Court Overturns SEC’s Enhanced Regulations for Private Equity, Hedge Funds

Because the court found that the SEC exceeded its authority in setting the rule, the judges didn’t evaluate the remaining issues, according to the ruling.

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler testifies before a Senate Banking, Housing, and Urban Affairs Committee oversight hearing on the SEC on Capitol Hill in Washington on Sept. 14, 2021. Evelyn Hockstein/Reuters

A federal appeals court has ruled that the Securities and Exchange Commission (SEC) overstepped its authority when it adopted enhanced regulations for hedge funds and private equity firms that industry groups denounced as regulatory overreach that would harm both fund managers and investors.

The Fifth U.S. Circuit Court of Appeals struck down the SEC’s rules in a decision filed on June 5, justifying its decision on the premise that the SEC exceeded its statutory authority.