Washington, D.C. — 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 upend American capital markets. A new CAP report explains how the decision on the legal petition against the SEC’s private fund advisers rule could open the door to broad attacks on the regulatory framework that Congress authorized the SEC to develop and enforce for capital markets.
The case centers on the private fund advisers rule adopted by the SEC last year, which requires private funds and their advisers to provide investors with regular account statements, standardized fee and expense information, and basic disclosures regarding their conflicts of interest.
As explained in the SEC’s final rule, the private fund advisers rule would help prevent fraud and provide essential information to investors while ensuring that disclosures are made public so that all investors and marketplace participants can have the basic information necessary to make sound investment decisions. This report examines how the private fund industry’s lawsuit is built on sweeping claims about authority, process, and burden that are unsupported by the facts and could undermine decades of judicial precedent upholding the SEC’s ability to fulfill its duties.
“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.”
Read the report: “The Lawsuit Against a New SEC Rule Could Harm Investor Protections” by Alexandra Thornton
For more information or to speak with an expert, please contact Sarah Nadeau at [email protected]