500 U.S. 90 (1991)
Petitioner brought this suit to enforce § 20(a) of the Act, 15 U. S. C. § 80a-20(a), which prohibits materially misleading proxy statements. The complaint was styled as a shareholder derivative action brought on behalf of respondent Cash Equivalent Fund, Inc. (Fund), a registered investment company, against Kemper Financial Services, Inc. (KFS), the Fund’s investment adviser.1 Petitioner alleged that KFS obtained shareholder approval of the investment-adviser contract by causing the Fund to issue a proxy statement that materially misrepresented the character of KFS’ fees.2 Petitioner also averred that she made no precomplaint demand on the Fund’s board of directors because doing so would have been futile.3
In support of this allegation, the complaint stated that all of the directors were under the control of KFS, that the board had voted unanimously to approve the offending proxy statement, and that the board had subsequently evidenced its hostility to petitioner’s claim by moving to dismiss.4 The District Court granted KFS’ motion to dismiss on the ground that petitioner had failed to plead the facts excusing demand with sufficient particularity for purposes of Federal Rule of Civil Procedure 23.1.5
The Court of Appeals affirmed the dismissal of petitioner’s § 20(a) claim.6 Drawing heavily on the American Law Institute’s Principles of Corporate Governance, the Court of Appeals adopted as a rule of federal common law the ALI’s so-called “universal demand” rule, under which the futility exception is abolished.7 The court noted that the Fund is incorporated in Maryland.8 It held that petitioner’s challenge to the court’s power to adopt the ALI’s universal-demand rule came too late to be considered.9
We granted certiorari, 498 U. S. 997 (1990), and now reverse.10
Whether federal courts should fashion a uniform federal common law rule obliging the representative shareholder in a derivative action founded on the Investment Company Act of 1940 to make a demand on the board of directors even when such a demand would be excused as futile under state law?11
In derivative actions founded on the ICA, federal courts should incorporate state law governing the demand requirement unless application of the particular state law would frustrate specific objectives of the federal programs.12 The contours of the demand requirement relate to the allocation of governing powers within the corporation.13 A futility exception does not impede the policies underlying the ICA.14
No. The Court of Appeals erred by fashioning a uniform federal common law rule abolishing the futility exception in derivative actions founded on the ICA.15 Petitioner filed a derivative action under the ICA without making demand, alleging futility based on the directors' control by KFS and their approval of the proxy.16 The Fund is incorporated in Maryland, whose law recognizes the futility exception.17 Because the demand requirement affects who controls corporate litigation, state law governs, and the futility exception is consistent with the ICA's policies of allowing shareholder actions to protect against conflicts of interest.18
Applying the universal demand rule would enlarge the power of directors beyond what state law provides and disrupt the allocation of corporate powers.19
Federal courts should not fashion a uniform federal common law rule requiring demand even when excused as futile under state law in ICA derivative actions; instead, they must apply the state law futility exception.20