TRANSAMERICA MORTGAGE ADVISORS, INC. v. LEWIS

MR. JUSTICE STEWART delivered the opinion of the Court.

The Investment Advisers Act of 1940, 15 U. S. C. § 80b-1 et seq., was enacted to deal with abuses that Congress had found to exist in the investment advisers industry. The question in this case is whether that Act creates a private cause of action for damages or other relief in favor of persons aggrieved by those who allegedly have violated it.

The respondent, a shareholder of petitioner Mortgage Trust of America (Trust), brought this suit in a Federal District Court as a derivative action on behalf of the Trust and as a class action on behalf of the Trust's shareholders. Named as defendants were the Trust, several individual trustees, the Trust's investment adviser, Transamerica Mortgage Advisors, Inc. (TAMA), and two corporations affiliated with TAMA, Land Capital, Inc. (Land Capital), and Transamerica Corp. (Transamerica), all of which are petitioners in this case.1

The respondent's complaint alleged that the petitioners in the course of advising or managing the Trust had been guilty of various frauds and breaches of fiduciary duty. The complaint set out three causes of action, each said to arise under the Investment Advisers Act of 1940.2 The first alleged that the advisory contract between TAMA and the Trust was unlawful because TAMA and Transamerica were not registered under the Act and because the contract had provided for grossly excessive compensation. The second alleged that the petitioners breached their fiduciary duty to the Trust by causing it to purchase securities of inferior quality from Land Capital. The third alleged that the petitioners had misappropriated profitable investment opportunities for the benefit of other companies affiliated with Transamerica. The complaint sought injunctive relief to restrain further performance of the advisory contract, rescission of the contract, restitution of fees and other considerations paid by the Trust, an accounting of illegal profits, and an award of damages.

The trial court ruled that the Investment Advisers Act confers no private right of action, and accordingly dismissed the complaint.3 The Court of Appeals reversed, Lewis v. Transamerica Corp., 575 F.2d 237, holding that "implication of a private right of action for injunctive relief and damages under the Advisers Act in favor of appropriate plaintiffs is necessary to achieve the goals of Congress in enacting the legislation." Id., at 239.4 We granted certiorari to consider the important federal question presented. 439 U.S. 952.

The Investment Advisers Act nowhere expressly provides for a private cause of action. The only provision of the Act that authorizes any suits to enforce the duties or obligations created by it is § 209, which permits the Securities and Exchange Commission (Commission) to bring suit in a federal district court to enjoin violations of the Act or the rules promulgated under it.5 The argument is made, however, that the clients of investment advisers were the intended beneficiaries of the Act and that courts should therefore imply a private cause of action in their favor. See Cannon v. University of Chicago, 441 U.S. 677, 689; Cort v. Ash, 422 U.S. 66, 78; J. I. Case Co. v. Borak, 377 U.S. 426, 432.

The question whether a statute creates a cause of action, either expressly or by implication, is basically a matter of statutory construction. Touche Ross & Co. v. Redington, 442 U.S. 560, 568; Cannon v. University of Chicago, supra, at 688; see National Railroad Passenger Corp. v. National Association of Railroad Passengers, 414 U.S. 453, 458 (Amtrak.) While some opinions of the Court have placed considerable emphasis upon the desirability of implying private rights of action in order to provide remedies thought to effectuate the purposes of a given statute, e. g., J. I. Case Co. v. Borak, supra, what must ultimately be determined is whether Congress intended to create the private remedy asserted, as our recent decisions have made clear. Touche Ross & Co. v. Redington, supra, at 568; Cannon v. University of Chicago, supra, at 688. We accept this as the appropriate inquiry to be made in resolving the issues presented by the case before us.

Accordingly, we begin with the language of the statute itself. Touche Ross & Co. v. Redington, supra, at 568; Cannon v. University of Chicago, supra, at 689; Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 472; Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 24. It is asserted that the creation of a private right of action can fairly be inferred from the language of two sections of the Act. The first is § 206, which broadly proscribes fraudulent practices by investment advisers, making it unlawful for any investment adviser "to employ any device, scheme, or artifice to defraud . . . [or] to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client," or to engage in specified transactions with clients without making required disclosures.6 The second is § 215, which provides that contracts whose formation or performance would violate the Act "shall be void . . . as regards the rights of" the violator and knowing successors in interest.7

