The US Securities and Exchange Commission (SEC) has abandoned its legal efforts to revive a rule mandating increased hedge fund and private equity fee disclosures, following a court setback in Chair Gary Gensler’s campaign for greater transparency in the private funds sector, according to a report by Bloomberg.
The report cites an anonymous source familiar with the matter as revealing that the SEC missed Tuesday’s deadline to request the Supreme Court to review a decision that blocked new disclosure requirements. The disclosure rule, adopted in August 2023, was designed to provide investors with clearer details about quarterly fees and expenses. It also required that all investors in a fund receive equal treatment, especially concerning cash-out options for favoured investors.
Industry groups, including the Managed Funds Association and the American Investment Council, immediately opposed the rule. In June, a three-judge panel from the 5th US Circuit Court of Appeals ruled that the SEC had exceeded its authority, leading the regulator to forgo further appeals in lower courts. The Supreme Court was the last option for the SEC to challenge the ruling.
Initially declining to comment, the SEC later issued a statement indicating it had made a “strategic decision” to shift focus to other priorities on its regulatory agenda. The agency expressed disappointment in the appellate court’s ruling, maintaining that the rule was both beneficial to investors and within the SEC’s legal authority.
