Industry Updates

AIMA, with other associations, files suit to challenge lawfulness of SEC Private Funds Adviser Rules

Sunday, September 03, 2023

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Opalesque Industry Update - AIMA, the global representative of the alternative investment industry, along with the National Association of Private Fund Managers (NAPFM) and four other business trade associations, has filed suit in the US Court of Appeals for the Fifth Circuit, asking the Court to set aside the final Private Fund Advisers Rules, adopted by the SEC on 23rd August 2023 on the grounds that they exceed the agency's statutory authority and are arbitrary, capricious, and otherwise unlawful.

Combined, the group of associations represents most sectors of the private funds industry. In addition to AIMA and NAPFM, they are: American Investment Council (AIC), Loan Syndications & Trading Association (LSTA), Managed Funds Association (MFA), and National Venture Capital Association (NVCA). The associations are being represented jointly by Gene Scalia and Helgi Walker of the law firm Gibson Dunn & Crutcher LLP.

AIMA has chosen to form part of this coalition of associations after an extensive review of the final text of the PFAR proposal and reflects the need to protect our global membership from the negative consequences of these rules. Private funds are a major driver of economic growth and provide significant benefits for investors. The new rules are unambiguously harmful to the industry and the choices that are available to investors. A detailed review of the text of the SEC's order adopting the rules has shown that the level of restrictions being imposed is damaging to innovation and investment and that the basis of the SEC's claimed authority to adopt them is without legal merit.

Among other negative ramifications, we believe the rules would set back the industry by several decades by making it nearly impossible for private fund managers to offer bespoke treatment to fund investors. Our research and investor feedback show that customisation is a growing trend that has been spearheaded by institutional investors moving away from uniform products to a partnership model. This model offers investors greater flexibility while still retaining the operational benefits of investing in pooled vehicles.

AIMA CEO Jack Inglis said: "The decision to file suit is one we must take to protect the interests of our members against the severe and adverse impacts of the new rules. 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."

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