The Fifth Circuit Court of Appeals Rules to Vacate the SEC's Private Fund Adviser Rules


ACA Group

Publish Date


Compliance Alert

  • Compliance
  • SEC
  • Private Fund

Today, the Fifth Circuit Court of Appeals vacated the U.S. Securities and Exchange Commission's (SEC's) Private Fund Adviser Rules.

However, we expect the SEC to appeal the decision. They have two options and may use one or both of them:

  1. Request a rehearing within 14 days of judgment by another panel of the Fifth Circuit (usually three judges) or en banc, an extraordinary remedy that would assemble all the judges on the Fifth Circuit to rehear the case.
  2. Appeal directly (or after any rehearing) to the Supreme Court, by filing a petition for a writ of certiorari within 90 days after judgment was entered (by September 3, 2024).

Should the Fifth Circuit's opinion be reversed on appeal, some or all of the rules could be reinstated. The SEC has not addressed its plans regarding the compliance dates of any reinstated rules. 

We also note that private fund investors, including institutional limited partners (LPs), seeing the benefits of the Private Fund Adviser Rules, have begun to negotiate for some of these protections as a matter of contract. For example, they have been working with the Institutional Limited Partners Association (ILPA) to create template reports. While ILPA would have more flexibility in designing template reports if the SEC rules are finally struck down, we do not expect institutional investors to back away from their objectives of enhanced governance, fee transparency, and alignment of interests.

We also expect the SEC to continue its strong focus on private funds under existing rules and via its examination and enforcement divisions.

Our guidance

For all of these reasons, we do not see this as a moment to "put pencils down,” but rather to monitor closely and continue with compliance readiness under potential appeal outcomes and ILPA guidance reflecting LP expectations. We will continue to monitor developments closely and provide further updates and guidance.

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