U.S. Supreme Court weighs opening investment funds to more lawsuits
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At issue before the court is whether the 1940 Investment Company Act authorizes private lawsuits for most violations. Photo by Anna Moneymaker/Getty Images/Postmedia filesArticle contentThe United States Supreme Court grappled with whether to let investors broadly use an 85-year-old law to sue funds over their management decisions in a case being closely watched on Wall Street.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentHearing arguments Wednesday in Washington, the justices questioned a lower court ruling that let activist investors sue 11 closed-end funds, including some affiliated with FS Credit Opportunities Corp. and BlackRock Inc. The suing investors are led by hedge fund manager Boaz Weinstein’s Saba Capital Master Fund.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.We apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Play VideoArticle contentArticle contentAt issue is whether the 1940 Investment Company Act authorizes private lawsuits for most violations. The closed-end funds appealed after the 2nd U.S. Circuit Court of Appeals said the law contained a so-called private right of action letting investors sue.Article contentPosthasteBreaking business news, incisive views, must-reads and market signals. Weekdays by 9 a.m.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Posthaste will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentThe 80-minute Supreme Court session didn’t give a clear indication about the likely outcome, with potentially pivotal Justice Brett Kavanaugh calling the case “extremely close.”Article contentSaba is trying to use the ICA to challenge the funds’ invocation of a Maryland law that lets controlling shareholders block other investors from acquiring more than a 10 per cent voting share.Article contentSaba says the Maryland “control-share” law lets underperforming funds escape accountability, while FS and BlackRock say it helps funds take a long-term view, protecting them from arbitragers seeking short-term profits.Article contentActivist investors typically accumulate stakes in companies and then push for change by trying to gain seats on the board, often clashing with fund managers like BlackRock and FS.Article contentThe ICA is designed to protect investors in a variety of ways, including registration and disclosure requirements. The provision Saba is seeking to invoke says that each share of a fund generally shall have “equal voting rights with every other outstanding voting stock.”Article content—With assistance from Jef Feeley.Article contentBloomberg.comArticle contentTrending David Rosenberg: 10 reasons why we're now bullish on the Canadian dollar for the first time in many years News This generation of Canadians is rapidly increasing its wealth and may soon unseat the boomers Wealth Posthaste: A market phenomenon not seen in 50 years is raising red flags at the world's central bank News This Canadian mine is as big as a city. It has a basketball court and its chefs serve 4,000 meals daily Commodities Bank of Canada tempers expectations for any moves on rates in 2026, economists say Economy Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. David Rosenberg: 10 reasons why we're now bullish on the Canadian dollar for the first time in many years News This generation of Canadians is rapidly increasing its wealth and may soon unseat the boomers Wealth Posthaste: A market phenomenon not seen in 50 years is raising red flags at the world's central bank News This Canadian mine is as big as a city. It has a basketball court and its chefs serve 4,000 meals daily Commodities Bank of Canada tempers expectations for any moves on rates in 2026, economists say Economy