US Appeals Court: SEC Exceeded its Authority with Fund Rule

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A recent decision by a United States appeals court has struck down a Securities and Exchange Commission (SEC) rule that aimed to increase transparency in the hedge fund and private equity sectors.

The court ruled that the SEC had overstepped its authority in implementing the rule, which has been a source of criticism from the crypto industry in recent years.

On June 5, a three-judge panel on the Fifth Circuit Court of Appeals unanimously ruled against the SEC, siding with six industry groups who had challenged the rule. The groups argued that it would lead to higher compliance costs and significant changes in the sector’s operations.

In the ruling, Judge Kurt Engelhardt stated that the SEC had exceeded its statutory authority and that the promulgation of the rule was not authorized.

This means that the entire 656-page rule is invalid. The rule, which was passed in August, required funds to release quarterly reports on their performance and fees, undergo yearly audits, and eliminate preferential treatment for certain investors.