The Alternative Investment Management Association (AIMA) welcomes the US Court of Appeals for the Fifth Circuit's decision to vacate the Securities and Exchange Commission's (US SEC) private fund adviser rule on the grounds that it is unlawful and exceeds the regulator's authority to enact.
Commenting on the ruling, AIMA CEO Jack Inglis said:
"We are very pleased by the Court's ruling, which will spare the private funds industry and investors a lot of unnecessary costs and disruption, as a result of the US SEC's unlawful action. Today's ruling rewards our decision to file suit, which was taken to protect the interests of our members against regulatory overreach and improper rulemaking by the US SEC that would have had severe and adverse impacts on a wide variety of market participants."
The court's summary of the ruling is here.
In September 2023, Gibson, Dunn & Crutcher LLP filed suit on behalf of AIMA and other industry trade bodies in the US Court of Appeals for the Fifth Circuit challenging the rule adopted by the US SEC regulating private fund advisers.
The consortium of trade bodies argued that the rule should be vacated based on their arguments that, among other things:
- The new rule exceeds the US SEC's statutory authority by attempting to regulate the terms of the relationship between private funds (which are specifically exempt from such regulation) and their investors;
- The US SEC failed to provide the public a meaningful opportunity to comment on the final rule, which was not a logical outgrowth of the proposed rule;
- The rule is arbitrary, capricious, and otherwise unlawful. It claims to fix an industry problem, but the US SEC cites no evidence of the problem; and
- The US SEC did not perform an adequate cost-benefit analysis, neglecting its statutory duty to consider whether the rule "will promote efficiency, competition, and capital formation".
Today, the panel of judges presiding over the case has ruled in favour of AIMA and other industry trade bodies, agreeing in principle with the arguments outlined above.
Contact Details:
Drew Nicol, Associate Director, Research and Communications, AIMA
Email: [email protected]
About AIMA:
The Alternative Investment Management Association (AIMA) is the global representative of the alternative investment industry, with around 2,100 corporate members in over 60 countries. AIMA's fund manager members collectively manage more than US$3 trillion in hedge fund and private credit assets.
AIMA draws upon the expertise and diversity of its membership to provide leadership in industry initiatives such as advocacy, policy and regulatory engagement, educational programmes and sound practice guides. AIMA works to raise media and public awareness of the value of the industry.
AIMA set up the Alternative Credit Council (ACC) to help firms focused in the private credit and direct lending space. The ACC currently represents over 250 members that manage US$1 trillion of private credit assets globally.
AIMA is committed to developing skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the first and only specialised educational standard for alternative investment specialists. AIMA is governed by its Council (Board of Directors).
