Fifth Circuit Court Vacates SEC’s Private Fund Advisers Rule

On Wednesday, June 5, 2024, the U.S. Court of Appeals for the Fifth Circuit sided with a group of trade associations and vacated the SEC’s Private Fund Advisers Rule, which was adopted in August 2023.

This rule aimed to provide more protections and transparency to investors and enhance oversight in the private fund industry. The rule imposed new reporting requirements including detailed information on fees, performance, and conflicts of interest. It also required an annual audit and restricted certain practices by private fund advisers that the SEC argued could disadvantage some investors.

The Court’s decision was based on arguments that the SEC exceeded its statutory authority, and the rule would impose undue regulatory burdens and costs.

The decision significantly curtails the SEC’s regulatory reach over private fund advisers. The SEC is now reviewing the decision and will decide on its next steps. This development is significant for markets, fund managers, and investors, including pensions, foundations, and endowments. 

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