It is apparent that the two sections were intended to benefit the clients of investment advisers, and, in the case of § 215, the parties to advisory contracts as well. As we have previously recognized, § 206 establishes "federal fiduciary standards" to govern the conduct of investment advisers, Santa Fe Industries, Inc. v. Green, supra, at 471, n. 11; Burks v. Lasker, 441 U.S. 471, 481-482, n. 10; SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 191-192. Indeed, the Act's legislative history leaves no doubt that Congress intended to impose enforceable fiduciary obligations. See H. R. Rep. No. 2639, 76th Cong., 3d Sess., 28 (1940); S. Rep. No. 1775, 76th Cong., 3d Sess., 21 (1940); SEC, Report on Investment Trusts and Investment Companies (Investment Counsel and Investment Advisory Services), H. R. Doc. No. 477, 76th Cong., 2d Sess., 27-30 (1939). But whether Congress intended additionally that these provisions would be enforced through private litigation is a different question.

On this question the legislative history of the Act is entirely silent—a state of affairs not surprising when it is remembered that the Act concededly does not explicitly provide any private remedies whatever. See Cannon v. University of Chicago, 441 U. S., at 694. But while the absence of anything in the legislative history that indicates an intention to confer any private right of action is hardly helpful to the respondent, it does not automatically undermine his position. This Court has held that the failure of Congress expressly to consider a private remedy is not inevitably inconsistent with an intent on its part to make such a remedy available. Ibid. Such an intent may appear implicitly in the language or structure of the statute, or in the circumstances of its enactment.

In the case of § 215, we conclude that the statutory language itself fairly implies a right to specific and limited relief in a federal court. By declaring certain contracts void, § 215 by its terms necessarily contemplates that the issue of voidness under its criteria may be litigated somewhere. At the very least Congress must have assumed that § 215 could be raised defensively in private litigation to preclude the enforcement of an investment advisers contract. But the legal consequences of voidness are typically not so limited. A person with the power to avoid a contract ordinarily may resort to a court to have the contract rescinded and to obtain restitution of consideration paid. See Deckert v. Independence Corp., 311 U.S. 282, 289; S. Williston, Contracts § 1525 (3d ed. 1970); J. Pomeroy, Equity Jurisprudence § 881 and 1092 (4th ed. 1918). And this Court has previously recognized that a comparable provision, § 29 (b) of the Securities Exchange Act of 1934, 15 U. S. C. § 78cc (b), confers a "right to rescind" a contract void under the criteria of the statute. Mills v. Electric Auto-Lite Co., 396 U.S. 375, 388. Moreover, the federal courts in general have viewed such language as implying an equitable cause of action for rescission or similar relief. E. g., Kardon v. National Gypsum Co., 69 F.Supp. 512, 514 (ED Pa. 1946); see 3 L. Loss, Securities Regulation 1758-1759 (2d ed. 1961). Cf. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 735.

For these reasons we conclude that when Congress declared in § 215 that certain contracts are void, it intended that the customary legal incidents of voidness would follow, including the availability of a suit for rescission or for an injunction against continued operation of the contract, and for restitution.8 Accordingly, we hold that the Court of Appeals was correct in ruling that the respondent may maintain an action on behalf of the Trust seeking to void the investment advisers contract.9

We view quite differently, however, the respondent's claims for damages and other monetary relief under § 206. Unlike § 215, § 206 simply proscribes certain conduct, and does not in terms create or alter any civil liabilities. If monetary liability to a private plaintiff is to be found, it must be read into the Act. Yet it is an elemental canon of statutory construction that where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it. "When a statute limits a thing to be done in a particular mode, it includes the negative of any other mode." Botany Mills v. United States, 278 U.S. 282, 289. See Amtrak, 414 U. S., at 458; Securities Investor Protection Corp. v. Barbour, 421 U.S. 412, 419; T. I. M. E., Inc. v. United States, 359 U.S. 464, 471. Congress expressly provided both judicial and administrative means for enforcing compliance with § 206. First, under § 217, 15 U. S. C. § 80b-17, willful violations of the Act are criminal offenses, punishable by fine or imprisonment, or both. Second, § 209 authorizes the Commission to bring civil actions in federal courts to enjoin compliance with the Act, including, of course, § 206. Third, the Commission is authorized by § 203 to impose various administrative sanctions on persons who violate the Act, including § 206. In view of these express provisions for enforcing the duties imposed by § 206, it is highly improbable that "Congress absentmindedly forgot to mention an intended private action." Cannon v. University of Chicago, supra, at 742 (POWELL, J., dissenting).

