SEC Private Fund Adviser Rules struck down in full

The rules were vacated on the basis that the SEC had “exceeded its statutory authority” as stated by Judge Kurt D. Engelhardt.

The SBAI had raised concerns about the overly prescriptive nature and potential unintended consequences of the Rules in our consultation responses and ongoing engagement with the SEC. Institutional investors have differing needs and spend significant time and resources negotiating contractual elements based on their own differing preferences. Investors should retain the freedom to negotiate their required contractual arrangements and other terms, supported by appropriate disclosure.

Given that expectations among many investors may have adapted in anticipation of the rule being implemented, the longer-term impact on GP/LP relationships is to be seen. We, at the SBAI, will continue to explore the topics of disclosure and transparency within our network of investors and managers in our continual effort to improve industry practices – through both the SBAI’s Standards and Toolbox of industry guidance. This includes work that the SBAI has been carrying out in revisiting expense reporting based on SBAI's existing Standards and expense reporting templates.

The SBAI's Alternative Investment Standards already address many of the issues the Rules were seeking to address, including disclosure of conflicts of interest and governance arrangements at the firm and fund level. We invite alternative investment managers and investors to join the SBAI through Signatory status or Investor Chapter membership to have a voice at the table in shaping industry Standards and guidance going forward.