Financial Industry Triumphs as 5th Circuit Vacates SEC’s Private Fund Adviser Rules

5th June 2024

A Landmark Decision by the 5th Circuit

The financial industry received a significant boost this morning as the 5th Circuit vacated the SEC’s Private Fund Adviser rules in full.  This decision represents a monumental victory for private fund managers who faced extensive disclosure and reporting burdens under these rules, which had a substantial material and financial impact on their operations.

The Collective Strength of the Financial Industry

This victory underscores the financial industry’s collective strength against perceived regulatory overreach. It may mark a pivotal moment in challenging the agenda of SEC Chairman Gary Gensler, who has been known for his aggressive rulemaking. While some of his rules have been relatively harmless, others, such as the Private Fund Adviser rules, have significantly affected the financial services sector.

The group of petitioners that successfully argued for vacating the Private Fund Adviser rules appears poised to challenge other SEC regulations, including those on outsourcing by investment advisers. Additionally, there are anticipated petitions against ESG-related rules, such as the ESG disclosure rules for investment advisers and companies.

The success in overturning the Private Fund Adviser rules was somewhat expected due to the SEC’s contentious reliance on general fraud provisions applicable to private fund advisors. However, future challenges may prove more difficult.

Navigating the Evolving US Financial Regulatory Landscape

Scott Parkin, Head of US at Zeidler, views today’s victory as further validation for the private sector to continue challenging potential regulatory overreach. While success on the Private Fund Rules was a chose acquise due to the SEC’s spurious – yet all too common – statutory reliance on the general fraud provisions applicable to private fund advisors, success on other challenges may not be as easy. It forces the SEC to reconsider the aggressiveness of new rules, particularly in an election season. It also means that the current proposed rules are under scrutiny, and the financial sector must review and prepare for them, knowing that these rules could change.

As always Zeidler Group remains committed to helping navigate this complex and ever-changing landscape of US financial regulation. For a complimentary consultation, get in touch with our team of regulatory compliance and legal specialists today.


Scott G. Parkin