Supreme Court Rejects Implied Private Right Of Action Under Section 47(b) Of The Investment Company Act

On June 11, 2026, the Supreme Court issued its decision in FS Credit Opportunities Corp., et al. v. Saba Capital Master Fund, Ltd., et al., 24-345, to resolve a circuit split over whether Section 47(b) of the Investment Company Act (ICA) grants parties a private right of action to sue for rescission of contracts that violate the Act. The Court held that it does not do so.

The ICA regulates certain investment entities, such as mutual funds and exchange-traded funds, and designates the Securities and Exchange Commission (SEC) as its primary enforcer. Section 47(b) of the ICA states that any contract made or performed in violation of the ICA is voidable. Should a contract, by formation or performance, violate the ICA, “a court may not deny rescission at the instance of any party.” Here, several closed-end mutual funds, which were formed under Maryland law, had opted in to provisions of the Maryland Control Share Acquisition Act (MCSAA). These provisions allow companies to restrict or eliminate the voting rights of shareholders possessing 10% or more of a company’s total voting power. Approximately half of the states have adopted various forms of control share laws. In 2023, two Saba Capital entities sued in the Southern District of New York for rescission of the control share provisions, claiming that resolutions opting in to the MCSAA violated the ICA’s requirement that “every share of stock … shall be a voting stock and have equal voting rights with every other outstanding stock.” For a right of action, Saba invoked Section 47(b) of the ICA. The district court held that Section 47(b) creates an implied right of action to sue for contract rescission and granted the motion for summary judgment, concluding that the control share provisions violated the ICA. The Second Circuit affirmed.

The Supreme Court reversed. Justice Barrett, joined by Chief Justice Roberts and Justices Thomas, Alito, Gorsuch, and Kavanaugh, held that the language of Section 47(b) does not create a private right of action. Justice Jackson filed a dissenting opinion, joined in full by Justice Sotomayor and in part by Justice Kagan. Justice Kagan filed a brief, solo dissent.

After providing a history of the ICA, and the factual and procedural history of this case, the Court turned to the merits, detailing the history of the Court’s recognition of implied private rights of action. According to the Court, to create an implied private right, a statute must use “rights-creating language” aimed to protect “a particular class of persons.” Moreover, the Court explained, “language establishing an express remedial scheme elsewhere in the statute may foreclose a private cause of action to enforce even those statutes that admittedly create substantive private rights.”

The Court held that, in this remedial scheme, the phrase “a court may not deny rescission at the instance of any party” in Section 47(b) of the ICA does not imply a private right of action but, instead, is a direction to courts on their use of their own remedial authority, “presuppos[ing] that parties are already before the court.” The Court found further support for its conclusion in the traditional treatment of rescission by contract law as a remedy, not a cause of action, and the function of Section 47(b) to provide a deviation from the common law where rescission would be unavailable. Critically, the Court stated that the structure of the ICA renders the SEC the primary enforcer of statutory remedies, while private rights of action are explicitly authorized by the ICA in only two distinct scenarios. Those provisions, the Court explained, demonstrate that when Congress intended to provide a private remedy to enforce the ICA, it did so expressly.

The Court rejected Saba’s counterargument that Section 47(b)’s use of the phrase “at the instance of any party” meant that Congress intended to imply a private right of action. It explained that “at the instance of any party” is most naturally read to direct a court’s remedial power when a party before it is urging rescission — not to create a right to sue in the first place. The Court also distinguished Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11 (1979) (TAMA). That case held that Section 215 of the Investment Advisors Act (IAA), a statute contemporaneously enacted with the ICA, created an implied private right of action, and Saba argued that Section 47(b) of the ICA, as enacted, mirrored Section 215 of the IAA. The Court rejected this argument, observing that, in 1980, Congress “entirely reworked Section 47(b)” — amendments that the Court held were substantive, rather than merely clarifying a preexisting private right, as Saba had argued. The Court, therefore, did not accept what it characterized as Saba’s argument for “a sweeping right” to bring private suits pursuant to Section 47(b) of the ICA.

Finally, the Court addressed the principal dissent. Justice Jackson argued that each of the following supported implication of a private right of action: (i) the text, statutory structure, and statutory history of Section 47(b); (ii) Congress’s amendment of the ICA with TAMA as a backdrop, and no indication that it intended to reject TAMA’s holding; and (iii) the legislative history based on the House and Senate Committee Reports from the 1980 amendments to the ICA. The majority, in turn, critiqued the dissent’s alleged “misuse” of legislative history and its attempt to “revive that old-time devotion to legislative history” epitomized by Church of Holy Trinity v. U.S., 143 U.S. 457 (1892). The Court further observed that the Committee Reports reflected that Congress was well aware of the then-recent trend of the Court “toward a strict construction of statutory language” and “the Court’s unwillingness to imply causes of action,” noting that Congress could have chosen to enact an express private right of action, but did not do so.

The Court therefore reversed the Second Circuit’s judgment and held that Section 47(b) of the ICA does not create a private right of action. The decision puts the SEC firmly in control of enforcing the ICA.

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