On June 11, 2026, the U.S. Supreme Court issued a 6-3 decision in FS Credit Opportunities Corp. et al. v. Saba Capital Master Fund, Ltd., et al., holding that Section 47(b) of the Investment Company Act of 1940 (ICA) does not give private parties a right to sue for rescission of contracts that allegedly violate the ICA. The Court reversed the Second Circuit, resolving a circuit split and foreclosing Section 47(b) as a private right of action.
Section 47(b) addresses the enforceability of contracts that violate the ICA, providing that such contracts are generally unenforceable and, if performed, that a court may not deny rescission “at the instance of any party” unless denial would be more equitable and consistent with the ICA’s purposes. The provision, however, does not expressly grant rights to a specified class of persons. Rather, it is a “mandate directed to the . . . courts.”
The dispute arose from a challenge brought by Saba Capital Master Fund, Ltd., and Saba Capital Management, L.P. (collectively, “Saba”), an activist investor focused on closed-end funds. Saba sued several Maryland closed-end funds that had opted into the Maryland Control Share Acquisition Act (MCSAA), which limits voting rights for shareholders that acquire large ownership positions unless other shareholders approve. The MCSAA is often used by closed-end funds as a defensive measure to guard against activist-investor takeovers. Saba argued that the resolutions taken by the boards of the subject funds when opting into the MCSAA violated Section 18(i) of the ICA, which requires that every share of stock be a voting stock with equal voting rights. Because Section 18(i) has no express private right of action, Saba invoked Section 47(b) to bring the suit, claiming the resolutions adopting control share provisions were “contracts” and seeking their rescission pursuant to Section 47(b).
The district court held that Section 47(b) creates an implied private right of action to sue for contract rescission and granted Saba summary judgment. The Second Circuit summarily affirmed based on a 2019 Second Circuit decision in Oxford University Bank v. Lansuppe Feeder, LLC, which had held that Section 47(b) creates an implied right of action to sue for contract rescission. 933 F.3d 999 (2d Cir. 2019). The Supreme Court granted certiorari to resolve a circuit split.
Writing for the majority, Justice Barrett’s opinion began with the modern implied-right-of-action framework: Congress decides who may enforce federal law, and courts should not infer a private cause of action unless the statute’s text and structure show congressional intent to create one.
Section 47(b) governs remedial authority; it does not create a claim. The majority reasoned that the phrase “a court may not deny rescission at the instance of any party” is directed to courts and tells them how to exercise remedial discretion when parties are already before them. The Court also emphasized that rescission is traditionally a remedy, not a cause of action. Section 47(b) therefore may affect what relief is available in a properly brought case, but it does not itself supply the basis for a suit.
The ICA’s structure confirms the absence of a private right of action. The ICA gives the SEC primary enforcement authority and expressly creates private rights of action in other provisions. The majority also rejected Saba’s reliance on Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11 (1979) (“TAMA”), a 1979 Supreme Court decision that recognized an implied rescission remedy under the Investment Advisers Act. Saba argued that TAMA supported recognizing a similar implied private right of action under Section 47(b), but the majority disagreed, reasoning that Congress amended Section 47(b) in 1980 to remove the “shall be void” language on which TAMA relied and replaced it with language focused on what “a court” may do. To the majority, the ICA’s structure and Congress’s decision to revise Section 47(b) demonstrated that Congress knew how to authorize a private right of action when it wanted to and intentionally did not do so in Section 47(b).