Ninth Circuit Holds There Is No Private Right of Action Under Section 13(a) of the Investment Company Act of 1940

August 17, 2010
The United States Court of Appeals for the Ninth Circuit recently held in Northstar Financial Advisors, Inc. v. Schwab Investments that section 13(a) of the Investment Company Act of 1940 does not provide a private cause of action when an investment company portfolio deviates from investment policies stated in the company’s registration statement. This update examines the decision, which is particularly important due to the broadly applicable reasoning used by the Ninth Circuit to join the Second Circuit in finding that there is no “implied private right of action to enforce the individual provisions of the Act.”