## Facts

- Mortgage Trust of America’s investment adviser was Transamerica Mortgage Advisors, Inc. (TAMA), affiliated with Transamerica Corp. and Land Capital, Inc.
- A shareholder, Harry Lewis, sued derivatively on behalf of the Trust and as a class representative for shareholders, alleging violations of the Investment Advisers Act of 1940.
- The complaint alleged that the advisory contract was unlawful because the adviser and an affiliate were not properly registered and because the contract provided grossly excessive compensation.
- It further alleged breaches of fiduciary duty through self-dealing by causing the Trust to buy inferior securities from an affiliate.
- It also alleged misappropriation of profitable investment opportunities for the benefit of affiliated companies.
- Requested relief included injunctive relief against further performance of the advisory contract, rescission, restitution of fees and other consideration, an accounting of illegal profits, and damages.

## Issues

1. Whether the Investment Advisers Act of 1940 implies a private cause of action for damages or other relief for persons injured by violations of the Act.
2. Whether § 215’s provision that certain contracts made or performed in violation of the Act “shall be void” implies a private right to seek rescission and related equitable relief.
3. Whether § 206’s antifraud prohibition implies a private cause of action for damages.

## Decision

- The Supreme Court affirmed in part and reversed in part the Ninth Circuit.
- The Court held that § 215 implies a limited private remedy to void an unlawful investment-advisory contract and obtain specific, associated equitable relief (including rescission, an injunction against continued performance, and restitution).
- The Court held that § 206 does not create an implied private cause of action for damages.
- The case was remanded for further proceedings consistent with recognizing the narrow § 215 remedy and rejecting broader damages claims premised on § 206.

## Legal Principles

- A statute’s private remedial scope turns on text and structure; protective purpose alone does not justify implying a private damages remedy.
- When Congress declares certain contracts “void” as to the violator, the customary legal consequences of voidness can include a private suit for rescission, injunctive relief against continued operation, and restitution.
- Provisions that merely proscribe conduct (such as antifraud prohibitions) do not, without more, imply private civil liability, particularly where the statute supplies express public enforcement mechanisms (e.g., SEC injunctive authority).

## Conclusion

The Court construed the Investment Advisers Act to permit only a narrow implied private remedy under § 215 to void unlawful advisory contracts and obtain related equitable relief, while rejecting any implied private damages action under § 206’s antifraud provision.


Transamerica Mortg. Advisors, Inc. v. Lewis, 444 U.S. 11 (1979)