In February 2024, judges on the U.S. Court of Appeals for the 5th Circuit heard oral arguments in National Association of Private Fund Managers v. Securities and Exchange Commission (SEC), a case that could significantly impact American capital markets. A new report by the Center for American Progress (CAP) details how a decision against the SEC’s private fund advisers rule might lead to broader challenges against the regulatory framework authorized by Congress.
The case revolves around the SEC's private fund advisers rule adopted last year. This rule mandates that private funds and their advisers provide investors with regular account statements, standardized fee and expense information, and basic disclosures regarding conflicts of interest.
According to the SEC’s final rule, these requirements aim to prevent fraud and supply essential information to investors. The rule ensures that disclosures are public, enabling all investors and marketplace participants to make informed investment decisions.
The CAP report argues that the lawsuit from the private fund industry is based on extensive claims about authority, process, and burden that lack factual support. It suggests that these claims could weaken longstanding judicial precedent supporting the SEC’s regulatory role.
“If the 5th Circuit vacates the SEC’s private fund advisers rule based on any of these broad and unsubstantiated claims, a wide range of existing and future rules to protect investors and the public could be at risk,” said Alexandra Thornton, senior director of financial regulation at CAP. “This case is an affront to Congress’ decades of work to protect investors and the public interest.”
For further information or expert commentary, contact Sarah Nadeau at [email protected].
