the firm’s financial statements for inclusion in the
annual shareholder report.
If fund shareholders can assert claims for “rescission” of such service agreements premised on alleged violations of other ICA provisions in the “performance” of
the contracts—with the bounty being disgorgement of
the fees paid thereunder—the potential claims that
could be contrived by the private plaintiffs’ bar are almost limitless in scope. In the brief of the United States
supporting certiorari, the Solicitor General and the SEC
cautioned that “[i]f Section 47(b) creates a private right
of action, a plaintiff could sue to challenge contractual
terms that are alleged to violate any ICA provision, not
just the Act’s provisions regarding voting rights” at issue in this action. U.S. Amicus Br. 19. “Allowing such expansive private enforcement would upset the balance
that Congress struck in the ICA.” Ibid. Procedurally,
23
these claims would most plausibly be asserted as derivative claims on behalf of the fund as party to the agreement in question. See, e.g., In re Regions Morgan Keegan Secs., Derivative, & ERISA Litig., 743 F. Supp. 2d
744, 761 (W.D. Tenn. 2010); Hamilton v. Allen, 396 F.
Supp. 2d 545, 558 (E.D. Pa. 2005). There is also some
precedent for fund shareholders bringing direct claims
as third-party beneficiaries of agreements between
funds and service providers. See Northstar Fin. Advisors Inc. v. Schwab Invs., 779 F.3d 1036, 1065 (9th Cir.
2015) (holding that fund shareholders could assert a direct claim under state law for breach of the investment
advisory agreement between a mutual fund and its adviser as third-party beneficiaries of that contract).
Prior attempts to invoke Section 47(b) in connection
with alleged violations of other ICA provisions (albeit
unsuccessfully) serve to illustrate the range of such
other provisions that might be targeted by back door
claims if the door were opened—even though courts
have repeatedly held there is no private right of action
as to the targeted provisions themselves. See, e.g.,
UFCW Local 1500 Pension Fund v. Mayer, 895 F.3d
695, 697-698 (9th Cir. 2018) (Section 3(b)); Smith v. Oppenheimer Funds Distrib., Inc., 824 F. Supp. 2d 511, 522523 (S.D.N.Y. 2011) (Sections 36(a), 38(a)); In re Regions
Morgan Keegan Secs., Derivative, & ERISA Litig., 743
F. Supp. 2d at 761-762 (Sections 13, 22, 30, 34(b)); Hamilton, 396 F. Supp. 2d at 553-555 (Section 36(a)); Mutchka
v. Harris, 373 F. Supp. 2d 1021, 1025-1026 (C.D. Cal.
2005) (Section 36(a)); Blatt v. Merrill Lynch, Pierce,
Fenner & Smith Inc., 916 F. Supp. 1343, 1357-1358
(D.N.J. 1996) (Section 13(a)(3)); Mathers Fund, Inc. v.
Colwell Co., 564 F.2d 780, 782 (7th Cir. 1977) (Section
17(a)(2)). In Mayer, where the Ninth Circuit rejected the
24
existence of a private right of action, the plaintiffs
sought to invoke Section 47(b) to establish that the internet search company Yahoo! had violated the conditions of an order granted to it by the SEC under Section
3(b)(2) exempting Yahoo! from registering as an investment company—violations that the SEC itself nowhere
alleged. 895 F.3d at 697-98. Under the reasoning of Oxford University Bank, there is no meaningful limiting
principle on the range of ICA “violations” that plaintiffs
could seek remedy through a litigation back door opened
under Section 47(b).
C. The resulting uncertainty over applicable regulatory standards, coupled with litigation expense, would harm fund shareholders and their
savings goals
Whether back door claims are asserted by self-interested concentrated holders like Saba or by the traditional class action plaintiffs’ bar, an implied Section 47(b)
private right of action could result in significant regulatory uncertainty and litigation expense for the fund industry to the detriment of shareholders. Recognizing a
Section 47(b) private right of action could be tantamount
to declaring open season on the SEC’s multi-layered interpretation and application of the ICA’s substantive
provisions, as reflected in the agency’s exemptive rules,
orders, published guidance, and enforcement actions.
