Private Fund Advisers Rule Struck Down by 5th Circuit Court of Appeals

On June 5, 2024, the U.S. Court of Appeals for the Fifth Circuit struck down the Private Fund Advisers Rule (the Rule), marking a tremendous win for the private fund industry. The Rule, initially passed by the U.S. Securities and Exchange Commission (SEC) in August 2023, would have substantially changed how registered investment advisers and exempt reporting advisers conducted their private fund businesses. The federal court agreed with industry advocates that the agency overstepped its authority.

In our latest Client Alert, our Investment Funds & Advisers lawyers – Steven Cooperman, Brian Forman, Timur Eron and Tracy Sigal – discuss the controversial Rule, the basis for which several industry groups argued that the SEC did not have authority to pass the Rule, the court’s decision and how the SEC may still continue to try to curb behaviors that the Rule was designed to prevent, despite this result.

It remains to be seen how this consequential defeat will influence the SEC in moving forward with existing proposals that would affect the industry, given the potential for an adverse result in court. 

The Morrison Cohen Investment Funds & Advisers team is available to provide any additional information regarding this decision, or other issues impacting private funds.

For more details regarding this legislation, see our Client Alert below.