Last month, the US Court of Appeals for the Fifth Circuit vacated the SEC’s rule regulating private fund advisers, stating that the agency overstepped its statutory authority. The SEC’s window for requesting an appeal has expired and the court issued a mandate. 

Schulte Roth & Zabel co-managing partner Marc Elovitz offered his perspective on the US Securities and Exchange Commission’s next course of action in The National Law Journal article titled, “SEC Will Keep Examining, Enforcing Private Fund Advisers’ Actions Despite Vacated Rule, Securities Lawyers Say.” 

Marc described the rule as “effectively over and done with in this incarnation,” but noted that the SEC’s examination and enforcement of private fund advisers is still very active, stating, “We are absolutely aware that the SEC, in its examination and enforcement program, will continue to focus on expenses and fees and make efforts to carefully evaluate those issues.”  

The private fund adviser rule’s quarterly reporting component is a potential provision the agency could restore as it “could be viewed as a type of disclosure requirement that is not unfamiliar in the securities laws,” explained Marc.  

“The Fifth Circuit didn’t think that the SEC had laid the groundwork for the rulemaking. So, if they were going to do that, they would need to lay the groundwork that would provide a sufficient basis for rulemaking with respect to quarterly reporting,” he added.  

However, Marc clarified that it is unlikely that the SEC will petition the Supreme Court to overturn the Fifth Circuit’s decision.   

“It was a bad ruling for the SEC, both in terms of the private fund advisers rules themselves, but also for the holding about the SEC’s authority under the [Investment] Advisers Act, which could influence other rules of the SEC, both existing rules, proposed rules and future rules. So to double down on that issue and take it to the Supreme Court and potentially get a precedent of the Supreme Court as to their authority under the Advisers Act would be highly, highly risky.” 

Schulte Roth & Zabel partner Taleah Jennings has been named a 2024 Most Influential Lawyer by Savoy Magazine, joining a powerhouse roster of professionals whose legal prowess and commitment to excellence inspire the highest levels of corporate and legal leadership. 

Taleah is a member of the firm’s Executive Committee, chair of the firm’s DEI Committee and co-chair of the Affinity Groups Steering Committee. She advises on complex commercial litigation matters with a primary focus on fiduciary-related issues, including matters raised in trust and estates litigation, shareholder disputes and litigations involving employment-related matters. 

Taleah’s clients include financial services entities, such as investment managers, private equity firms, interdealer brokerage firms, multiemployer pension funds and commercial real estate firms, and fiduciaries of large trusts and estates. She has litigated cases in various state and federal courts, as well as regulatory and arbitration forums, from the commencement of claims through trials and appeals. 

Taleah is recognized as a leading lawyer by The Legal 500 US, Benchmark Litigation and New York Super Lawyers. She was named one of Crain’s Notable Women in Law and Notable Diverse Leaders in Law. Her awards include Burton Award for Distinguished Legal Writing for the New York Law Journal article “Options When a Competitor Raids the Company” and Excellence in Pro Bono Advocacy Award by Sanctuary for Families. 

Schulte Roth & Zabel partner Dan Oshinsky recently discussed the evolving landscape of collateral loan obligations (“CLOs”) with 9fin for their article, “Private credit element brings mid-market closer to BSL CLOs as spread basis narrows.” He highlighted how the integration of ‘private credit’ is bridging the gap between middle-market and broadly syndicated loan (“BSL”) CLOs. As an example, traditionally, middle-market CLOs faced stricter limits on covenant-lite (“cov-lite”) loans compared to their BSL counterparts. But according to Dan, who specializes in mid-market and private credit CLO deals, the cov-lite basket found in many middle market CLOs has started to increase. “This is especially true for CLOs designed to include the large private credit loans that have become prevalent in the market,” Dan noted. Moreover, an expansion in the investor base for middle-market CLOs has enhanced liquidity for MM CLO investors and also brought spreads closer to the BSL CLO market levels. 

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