See U.S. Amicus Br. 19-20 (“If private parties could invoke Section 47(b) as a freestanding cause of action, they
could interfere with the SEC’s discretionary enforcement and exemption decisions.”). Although Congress
gave no indication whatsoever of an intent to deputize
shareholders to enforce the ICA’s provisions in parallel
with (or in tension with) the SEC, that could be the practical effect of a Section 47(b) back door. Recognizing a
25
private right of action under Section 47(b) effectively
converts a provision meant as a shield for defendants in
breach of contract actions into a sword for the plaintiffs’
bar. 5 See id. at 20 (“In the view of the United States, private enforcement suits under Section 47(b) threaten to
have an unpredictable impact on the operations and contractual arrangements of investment funds, including
the mutual funds on which millions of Americans rely.”).
The risk of regulatory uncertainty is made more
acute by questions surrounding whether courts would be
bound by the SEC’s interpretations in private litigation
pressing for alternative readings of the ICA. The industry has long relied on the interpretations of the ICA’s
provisions provided by the SEC and its staff in understanding what structures and practices are deemed appropriate under the statute by its primary enforcer. These interpretations are reflected in rules, orders, no-action letters, and enforcement actions, as well
as via informal consultation and comments made by the
staff on new fund registration statements before shares
are offered to the public. A clear understanding of what
activities will and will not trigger an SEC enforcement
action has long been a polestar for industry actors in
managing funds and investing in new business lines and
products. Opening up this body of guidance to secondguessing by private plaintiffs in litigation would dramatically undermine the ability of industry actors to rely on
Rejection of a Section 47(b) private rescission claim does not leave
shareholders without redress where fund service providers allegedly fall short. Shareholders can assert derivative claims for damages to a fund under common law theories such as breach of contract
or fiduciary duty, as well as direct claims under the federal securities laws in connection with alleged materially misleading statements in a fund’s registration statement.
5
26
what have heretofore been considered established guiding principles. This is especially so if courts hearing
these challenges consider themselves unbound by the
SEC’s long-stated views. Private litigants can be expected to argue that the agency’s interpretation of the
statute—and even its own rules thereunder—are not
binding on a court, and in many cases will not be entitled
to deference. See Kisor v. Wilkie, 588 U.S. 558 (2019).
Product innovations that have been enabled directly by
the industry’s ability to rely upon the SEC’s reasoned
judgments about exemptions from the ICA’s prohibitions have furthered the savings goals of millions of
American households. Regulatory uncertainty from a litigation-driven reopening of those judgments could seriously hamper product innovation that directly serves
U.S. savers.
Indeed, the risk of regulatory uncertainty is so pronounced in the ICA framework that the recognition of
implied private rights of action under arguably analogous provisions in other statutes cannot inform Congress’s intent as to private actions under Section 47(b).
For example, the Court found an implied private right of
action for rescission under Section 215 of the IAA, which
provides that a contract “shall be void” if it is “made” in
violation or its performance “involves the violation” of
the statute. 15 U.S.C. 80b-15(b); Transamerica Mortg.
Advisors, Inc. v. Lewis, 444 U.S. 11 (1979) (TAMA).
Aside from the fact that TAMA predates the modern approach of repudiating the inference of implied private
rights of action without express textual or structural
support as established in Alexander v. Sandoval and
the important textual distinctions between the provisions discussed in Petitioners’ opening brief, the Court’s
analysis of Congress’s implied intent as to IAA Section
27
215 cannot be exported to ICA Section 47(b) given the
important differences in the statutory frameworks
within which the two provisions are situated. Unlike the
many granular ICA prescriptions and prohibitions regarding registered fund structure, governance and daily
operations, the IAA (which is about one-third the length
of the ICA) imposes a more limited set of disclosure requirements, fiduciary duties, policy adoption mandates,
and a proscription on fraudulent conduct. The IAA likewise does not feature the ICA’s further check of independent director oversight. The very granular tapestry
of SEC rules, exemptive orders and guidance (reinforced by independent board review) that plays a fundamental role in the governance, structure, and operations
of registered funds under the ICA—per Congress’s design—is not mirrored in the less pervasive regulation of
investment adviser activities under the more principlesbased IAA. 6 Congress’ statutory framework for registered funds thus relies much more heavily on nuanced
and interlocking judgments of the SEC and independent
directors, making it all the clearer that there is no basis
to infer implied Congressional intent to give private
plaintiffs a separate say on these questions.
