U.S. Court of Appeals for the Second Circuit Upholds that Nuveen-Advised Closed-End Funds Violated the Investment Company Act of 1940

Trustees Terence J. Toth, Jack B. Evans, William C. Hunter, Albin F. Moschner, John K. Nelson, Judith M. Stockdale, Carole E. Stone, Margaret L. Wolff, Robert L. Young and Matthew Thornton, III Violated Federal Law

Saba Capital Management, L.P. (collectively with certain of its affiliates, “Saba” or “we”) today commented on the outcome of the lawsuit brought in the United States Court of Appeals for the Second Circuit (the “Court”) by five closed-end funds advised by Nuveen Fund Advisors, LLC and Nuveen Asset Management, LLC (collectively, “Nuveen”) – the Nuveen Floating Rate Income Fund (NYSE: JFR), Nuveen Floating Rate Income Opportunity Fund (NYSE: JRO), Nuveen Short Duration Credit Opportunities Fund (NYSE: JSD), Nuveen Global High Income Fund (NYSE: JGH), and Nuveen Senior Income Fund (NYSE: NSL) (the “Funds”) – and trustees that include Terence J. Toth, Jack B. Evans, William C. Hunter, Albin F. Moschner, John K. Nelson, Judith M. Stockdale, Carole E. Stone, Margaret L. Wolff, Robert L. Young and Matthew Thornton, III.

Saba sued Nuveen and the trustees in the United States District Court for the Southern District of New York (the “District Court”) on January 14, 2021, after they stripped voting rights from shareholders in violation of the Investment Company Act of 1940 (the “ICA”). The District Court subsequently issued a summary judgment ruling in favor of Saba and invalidated the actions of Nuveen and the Funds’ trustees. The Court’s decision on November 30, 2023, upholds the District Court’s ruling that Nuveen’s practice of vote stripping is unlawful.

Boaz Weinstein, Founder and Chief Investment Officer of Saba, commented:

“Federal law is unambiguous in the protections it provides shareholders. This ruling reinforces that Nuveen and other closed-end fund managers are violating the law by implementing illegal vote stripping provisions to disenfranchise shareholders and entrench their boardroom pawns. Closed-end fund trustees should reconsider the caliber of the legal advice that they have been receiving, and should spend less time and shareholder capital on meritless battles and more on improving performance.

These Funds’ trustees, who are clearly unfit to serve as fiduciaries, should resign immediately and never again serve on boards. The Court’s ruling is a victory for shareholders who have suffered at the hands of hypocritical, self-interested fund managers like Nuveen.”

The Court’s decision noted the following:

  • “The question in this case is whether Nuveen violated the ICA by adopting an amendment to its bylaws that restricts shareholders in certain of its closed-end investment funds from voting shares acquired above specified levels of ownership. We hold that this voting restriction violates the ICA.”
  • “Congress expressed concern over, inter alia, (i) investment companies that are ‘organized, operated,’ and ‘managed’ “in the interest of directors, officers, investment advisers, depositors, or other affiliated persons thereof’; and (ii) investment companies that ‘issue securities containing inequitable or discriminatory provisions, or fail to protect the preferences and privileges of the holders of their outstanding securities.’ 15 U.S.C. § 80a-1(b)(2)–(3). It is not clear that Nuveen’s Amendment supports these policy objectives by stripping shares of voting rights unequally.”
  • “Saba asserts that Nuveen’s Amendment violates 15 U.S.C. § 80a-18(i) of the ICA, which requires that every share of common stock issued by a regulated fund be ‘voting stock’ and ‘have equal voting rights’ with other shares. We agree. The Amendment illegally strips some of Nuveen’s shares of voting rights.”
  • “We have examined Nuveen’s remaining arguments and conclude that they are without merit. We AFFIRM the judgment of the district court.”

About Saba Capital

Saba Capital Management, L.P. is a global alternative asset management firm that seeks to deliver superior risk-adjusted returns for a diverse group of clients. Founded in 2009 by Boaz Weinstein, Saba is a pioneer of credit relative value strategies and capital structure arbitrage. Saba is headquartered in New York City. Learn more at www.sabacapital.com.


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