The Private Fund Adviser Rules adopted by the SEC in August 2023 (and summarised in our September note) were overturned on 5 June 2024 by a US appeals court. We observed in the February 2024 edition of our Private Funds Radar that the Rules were being challenged by the Alternative Investment Management Association (AIMA) and other industry groups, principally on the basis that the SEC did not have the power to make the Rules.
In its judgement, the court agreed, stating "[t]he [SEC] has exceeded its statutory authority . . . no part of [the Rules] can stand".
While the Rules largely did not apply to non-US sponsors of non-US funds, this outcome will still be welcomed by non-US sponsors who fundraise in the US. Had the Rules stood, those sponsors may have found it beneficial or even necessary to comply with the Rules voluntarily to facilitate their US fundraising efforts.
It will be interesting to see how the SEC responds to the judgement (and in particular whether it will appeal to the US Supreme Court); we will continue to monitor developments in this area.
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