Even settled rules of statutory construction could yield, of course, to persuasive evidence of a contrary legislative intent. Securities Investor Protection Corp. v. Barbour, supra, at 419; Amtrak, supra, at 458. But what evidence of intent exists in this case, circumstantial though it be, weighs against the implication of a private right of action for a monetary award in a case such as this. Under each of the securities laws that preceded the Act here in question, and under the Investment Company Act of 1940 which was enacted as companion legislation, Congress expressly authorized private suits for damages in prescribed circumstances.10 For example, Congress provided an express damages remedy for misrepresentations contained in an underwriter's registration statement in § 11 (a) of the Securities Act of 1933, and for certain materially misleading statements in § 18 (a) of the Securities Exchange Act of 1934. "Obviously, then, when Congress wished to provide a private damages remedy, it knew how to do so and did so expressly." Touche Ross & Co. v. Redington, 442 U. S., at 572; Blue Chip Stamps v. Manor Drug Stores, supra, at 734; see Amtrak, supra, at 458; T. I. M. E., Inc. v. United States, supra, at 471. The fact that it enacted no analogous provisions in the legislation here at issue strongly suggests that Congress was simply unwilling to impose any potential monetary liability on a private suitor. See Abrahamson v. Fleschner, 568 F.2d 862, 883 (CA2 1977) (Gurfein, J., concurring and dissenting).

The omission of any such potential remedy from the Act's substantive provisions was paralleled in the jurisdictional section, § 214.11 Early drafts of the bill had simply incorporated by reference a provision of the Public Utility Holding Company Act of 1935, which gave the federal courts jurisdiction "of all suits in equity and actions at law brought to enforce any liability or duty created by" the statute (emphasis added). See S. 3580, 76th Cong., 3d Sess., §§ 40 (a), 203 (introduced by Sen. Wagner, Mar. 14, 1940); H. R. 8935, 76th Cong., 3d Sess., §§ 40 (a), 203 (introduced by Rep. Lea, Mar. 14, 1940). After hearings on the bill in the Senate, representatives of the investment advisers industry and the staff of the Commission met to discuss the bill, and certain changes were made. The language that was enacted as § 214 first appeared in this compromise version of the bill. See Confidential Committee Print, S. 3580, 76th Cong., 3d Sess., § 213 (1940). That version, and the version finally enacted into law, S. 4108, 76th Cong., 3d Sess., § 214 (1940), both omitted any references to "actions at law" or to "liability."12 The unexplained deletion of a single phrase from a jurisdictional provision is, of course, not determinative of whether a private remedy exists. But it is one more piece of evidence that Congress did not intend to authorize a cause of action for anything beyond limited equitable relief.13

Relying on the factors identified in Cort v. Ash, 422 U.S. 66, the respondent and the Commission, as amicus curiae, argue that our inquiry in this case cannot stop with the intent of Congress, but must consider the utility of a private remedy, and the fact that it may be one not traditionally relegated to state law. We rejected the same contentions last Term in Touche Ross & Co. v. Redington, where it was argued that these factors standing alone justified the implication of a private right of action under § 17 (a) of the Securities Exchange Act of 1934. We said in that case:

The statute in Touche Ross by its terms neither granted private rights to the members of any identifiable class, nor proscribed any conduct as unlawful. Touche Ross & Co. v. Redington, 442 U. S., at 576. In those circumstances it was evident to the Court that no private remedy was available. Section 206 of the Act here involved concededly was intended to protect the victims of the fraudulent practices it prohibited. But the mere fact that the statute was designed to protect advisers' clients does not require the implication of a private cause of action for damages on their behalf. Touche Ross & Co. v. Redington, supra, at 578; Cannon v. University of Chicago, 441 U. S., at 690-693; Securities Investor Protection Corp. v. Barbour, 421 U. S., at 421. The dispositive question remains whether Congress intended to create any such remedy. Having answered that question in the negative, our inquiry is at an end.

For the reasons stated in this opinion, we hold that there exists a limited private remedy under the Investment Advisers Act of 1940 to void an investment advisers contract, but that the Act confers no other private causes of action, legal or equitable.14 Accordingly, the judgment of the Court of Appeals is affirmed in part and reversed in part, and the case is remanded to that court for further proceedings consistent with this opinion.

It is so ordered.

MR. JUSTICE POWELL, concurring.

I join the Court's opinion, which I view as compatible with my dissent in Cannon v. University of Chicago, 441 U.S. 677, 730 (1979). Ante, at 19-21.

