MFA Files Lawsuit Against SEC to Prevent Adoption of Private Fund Adviser Rule

Rule Exceeds SEC’s Statutory Authority, Fails to Address the Stated Objectives, and Will Harm Institutional Investors and Their Beneficiaries

WASHINGTON--()--Today, Managed Funds Association (MFA), the trade association for the global alternative asset management industry, joined the National Association of Private Fund Managers (NAPFM), National Venture Capital Association (NVCA), American Investment Council (AIC), Alternative Investment Management Association (AIMA), and Loan Syndications & Trading Association (LSTA) in filing a lawsuit in the United States Court of Appeals for the Fifth Circuit against the United States Securities and Exchange Commission (SEC) challenging the SEC’s newly adopted approved Private Fund Adviser rule. The petitioners are represented by Gene Scalia and Helgi Walker of Gibson, Dunn & Crutcher LLP.

The SEC has overstepped its statutory authority and core legislative mandate, leaving us no choice but to litigate,” said MFA President and CEO Bryan Corbett. “The Private Fund Adviser rule will harm investors, fund managers, and markets by increasing costs, undermining competition, and reducing investment opportunities for pensions, foundations, and endowments."

The petitioners believe the rule will result in increased fees, less competition, and decreased choice for institutional investors, including pensions, foundations, and endowments. The negative effects on private fund advisers and their investors are a product of these harmful aspects of the rule:

  • Needlessly limiting the right of private fund advisers and their investors to tailor their relationships and interactions;
  • Enacting overreaching prohibitions and restrictions on certain private fund adviser activities; and
  • Imposing onerous, costly disclosure requirements and administrative obligations upon private fund advisers.

The petitioners believe the rule exceeds the SEC’s authority under the Investment Advisers Act of 1940 and other applicable laws, and runs counter to the SEC’s stated mission to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

The petition for review can be found here.

About the Global Hedge Fund and Alternative Asset Management Industry

The global alternative asset management industry, including hedge funds, credit funds, and crossover funds, has assets under management of $4 trillion (Q4 2022). The industry serves thousands of public and private pension funds, charitable endowments, foundations, sovereign governments, and other global institutional investors by providing portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets.

About the Managed Funds Association

Managed Funds Association (MFA), based in Washington, DC, New York, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 170 member firms, including traditional hedge funds, credit funds, and crossover funds, that collectively manage nearly $2.2 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time.

Contacts

Noah Theran, EVP & MD, Head of Global External Affairs and Raffi Williams, Vice President Communications
News@Managedfunds.org

Contacts

Noah Theran, EVP & MD, Head of Global External Affairs and Raffi Williams, Vice President Communications
News@Managedfunds.org