SEC private fund adviser rule vacated by Fifth Circuit

Specifically, the court was unpersuaded by the SEC’s reliance on Sections 211(h) and 206(4) of the Investment Advisers Act of 1940 for its authority to promulgate the final rule. The court's opinion can be accessible here. 

According to A&O Shearman funds partner, Susan Gault-Brown, “I think this ruling is going to prompt a rethinking of the post-Dodd-Frank investment adviser rulemakings, especially those relying on 206(4) or 211(h) (such as the Marketing Rule) to consider the validity of those provisions. I also think that although the court vacated the Private Fund Adviser Rule, clients will need to consider how to prepare or respond if the SEC on examinations looks for or asks for some of the vacated measures on pure anti-fraud grounds (to the extent the SEC disagrees with the court’s conclusions).”

On November 8, 2023, A&O Shearman counsel, C. Wallace DeWitt, submitted an amicus brief in the pending litigation on behalf of the Committee on Capital Markets Regulation, arguing that by failing to conduct an adequate economic analysis, the SEC had violated both the Investment Adviser Act of 1940 and the Administrative Procedure Act.

The brief described the now-vacated final rule as “an unprecedented expansion of SEC regulation into the private market for investment advisory services.” The amicus brief challenging the SEC’s rulemaking is one of three submitted by A&O Shearman since November 2023 on behalf of the Committee on Capital Markets Regulation.