MR. JUSTICE WHITE, with whom MR. JUSTICE BRENNAN, MR. JUSTICE MARSHALL, and MR. JUSTICE STEVENS join, dissenting.

The Court today holds that private rights of action under the Investment Advisers Act of 1940 (Act) are limited to actions for rescission of investment advisers contracts. In reaching this decision, the Court departs from established principles governing the implication of private rights of action by confusing the inquiry into the existence of a right of action with the question of available relief. By holding that damages are unavailable to victims of violations of the Act, the Court rejects the conclusion of every United States Court of Appeals that has considered the question. Abrahamson v. Fleschner, 568 F.2d 862 (CA2 1977); Wilson v. First Houston Investment Corp., 566 F.2d 1235 (CA5 1978); Lewis v. Transamerica Corp., 575 F.2d 237 (CA9 1978). The Court's decision cannot be reconciled with our decisions recognizing implied private actions for damages under securities laws with substantially the same language as the Act.1 By resurrecting distinctions between legal and equitable relief, the Court reaches a result that, as all parties to this litigation agree, can only be considered anomalous.

I

This Court has long recognized that private rights of action do not require express statutory authorization. Texas & Pacific R. Co. v. Rigsby, 241 U.S. 33 (1916); Tunstall v. Locomotive Firemen & Enginemen, 323 U.S. 210 (1944).2 The preferred approach for determining whether a private right of action should be implied from a federal statute was outlined in Cort v. Ash, 422 U.S. 66, 78 (1975). See Cannon v. University of Chicago, 441 U.S. 677 (1979). Four factors were thought relevant;3 and although subsequent decisions have indicated that the implication of a private right of action "is limited solely to determining whether Congress intended to create the private right of action," Touche Ross & Co. v. Redington, 442 U.S. 560, 568 (1979), these four factors are "the criteria through which this intent could be discerned." Davis v. Passman, 442 U.S. 228, 241 (1979). Proper application of the factors outlined in Cort clearly indicates that § 206 of the Act, 15 U. S. C. § 80b-6, creates a private right of action.

II

In determining whether respondent can assert a private right of action under the Act, "the threshold question under Cort is whether the statute was enacted for the benefit of a special class of which the plaintiff is a member." Cannon v. University of Chicago, supra, at 689. The instant action was brought by respondent as both a derivative action on behalf of Mortgage Trust of America and a class action on behalf of Mortgage Trust's shareholders. Respondent alleged that Mortgage Trust had retained Transamerica Mortgage Advisors, Inc. (TAMA), as its investment adviser and that violations of the Act by TAMA had injured the client corporation. Thus the question under Cort is whether the Act was enacted for the special benefit of clients of investment advisers.

The Court concedes that the language and legislative history of § 206 leave no doubt that it was "intended to benefit the clients of investment advisers," ante, at 17, as we have previously recognized. SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 191-192 (1963); Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 471, n. 11 (1977).4 Because respondent's claims were brought on behalf of a member of the class the Act was designed to benefit, i. e., the clients of investment advisers, the first prong of the Cort test is satisfied in this case.

III

The second inquiry under the Cort approach is whether there is evidence of an express or implicit legislative intent to negate the claimed private rights of action. As the Court noted in Cannon:

I find no such intent to foreclose private actions. Indeed, the statutory language evinces an intent to create such actions.5 In § 215 (b) of the Act Congress provided that contracts made in violation of any provision of the Act "shall be void." As the Court recognizes, such a provision clearly contemplates the existence of private rights under the Act. Similar provisions in the Investment Company Act of 1940, 15 U. S. C. § 80a-46 (b), the Securities Exchange Act of 1934, 15 U. S. C. § 78cc (b), and the Public Utility Holding Company Act of 1935, 15 U. S. C. § 79z (b), have been recognized as reflecting an intent to create private rights of action to redress violations of substantive provisions of those Acts. Brown v. Bullock, 194 F.Supp. 207, 225-228 (SDNY), aff'd, 294 F.2d 415 (CA2 1961); Kardon v. National Gypsum Co., 69 F.Supp. 512, 514 (ED Pa. 1946); Fischman v. Raytheon Mfg. Co., 188 F.2d 783, 787, n. 4 (CA2 1951); Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 735 (1975); Goldstein v. Groesbeck, 142 F.2d 422, 426-427 (CA2 1944).

