PFAR has one week to avoid chopping block
The controversial US private fund adviser rule (PFAR) could be officially withdrawn within a week, if the Securities and Exchange Commission (SEC) misses its deadline to appeal.
Last month, the Fifth Circuit of the US Court of Appeals unanimously vacated PFAR, claiming that the SEC did not have the authority to enforce the rules.
This followed a high profile legal case led by a coalition of six industry trade groups – including the Alternative Investment Managers Association (AIMA) – who argued that the SEC was exceeding its remit.
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“The US Court of Appeals for the Fifth Circuit ruled in AIMA’s favour that the PFAR must be fully vacated because it is unlawful and exceeds the regulator’s authority,” said Drew Nicol, associate director of AIMA.
“The SEC has a few options, including applying for a rehearing either by the same judges or en banc, meaning all the Fifth Circuit judges. The deadline for submitting that application is [end of the day] central time today (22 July).
“If the SEC decides not to appeal, the Court issues a formal “mandate” no later than seven days after the deadline (29 July), at which point PFAR will be dead-dead.”
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Nicol warned that the SEC could have “a final roll of the dice” by getting the Supreme Court involved, but added that AIMA “will cross that bridge when we come to it.”
PFAR was first mooted last year, and would require all private funds to comply with new transparency standards. The rules would also restrict or impose substantial limitations on certain contractual provisions and industry practices.
It has proven unpopular with fund managers and investors, largely due to the inclusion of a ‘preferential treatment rule’ which would force fund managers to prepare disclosures before and after each close.
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