The U.S. Securities and Exchange Commission (SEC) suffered another defeat in court as the 5th U.S. Circuit Court of Appeals overturned the SEC’s Private Fund Adviser rule on June 5. This rule, created to improve transparency in the private fund industry, was deemed to exceed the SEC’s legal boundaries by the court. The regulation, introduced in August 2023, required thorough reports on fund performance and fees, annual audits, and fair treatment of investors to promote transparency. However, influential industry groups vehemently opposed the rule, arguing that it would significantly raise compliance costs and hinder the formation of capital. This ruling is part of a consistent trend in which financial service companies successfully challenge SEC regulations.
