U.S. appeals court rejects SEC oversight rule for private equity, hedge funds

A U.S. appeals court on Wednesday rejected a Securities and Exchange Commission rule intended to give investors more transparency into private funds, but which the nearly $27 trillion industry said threatened to fundamentally change how it does business.

The New Orleans-based 5th U.S. Circuit Court of Appeals decided that the SEC exceeded its authority by adopting the rule in August 2023. It ruled in favor of six private equity and hedge fund groups that challenged the regulations.

The 5th Circuit decision is a victory for U.S. financial services companies and trade groups that have gone to court increasingly often to challenge rules they have argued would boost compliance costs and reduce profits.

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