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MFA preps for SEC fee disclosure legal challenge

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A legal clash between hedge funds and private equity firms and the SEC is looming large over the regulator’s proposed plan to tighten rules on the disclosure of fees and dealing with investors, according to a report by Bloomberg.

The report cites a recent email sent by the Managed Funds Association – and seen by Bloomberg – to members of the trade group saying that it could sue the SEC within two weeks of the new regulations being finalised, unless they’re softened significantly from the agency’s initial proposal, which was made in February 2022.

Under the terms of the SEC’s draft rules, hedge funds and private equity firms would be required to disclose details of the charges they levy and certain types of fee arrangements would also be banned. The new rules would also make it easier for pension funds and endowments to sue managers over their investment decisions.

According to unnamed Bloomberg sources familiar with the matter, while the regulator has yet to announce a date for the implementation of the new rules, a near-final version is already circulating among the agency’s five commissioners, indicating that a final vote could be held within a month.

Trade groups and investment firms, including Citadel and Andreessen Horowitz, have all sent comments to the SEC opposing the plan since the regulator released its initial proposal.

In its email to members, which include many of the world’s biggest hedge fund and private equity firms, the MFA wrote: “MFA has been preparing to defend members through litigation. As a part of MFA’s litigation strategy, we have gathered a coalition of impacted trade groups to join our potential suit against the SEC.”

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