On June 5th, the United States Fifth Circuit Court of Appeals vacated the SEC’s Private Fund Advisers Rule (88 Fed. Reg. 63026), which would have required, among other things, restrictions on expenses that could be passed through to investors, quarterly statements to investors in private funds, and restrictions on preferential treatment.
Several key uncertainties exist moving forward:
- Will the SEC ask the full Fifth Circuit Court of Appeals to review the panel’s decision as a full court?
- Or will the SEC appeal the decision to the Supreme Court by filing a petition asking the highest court to review the case?
Even with the Private Fund Advisers Rule struck down by the court, the SEC will likely continue its heightened scrutiny on how investment fund managers:
- Disclose expenses and how expenses are allocated
- Disclose if certain investors receive preferential treatment
- Identify and disclose potential conflicts of interest
Have questions? Email Steve Vlasak, Richey May’s Business Development Partner, Alternative Investments Practice.
