The court of appeals reversed a district court judgment and remanded the action with directions. The court held that there existed no private cause of action to enforce provisions of the Investment Company Act of 1940 that generally require an investment company to obtain shareholder approval before deviating from the investment policies contained in the company’s Securities and Exchange Commission registration statement.
Northstar Financial Advisors, Inc. was a registered investment advisory and financial planning firm that managed accounts on behalf of investors. Northstar filed a shareholder class action against Schwab Investments and Charles Schwab Investment Management, Inc. for violations of §13(a) of the Investment Company Act of 1940. The primary claim asserted by Northstar was that Schwab allegedly deviated from the fundamental investment policies set out for the Schwab Total Bond Market Fund in the Fund’s registration statement filed with the Securities and Exchange Commission (SEC).
