The U.S. Securities and Exchange Commission (SEC) has decided to end its legal battle over new fee disclosure rules for hedge funds and private equity firms. Following a recent court ruling against the regulations, the SEC chose not to appeal to the Supreme Court by the Tuesday deadline.
The rules, introduced in August 2023, required private fund managers to provide more detailed quarterly reports on fees and expenses to investors. Additionally, the SEC aimed to prevent firms from offering favorable redemption terms to select investors without extending the same terms to all. The SEC argued these changes would increase transparency and benefit investors.
However, industry groups quickly opposed the new regulations, leading to a legal challenge. In June 2024, a panel from the Fifth U.S. Circuit Court of Appeals ruled that the SEC had exceeded its authority. The regulator opted not to seek a full court review, leaving the Supreme Court as its final option, which it ultimately declined to pursue.
The decision marks a victory for industry groups such as the Managed Funds Association and the American Investment Council, who argued that the SEC’s rules targeted sophisticated investors, not retail ones. SEC Chair Gary Gensler remains committed to addressing transparency concerns in private funds, signaling the issue may resurface through other avenues.