Private Fund Rule Overturned by Appeals Court
NEWS AND ALERTS
Court Opinion in the 5th Circuit
Introduction
The Private Fund Rules adopted in August of 2023, with compliance dates for some Firms this fall, has recently been overturned by a U.S. Court of Appeals.
The Private Fund Rule had created waves in the industry and received significant push back, and six (6) Private Equity and Hedge Fund groups filed a lawsuit against the SEC.
Final Decision
- The SEC “has exceeded its statutory authority in adopting the Final Rule”, “that no part of it can stand”, and they “VACATE the Final Rule”.
- The court argued that “the Final Rule does not fit within the statutory design” of the Investment Company Act of 1940.
- The design of the Investment Company Act intentionally exempted Private Funds.
- The Dodd-Frank Act did not expand the SEC’s rule making authority to cover Private Fund Advisers.
Vigilant’s Conclusion
As the rule is currently overturned, it appears that the Private Fund Rule is no longer enforceable. It is not certain what steps the SEC will take next, but we will continue to provide updates as they come in.
Please reach out to us with any questions or concerns you may have.