The Alternative Investment Management Association (AIMA), and Managed Funds Association MFA, along with four other industry bodies, have filed a law suit challenging the adoption of the new Private Funds Advisor Rules by the US Securities & Exchange Commission (SEC).
In the suit, filed with the Fifth Circuit Court of Appeals in New Orleans, AIMA and the MFA claim that in adopting the new rules, which increase disclosure requirements and ban some so-called side letter deals offering more favourable terms to certain investors, the SEC has overstepped its legal authority.
The SEC has responded by saying it “undertakes rulemaking consistent with its authorities and laws governing the administrative process”, and will “vigorously defend the challenged rule in court”.
MFA President and CEO Bryan Corbett said in a statement: “The SEC has overstepped its statutory authority and core legislative mandate, leaving us no choice but to litigate. 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.”
AIMA meanwhile has highlighted division in the SEC’s ranks over the new rules saying that: “AIMA agrees with the public statements made by SEC Commissioners Hester Peirce and Mark Uyeda that the adoption of the rules is both harmful and unlawful and lacks proper economic analysis of the effect on the private funds industry and the essential source of capital it provides.”
