Press Release August 26, 2019

Press Post: Investment Company Act Circuit Split Exposes Mutual Funds (Law360)

The Investment Company Act of 1940[1] regulates mutual funds, exchange-traded funds and certain other pooled investment vehicles. Since 2002, federal courts have refused to find that implied private rights of action exist under the act. Earlier this month, however, the U.S. Court of Appeals for the Second Circuit held in Oxford University Bank v. Lansuppe Feeder LLC that private plaintiffs may bring actions under Section 47(b) of the act[2] for rescission of contracts that violate the act. As the Second Circuit recognized, its decision conflicts with several other federal court decisions that have refused to find an implied private right of action under Section 47(b), including a 2012 decision by the U.S. Court of Appeals for the Third Circuit. The U.S. Supreme Court is not expected to have an immediate opportunity to resolve this circuit split, however, because of the new decision’s procedural posture. In a byline article in Law360, Goodwin partners Mark Holland, Mike Isenman and Jamie Fleckner consider the increased uncertainty and litigation risk faced by participants in the investment company industry over the next few years if mutual fund investors attempt to bring private actions to rescind contracts that allegedly violate the act. Read the article here.