At the U.S. Securities and Exchange Commission (SEC) headquarters in Washington, D.C., signage can be seen.
Six trade associations representing private equity and hedge funds filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) on Friday, claiming the agency exceeded its legal power by passing comprehensive new expense and disclosure requirements last week.
Transparency In Private Funds
The reforms, according to SEC Chair Gary Gensler, would boost competition and transparency in the $20 trillion-plus private funds sector, which has been criticized by advocacy organizations for its secrecy and conflicts of interest.
A spokeswoman for the organization claimed that the SEC “undertakes rulemaking consistent with its authorities and laws governing the administrative process.” It noted that it would support the new rules in the court.
Private funds must now publish quarterly fee and performance reports and conduct annual audits as a result of the changes. Additionally, they forbid funds from giving particular investors special treatment in terms of their exposure to the portfolio and withdrawal options, and they demand that funds publish specific fee structures.
Violation Of Administrative Procedure Act
The rules, according to the associations, “exceed the Commission’s statutory authority, were adopted without complying with notice-and-comment requirements, and are otherwise arbitrary, capricious, an abuse of discretion, and contrary to law, all in violation of the Administrative Procedure Act.”
According to the paper, they requested that the court throw out the restrictions. According to Bryan Corbett, CEO of the Managed Funds Association (MFA), the regulations will raise prices for investors and reduce competition.
The 5th U.S. Circuit Court of Appeals received the complaint. The American Investment Council, National Association of Private Fund Managers, Alternative Investment Management Association, National Venture Capital Association, and Loan Syndications & Trading Association are the other petitioners.
The lawsuit is one of many that are being filed against Gensler’s SEC. A judge panel recently found that the SEC erred in rejecting Grayscale Investments’ proposed bitcoin ETF without providing a justification, dealing a blow to the agency.