By Svea Herbst-Bayliss

BOSTON (Reuters). -A U.S. federal Judge ruled Nuveen, trustees of its closed end funds, violated The Investment Company Act. Saba Capital filed suit against Nuveen funds in early 2021 claiming that trustees illegally altered fund bylaws to prohibit large shareholders voting. There was no way for shareholders to vote more than 10% of their shares unless the trustees approved them to do so.

Nuveen, BlackRock, and other investment companies dominate the closed-end market of $280 billion funds. Fees are earned based on a fund’s levered assets. Experts said that other closed-end funds have also changed their bylaws. This could potentially result in a positive impact on these funds.

“Saba has the better argument on Section 18(i)’s requirement that all stock be ‘voting stock’,” wrote Judge Paul Oetken in a rare summary judgment order on Thursday. “Section 18(i)’s requirements that every stock be voting and have equal voting rights are clear and unambiguous,” he wrote.

Boaz Weinstein’s Saba has been the most active activist to launch proxy fights against closed-end funds in recent years.

Weinstein said that Nuveen’s self-serving activities were being recognized by the court for what they really are, an illegal attempt to skirt the requirement of equal voting rights in 1940 Act.

Nuveen, an investment company TIAA’s wholly-owned subsidiary, is Nuveen. Nuveen’s spokeswoman indicated that Nuveen did not accept the ruling, and would “determine next steps in order to safeguard long-term shareholder interests.”

Saba appointed directors to many well-respected investment firms. Saba argued that shareholders were being hurt by the fact that funds can trade at large discounts from their underlying holdings, and lack good corporate governance.

Saba Capital Closed End Opportunities Fund was created in 2015. It has returned 12.5% on average per year.

Nuveen’s claim that closed-end funds could adopt control share provisions by the U.S Securities and Exchange Commission was rejected by the court