Supreme Court Rejects Implied Private Right of Action Under Section 47(b) of the Investment Company Act of 1940

Short summary

In a 6-3 decision, the Supreme Court held that Section 47(b) of the Investment Company Act of 1940 does not provide private parties a right of action for rescinding contracts. This eliminates a mechanism activist investors used to challenge fund governance and operational decisions. Investment companies and managers now enjoy greater regulatory certainty and reduced litigation exposure.

• •Supreme Court ruled Section 47(b) ICA does not create private right of action for contract rescission
• •Eliminates activist investors' primary tool to challenge fund governance, bylaws, and advisory relationships
• •Provides investment companies regulatory certainty and significantly reduces litigation risk over service contracts

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