Moreover, as demonstrated by the long history of
private litigation involving registered funds, such claims
are typically motivated by self-interested agendas like
It is also unclear that TAMA’s reasoning can be read to open a
litigation back door in the IAA of the type that Saba’s arguments
threaten in the ICA. In TAMA, the Court held that “there exists a
limited private remedy under [Section 215 of the IAA] to void an
investment adviser’s contract, but that the Act confers no other private causes of action, legal or equitable”—including recovery of
damages for violations of the antifraud provisions in Section 206 of
the statute. 444 U.S. at 24.
6
28
Saba’s and/or by hopes of a large attorney fee—not to
enhance shareholder protection. Funds and their advisers and boards have been targeted for decades by class
actions plaintiffs’ lawyers, motivated by the desire to
score a large attorney fee from perceived “deep pocket”
defendants. One of the two express private right of action under the ICA—for “excessive fee” claims under
Section 36(b)—spawned a wave of cases, typically asserted against large funds that charged modest fees, in
hopes of a proportionately large attorney fee recovery.
Not a single plaintiff has ever prevailed in these cases,
despite imposing hundreds of millions of dollars of legal
expenses on the industry to defend against these claims.
See ICI Mutual, Claims Trends: A Review of Claims
Activity in the Mutual Fund Industry, at 4 (Apr. 2024),
https://www.icimutual.com/wp-content/uploads/ClaimsTrends-2023-2024.pdf. 7
The Second Circuit’s decision in Oxford University
Bank (2019) has itself spawned uncertainty and wasteful
incentives—including forum shopping by plaintiffs seeking to take advantage of the Section 47(b) claim within
the Second Circuit. Even in the present litigation, plaintiffs below asserted claims in the SDNY against multiple
funds with express forum selection clauses outside of
Empirical analysis confirms the experience lived by the industry
participants defending against this wave of cases: plaintiffs’ counsel
did not select funds for litigation based on high fees, but instead
based on large asset bases that would generate a higher attorney
fee in the event of a successful case. See Quinn Curtis & John Morley, An Empirical Study of Mutual Fund Excessive Fee Litigation:
Do the Merits Matter? (Sept. 18, 2012), https://law.yale.edu/sites/
default/files/area/workshop/leo/document/Morley_MutualFundExcessiveFeeLitigation.pdf.
7
29
New York—resulting in the funds’ dismissal, but only
after full briefing.
American retail investors have been served exceptionally well by the comprehensive regulation of the registered funds industry, carried out through the combined efforts of the SEC and independent fund directors
under the ICA framework. The compound risks of regulatory uncertainty and wasteful litigation posed by a litigation back door under Section 47(b) would not serve
shareholder interests and cannot have been Congress’s
intent.
CONCLUSION
For the foregoing reasons, the judgment of the
Court of Appeals should be reversed.
Respectfully submitted.
DOUGLAS HALLWARD-DRIEMEIER
AMY D. ROY
ROBERT A. SKINNER
ROPES & GRAY LLP
PAUL G. CELLUPICA
MATTHEW THORNTON
KEVIN ERCOLINE
THE INVESTMENT COMPANY
INSTITUTE
LINDSEY WEBER KELJO
THE ASSET MANAGEMENT GROUP OF
THE SECURITIES INDUSTRY AND
FINANCIAL MARKETS ASSOCIATION
SEPTEMBER 2025
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.