News and blog

Private equity wins legal reprieve to continue misleading investors on fees, returns

June 13, 2024

On June 5, in capitulation to the outcry from the private equity industry, the 5th U.S. Circuit Court of Appeals struck down[1] the Private Fund Advisors rule promulgated by the Securities Exchange Commission (SEC).

The SEC’s rule was designed to protect investors in private funds by increasing transparency, competition, and efficiency in the private funds market. However, shortly after it was finalized, trade associations representing private equity firms and other asset managers filed lawsuits challenging the regulation. The rule was supported by advocacy groups and institutional investors.[2]

PESP wrote in support of the rule when it was first proposed in April 2022, writing that the additional disclosures required by the rule would (1) provide investors with a clearer picture on how their investments are being managed (with such investments largely being funded by public sector workers), (2) prevent disparate treatment of investors, and (3) rein in unnecessary fees that cost investors and portfolio companies billions of dollars annually.

Major private equity firms including Blackstone, KKR, and Apollo have ramped up efforts to raise money from retail investors in recent years even as a private equity lobbying group, the American Investment Council, sued to block the SEC’s rule to ensure investors in private funds receive uniform information and a level playing field regardless of size.

Like other organizations concerned with the risk that private equity investments pose to investors,[3][4] including public pension funds, PESP believes that the Supreme Court should overturn the 5th Circuit’s decision. The SEC’s authority to regulate the private markets is clear,[5] and given the unique risks that private equity investments pose to investors, the agency acted within its mandate by promulgating rules to protect them.

“This ruling is a setback for those concerned with the opaqueness inherent in the private equity industry, especially as it relates to the public pension systems that invest in it on behalf of public employees,” said Chris Noble, PESP’s Policy Director “Ultimately, the retirement savings of millions of Americans are put at risk due to the lack of transparency from fund managers.”

If you have any questions about the SEC’s final rule regarding private funds, please contact Chris Noble at

[1] Stempel, Jonathan, and Carolina Mandl. US Appeals Court Strikes down SEC Private Equity, Hedge Fund Oversight Rule, Reuters, 5 June 2024,

[2] Noble, Chris. SEC Finalizes Private Funds Rule, Defends against Lawsuit, Private Equity Stakeholder Project, 3 Oct. 2023,

[3]News Release: Fifth Circuit’s Wall Street-Friendly Ruling a Broad Threat to SEC Disclosure Rules, Americans for Financial Reform Fund, 7 June 2024,

[4] “Statement from ILPA CEO Jennifer Choi on U.S. Fifth Circuit Court’s Ruling on the U.S. SEC’s Private Fund Advisers Rules .” ILPA, 5 June 2024,

[5] Section 913 of the Dodd-Frank Act Wall Street Reform and Consumer Protection Act,

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