Yesterday, the United States Court of Appeals for the Fifth Circuit vacated the SEC’s Private Fund Adviser Rule in its entirety. Dechert LLP represented the Chamber of Commerce of the United States of America in filing an amicus curiae brief in support of the successful challenge to the Rule. Consistent with the arguments advanced by the Petitioners and amicus curiae briefs, the Fifth Circuit held that the SEC exceeded its statutory authority in relying on Sections 211(h) and 206(4) of the Investment Advisers Act of 1940 to adopt the controversial package of rules and rule amendments.

The SEC has not yet indicated whether it will seek to appeal the decision. In the short term, it may petition the Fifth Circuit for an en banc hearing within 45 days or petition the U.S. Supreme Court to review the decision within 90 days. It is unlikely that either of these options would result in a decision before September 14, 2024, when compliance with key parts of the Private Fund Adviser Rule would have been required.

The impact of the Fifth Circuit’s decision may extend beyond the Private Fund Adviser Rule. The Fifth Circuit’s opinion broadly questions the SEC’s rulemaking authority under Section 206(4) of the Advisers Act, which is the basis for several existing and proposed antifraud rules. Dechert LLP will follow up in the coming weeks with updates that address the practical impact of the Fifth Circuit’s decision on U.S. and global private fund managers.