A&O Shearman files amicus brief in northern district of Texas challenging SEC redefinition of “dealer”

On May 7, 2024, A&O Shearman filed an amicus brief on behalf of the Committee on Capital Markets Regulation in support of the petitioners in National Association of Private Fund Managers, et al. v. Securities and Exchange Commission (Case No. 4:24-cv-00250-O). C. Wallace DeWitt, a counsel in the Washington, D.C. office, served as counsel to the Committee on the brief.

The brief represents the third amicus brief submitted by A&O Shearman in support of pending administrative law challenges to the SEC’s rulemaking agenda in the past several months.

On Feb. 6, 2024, the SEC promulgated new rules under the Securities and Exchange Act of 1934 to “further define the phrase ‘as a part of a regular business’ as used in the statutory definitions of ‘dealer’ and ‘government securities dealer’ under [the Exchange Act].” See Further Definition of ‘‘As a Part of a Regular Business’’ in the Definition of Dealer and Government Securities Dealer in Connection With Certain Liquidity Providers, Exchange Act Release No. 34–99477, 89 Fed. Reg. 14,938 (Feb. 29, 2024), available at:
https://www.federalregister.gov/documents/2024/02/29/2024-02837/further-definition-of-as-a[1]part-of-a-regular-business-in-the-definition-of-dealer-and-government

The Committee’s amicus brief contended that the final rule “constitutes a significant expansion of the regulatory regime for securities dealers based on an unlawful and unprecedented redefinition of the statutory term ‘dealer,’” and that it “omits the fundamental distinction between brokers and dealers and other securities market participants.”

The Committee requested that the court invalidate the final rule as “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” pursuant to Section 706 of the Administrative Procedure Act. 5 U.S.C. § 706.