The Court's conclusion that § 215, but not § 206, creates an implied private right of action ignores the relationship of § 215 to the substantive provisions of the Act contained in § 206. Like the jurisdictional provisions of a statute, § 215 "creates no cause of action of its own force and effect; it imposes no liabilities." Touche Ross & Co. v. Redington, supra, at 577. Section 215 merely specifies one consequence of a violation of the substantive prohibitions of § 206. The practical necessity of a private action to enforce this particular consequence of a § 206 violation suggests that Congress contemplated the use of private actions to redress violations of § 206. It also indicates that Congress did not intend the powers given to the SEC to be the exclusive means for enforcement of the Act.6

The Court's holding that private litigants are restricted to actions for contract rescission confuses the question whether a cause of action exists with the question of the nature of relief available in such an action. Last Term in Davis v. Passman, 442 U. S., at 239, we recognized that "the question of whether a litigant has a `cause of action' is analytically distinct and prior to the question of what relief, if any, a litigant may be entitled to receive." Once it is recognized that a statute creates an implied right of action, courts have wide discretion in fashioning available relief. Sullivan v. Little Hunting Park, Inc., 396 U.S. 229, 239 (1969) ("The existence of a statutory right implies the existence of all necessary and appropriate remedies"). As the Court stated in Bell v. Hood, 327 U.S. 678, 684 (1946), "where legal rights have been invaded, and a federal statute provides for a general right to sue for such invasion, federal courts may use any available remedy to make good the wrong done." Thus, in the absence of any contrary indication by Congress, courts may provide private litigants exercising implied rights of action whatever relief is consistent with the congressional purpose. J. I. Case Co. v. Borak, 377 U.S. 426 (1964); Securities Investor Protection Corp. v. Barbour, 421 U.S. 412, 424 (1975); cf. Texas & Pacific R. Co. v. Rigsby, 241 U. S., at 39. The very decisions cited by the Court to support implication of an equitable right of action from contract voidance provisions of a statute, indicate that the relief available in such an action need not be restricted to equitable relief. Deckert v. Independence Shares Corp., 311 U.S. 282, 287-288 (1940); Mills v. Electric Auto-Lite Co., 396 U.S. 375, 388 (1970) ("Monetary relief will, of course, also be a possibility"); Kardon v. National Gypsum Co., supra, at 514 ("[S]uch suits would include not only actions for rescission but also for money damages"). As the Court recognized in Porter v. Warner Holding Co., 328 U.S. 395, 399 (1946), "where, as here, the equitable jurisdiction of the court has properly been invoked for injunctive purposes, the court has the power to decide all relevant matters in dispute and to award complete relief even though the decree includes that which might be conferred by a court of law." Thus, if a private right of action exists under the Act, the relief available to private litigants may include an award of damages.

The Court concludes that the omission of the words "actions at law" from the jurisdictional provisions of § 214 of the Act and the failure of the Act to authorize expressly any private actions for damages reflect congressional intent to deny private actions for damages. Section 214 provides that federal district courts "shall have jurisdiction of violations of [the Act]" and "of all suits in equity to enjoin any violation of" the Act. 15 U. S. C. § 80b-14. Although other federal securities Acts have provisions expressly granting federal-court jurisdiction over "actions at law," the significance of this omission is Delphic at best. While a previous draft of the bill that became the Act incorporated by reference the jurisdictional provisions of the Investment Company Act and the Public Utility Holding Company Act, there is no indication in the legislative history as to why this draft was replaced with the language that became § 214.7 The only reference to the jurisdictional provisions of the Act is the statement in the House Committee Report that §§ 208-221 "contain provisions comparable to those in [the Investment Company Act]." H. R. Rep. No. 2639, 76th Cong., 3d Sess., 30 (1940). As the Second Circuit concluded in Abrahamson v. Fleschner, 568 F. 2d, at 875: "There is not a shred of evidence in the legislative history of the Advisers Act to support the assertion that Congress intentionally omitted the reference to `actions at law' in order to preclude private actions by investors." See Wilson v. First Houston Investment Corp., 566 F. 2d, at 1242. The Court recognizes that the more plausible explanation for the failure of § 214 expressly to include a reference to actions at law is that, unlike other federal securities Acts, the Act did not include other provisions expressly authorizing private civil actions for damages. See Abrahamson v. Fleschner, supra, at 874; Bolger v. Laventhol, Krekstein, Horwath & Horwath, 381 F.Supp. 260, 264-265 (SDNY 1974). But, as our cases indicate, this silence of the Act is not an automatic bar to private actions.8

