U.S. District Court for the Southern District of New York Rules That Certain Closed-End Funds, Including Funds Advised by BlackRock, Violated the Investment Company Act of 1940

By: Saba Capital Management, L.P. via Business Wire

December 07, 2023 at 08:00 AM EST

BlackRock Illegally Stripped Votes at its Closed-End Funds’ 2023 Annual Meetings

Saba Capital Management, L.P. (“Saba” or “we”) today commented on the outcome of the lawsuit brought in the United States District Court for the Southern District of New York (the “Court”) against 16 closed-end funds (the “Funds”) including those managed by BlackRock, Inc. (“BlackRock”) and its Trustees (R. Glenn Hubbard, W. Carl Kester, Cynthia L. Egan, Frank J. Fabozzi, Lorenzo A. Flores, Stayce D. Harris, J. Phillip Holloman, Catherine A. Lynch, Robert Fairbairn and John M. Perlowski).

Saba filed its lawsuit in the Court on June 29, 2023 after the BlackRock trustees disclosed they would strip shareholders’ votes, in violation of the Investment Company Act of 1940 (the “ICA”), at their 2023 Annual Meeting. Despite the Funds filing various motions to dismiss the lawsuit, the Court ruled in favor of Saba, finding that the actions of the BlackRock Fund and its trustees violated federal law.

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

“By hook or by crook, BlackRock and its trustees were determined to avoid being held accountable for the billions of dollars lost for investors. We are pleased to have brought this lawsuit for the benefit of all investors in closed-end funds managed by BlackRock to put an end to the practice of robbing shareholders of their right to vote all of their shares.

While ISS has previously highlighted BlackRock’s ‘abusive’ governance practices, this goes far beyond bad governance. By illegally stripping votes in an attempt to rig the election in their favor, BlackRock trustees broke the law and deprived shareholders of their right to a fair and democratic election. BlackRock did this despite the fact that two courts already made clear that stripping fund investors of their voting rights is illegal.”

Saba has previously brought and won lawsuits against Eaton Vance and Nuveen regarding illegal vote stripping. Just last week, the U.S. Court of Appeals for the Second Circuit upheld that certain Nuveen-advised closed-end funds also violated the ICA after Saba sued Nuveen and the trustees in the Court.

The Court found the following funds adopted control share provisions in violation of the ICA: BlackRock Municipal Income Fund (NYSE: MUI), BlackRock ESG Capital Allocation Term Trust (NYSE: ECAT), Adams Diversified Equity Fund (NYSE: ADX), Adams Natural Resources Fund (NYSE: PEO), Tortoise Midstream Energy Fund (NYSE: NTG), Tortoise Energy Independence Fund (NYSE: NDP), Tortoise Pipeline & Energy Fund (NYSE: TTP), Tortoise Energy Infrastructure Corp. (NYSE: TYG), Ecofin Sustainable and Social Impact Term Fund (NYSE: TEAF), Royce Global Value Trust (NYSE: RGT) and FS Credit Opportunities Corp. (NYSE: FSCO). Royce Global Value Trust is managed by Royce Investment Partners, an affiliate of Franklin Templeton.

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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.