Six private equity and hedge fund trade groups lodged a motion against the U.S. Securities and Exchange Commission (SEC), stating the regulator overstepped its reach by instituting new expense and disclosure rules. According to the SEC, these new measures serve to increase private fund transparency and competition.
SEC sees legal action from 6 groups over private fund rules
The new stipulations oblige private funds to submit quarterly fee and performance reports on top of annual audits. Additionally, funds must disclose specified fee structures and curb the preferential treatment of some investors, especially regarding portfolio disclosures and cash-out abilities.
This industry administers around $20trn in assets. Gary Gensler, the SEC chair, stated these measures are justified seeing advocacy groups alleged the private fund industry lacked transparency, causing conflicts of interest. A SEC spokesperson emphasised that the regulator approaches new rules and amendments to existing ones with consistency in line with its powers and administrative processes.
[Thursday 11:19] Katharine Hawkins
Don’t miss out the latest news, subscribe to LeapRate’s newsletter
However, a suit filed in the 5th U.S. Circuit Court of Appeals by the Managed Funds Association, National Venture Capital Association, American Investment Council, Alternative Investment Management Association, National Association of Private Fund Managers, and the Loan Syndications & Trading Association, claims the opposite.
The Chief Executive Officer of the Managed Funds Association believes these new rules will only increase costs and hamstring competition. In a combined statement, the associations said:
The rules exceed the Commission’s statutory authority, were adopted without compliance with notice-and-comment requirements, and are otherwise arbitrary, capricious, an abuse of discretion, and contrary to law, all in violation of the Administrative Procedure Act.