The fundamental problem with the Court's focus on § 214 is that it attempts to discern congressional intent to deny a private cause of action from a jurisdictional, rather than a substantive, provision of the Act. Because § 214 is only a jurisdictional provision, "[i]t creates no cause of action of its own force and effect; it imposes no liabilities." Touche Ross & Co. v. Redington, 442 U. S., at 577. Since the source of implied rights of action must be found "in the substantive provisions of [the Act] which they seek to enforce, not in the jurisdictional provision," ibid., § 214's failure to refer to "actions at law" does not indicate that private actions for damages are unavailable under the Act. The subject-matter jurisdiction of the federal courts over respondent's action is unquestioned, regardless of how § 214 is interpreted, because jurisdiction is provided by the "arising under" clause of 28 U. S. C. § 1331. Cf. Abrahamson v. Fleschner, supra, at 880, n. 5 (Gurfein, J., concurring and dissenting). Where federal courts have jurisdiction over actions to redress violations of federal statutory rights, relief cannot be denied simply because Congress did not expressly provide for independent jurisdiction under the statute creating the federal rights.9

IV

The third portion of the Cort standard requires consideration of the compatibility of a private right of action with the legislative scheme.10 While a private remedy will not be implied to the frustration of the legislative purpose, "when that remedy is necessary or at least helpful to the accomplishment of the statutory purpose, the Court is decidedly receptive to its implication under the statute." Cannon v. University of Chicago, 441 U. S., at 703.

The purposes of the Act have been reviewed extensively by the Court in SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180 (1963). A meticulous review of the legislative history convinced the Court that the purpose of the Act was "to prevent fraudulent practices by investment advisers." Id., at 195. The Court concluded that "Congress intended the Investment Advisers Act of 1940 to be construed like other securities legislation `enacted for the purpose of avoiding frauds,' not technically and restrictively, but flexibly to effectuate its remedial purposes." Ibid. (footnote omitted).

Implication of a private right of action for damages unquestionably would be not only consistent with the legislative goal of preventing fraudulent practices by investment advisers, but also essential to its achievement. While the Act empowers the SEC to take action to seek equitable relief to prevent offending investment advisers from engaging in future violations,11 in the absence of a private right of action for damages, victimized clients have little hope of obtaining redress for their injuries. Like the statute in Cannon, the Act does not assure that the members of the class it benefits are able "to activate and participate in the administrative process contemplated by the statute." Cannon v. University of Chicago, supra, at 707, n. 41. Moreover, the SEC candidly admits that, given the tremendous growth of the investment advisory industry, the magnitude of the enforcement problem exceeds the Commission's limited examination and enforcement capabilities.12 The Commission maintains that private litigation therefore is a necessary supplement to SEC enforcement activity. Under the circumstances of this case, this position seems unassailable. Cf. J. I. Case Co. v. Borak, 377 U. S., at 432; Cannon v. University of Chicago, supra, at 706-708.

V

The final consideration under the Cort analysis is whether the subject matter of the cause of action has been so traditionally relegated to state law as to make it inappropriate to infer a federal cause of action. Regulation of the activities of investment advisers has not been a traditional state concern. During the Senate hearings preceding enactment of the Act, Congress was informed that only six States had enacted legislation to regulate investment advisers. Hearings on S. 3580 before a Subcommittee of the Senate Committee on Banking and Currency, 76th Cong., 3d Sess., 996-1017 (1940). Most of the state statutes subsequently enacted have been patterned after the federal legislation. See Note, Private Causes of Action Under Section 206 of the Investment Advisers Act, 74 Mich. L. Rev. 308, 324 (1975).

Although some practices proscribed by the Act undoubtedly would have been actionable in common-law actions for fraud, "Congress intended the Investment Advisers Act to establish federal fiduciary standards for investment advisers." Santa Fe Industries, Inc. v. Green, 430 U. S., at 471, n. 11; SEC v. Capital Gains Research Bureau, Inc., supra, at 191-192. While state law may be applied to parties subject to the Act, "as long as private causes of action are available in federal courts for violation of the federal statutes, [the] enforcement problem is obviated." Burks v. Lasker, 441 U.S. 471, 479, n. 6 (1979).

VI

Each of the Cort factors points toward implication of a private cause of action in favor of clients defrauded by investment advisers in violation of the Act. The Act was enacted for the special benefit of clients of investment advisers, and there is no indication of any legislative intent to deny such a cause of action, which would be consistent with the legislative scheme governing an area not traditionally relegated to state law. Under these circumstances an implied private right of action for damages should be recognized.