The Private Fund Adviser Rule has been vacated in full

      The US Court of Appeals for the Fifth Circuit vacated the SEC's Private Fund Adviser Rule in its entirety on June 5, 2024.

      A number of industry trade associations and professionals had suspected that a portion of the Rule would remain intact, while other provisions would be deemed to be an “arbitrary and capricious” piece of rulemaking and an overstep by the SEC. The Fifth Circuit, however, was able to reference precedent for vacating the Rule in its totality and took broad and sweeping action against the Rule. It is important to note, nonetheless, that several features of the Rule appear to have been derived from prior enforcement cases decided in the SEC’s favor. Therefore, some of the concepts are likely to continue to be woven into the fabric of the SEC’s comments and deficiencies during examinations of private fund advisers despite the action by the Fifth Circuit.

      By way of example, it is worth mentioning that certain features of the Rule requiring notice and or consent from investors in private funds with respect to certain potential conflicts are items that the SEC routinely presents as examination findings that have the potential to result in enforcement proceedings on completely separate grounds outside of the proposed Private Fund Rule.

      We expect appeals and many other developments following the ruling. Our regulatory compliance teams are monitoring the situation closely and will continue to provide updates.

      For more details, please refer to the Alternative Investment Management Association’s press release here.

      How Waystone Compliance Solutions can help

      Waystone Compliance Solutions has extensive experience assisting firms to navigate SEC compliance requirements. If you would like to discuss your reporting requirements in more detail, please reach out to your usual Waystone representative, or contact us below.

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