U.S. Appeals Court Vacates SEC Final Rule Related to Private Fund Investments

In a recent ruling, the U.S. Court of Appeals for the Fifth Circuit vacated the SEC’s August 2023 final rule Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews. The final rule was intended to “protect private fund investors by increasing transparency, competition, and efficiency in the private funds market.”

Among other things, the court concluded that the SEC inappropriately relied on Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, noting that these provisions apply to retail customers rather than to private fund investors. Accordingly, the court ultimately determined that the Commission “exceeded its authority” in releasing the final rule.