SEC’s Private Fund Adviser Rule Struck Down by U.S. Appeals Court

The United States Court of Appeals for the Fifth Circuit vacated the U.S. Securities and Exchange Commission’s (SEC) private fund adviser rule in its entirety. The Institute for Portfolio Alternatives (IPA) welcomes this decision as a positive development for markets, fund managers and investors.

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“Today’s ruling is a clear reminder to the SEC to operate within the agency’s statutory mandate,” said Anya Coverman, President & CEO of IPA. “If implemented, this rule would have changed the closing process for private funds, prohibited common side letter terms, altered the co-investment market, and created unnecessary reporting requirements for private fund advisors. We thank the Court for this decision and for allowing our members to continue to operate without concerns of excessive oversight.”

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The implementation of the rule was planned to occur gradually, beginning this fall. However, the SEC now will need to assess the feasibility of appealing the decision or consider re-proposing the rule.

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This court decision is the latest example of the federal judiciary reining in regulatory authority. The Fifth Circuit’s opinion could give rise to challenges to other SEC rules that rely on similar authority and may have implications for future rulemakings.

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We encourage you to continue to follow IPA updates for the latest SEC developments.

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