Supreme Court Weighs Opening Investment Funds to More Suits (1)

The US 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.

Hearing 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.

At issue is whether the 1940 Investment Company Act authorizes private lawsuits for most violations. The closed-end funds appealed after the 2nd ...