AIC Applauds Fifth Circuit Court of Appeals Decision to Strike Down SEC’s Unlawful Private Fund Advisers Rule & Defeat Estimated $5 Billion Burden on Private Funds
Maloney: “The ruling is a victory for thousands of businesses across America that need capital to grow and millions of workers who depend on private equity and credit to strengthen their retirements.”
Washington, D.C. – Today, the United States Court of Appeals for the Fifth Circuit vacated the U.S. Securities and Exchange Commission’s 2023 Private Fund Advisers Rule. AIC applauds the court’s decision as the Commission’s Rule to restructure the business arrangements of private funds was unlawful, unwarranted, and ultimately harmful to investors.
“The ruling is a victory for thousands of businesses across America that need capital to grow and millions of workers who depend on private equity and credit to strengthen their retirements,” said AIC President and CEO Drew Maloney. “In rejecting the SEC’s unfounded legal theory, the court has sent Washington regulators a strong message that they cannot bypass Congress when pushing their extreme agenda.”
Private fund investors are among the largest and most sophisticated in the world, and Congress has long recognized that they do not require the type of exhaustive regulatory requirements the Commission attempted to impose.
In its initial lawsuit filed in September 2023, AIC joined five other industry groups – the National Association of Private Fund Managers, Alternative Investment Management Association, Loan Syndications and Trading Association, Managed Funds Association, and National Venture Capital Association – arguing that the Rule unlawfully restricted the long-standing, widely used business arrangements of private funds and their investors and that the Commission had exceeded its authority.
In the joint brief, the coalition highlighted the rule’s potential cost and burden for businesses and pension funds across America:
“The Commission’s own estimate, the Rule will cost $5.4 billion and require millions of hours of employee time. Even while downplaying these serious workability concerns, the Commission estimated that the preferential-treatment rule will be enormously costly, with the disclosures alone costing more than $400 million annually—which is actually a significant ‘underestimate.’ The Commission estimated compliance costs for the new requirements at nearly $500 million annually, which it conceded will be ‘ultimately paid by the fund investors.”
