TPAF Praises Fifth Circuit Court of Appeals’ Decision to Strike Down SEC’s Private Fund Advisers Rule

For Immediate Release

Contact: Kara Zupkus (224) 456-0257

WASHINGTON, D.C. – Today, the United States Court of Appeals for the Fifth Circuit vacated the U.S. Securities and Exchange Commission (SEC)’s 2023 rule on Private Fund Advisers. The decision reins in the ever-expanding overreach of the SEC. It also protects the dynamism of the American economy that was compromised after the Commission passed a costly, redundant rule antithetical to its mandate.

In response, Taxpayers Protection Alliance Foundation (TPAF) President David Williams offered the following statement:

“This is yet another example of how the SEC’s approach of aggressive and regulatory mission creep does not hold up to legal scrutiny. Investors and the American economy can breathe as the Fifth Circuit wisely vacated a rule that not only went beyond the Commission’s authority, but also threw a wrench into the normal functioning of private funds in the process.

“By restricting the ability of fund advisers to offer different terms and information to investors, the SEC would have undone what are established and benign practices. It would have threatened the landscape which helps funds attract more investment. For example, by offering tailored information, advisers can attract public pension funds by ensuring that the disclosure documents comply with reporting requirements.

“The rule would have increased costs for funds that would now have higher reporting requirements as a result. Funds would have had to waste valuable time filling forms to apply for rule exceptions. In fact, the SEC’s own estimation is that this rule would have cost more $5 billion and millions of hours of workers’ time.

“The rule was also redundant because it claimed that these restrictions applied to scenarios where preferential treatment or terms could have a ‘material, negative effect on other investors.’ However, advisers are already prohibited from pursuing such deals, as they already have a fiduciary duty to only pursue deals that benefit the fund overall.

“Ultimately, this ruling is a win for American investors and the economy. The SEC needs to stop their mission creep and get back to their mission to ‘protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.’”

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The Taxpayers Protection Alliance Foundation (TPAF) is a non-profit non-partisan organization dedicated to educating the public through research, investigative reporting, and analysis about the effects of excessive taxation and spending by all levels of government. TPAF educates the public about government transparency and openness in the United States and around the world.