U.S. Appeals Court: SEC Exceeded Its Authority in Formulating New Rules Affecting Hedge Funds

ChainCatcher news, according to Cointelegraph, recently, a U.S. appeals court overturned a regulation by the U.S. Securities and Exchange Commission (SEC) that required hedge funds and private equity firms to increase transparency regarding fees and expenses. The court found that this move exceeded the authority granted by Congress. This case strikes a blow against the regulatory agency's claims of congressional authorization over the industry. In recent years, outspoken critics of this regulatory agency within the cryptocurrency industry have raised similar criticisms.

On June 5, the Fifth Circuit Court of Appeals ruled against the SEC, stating that it "exceeded its statutory authority." The 656-page regulation required funds to publish quarterly reports, conduct annual audits, and prohibited preferential treatment for certain investors. Six industry groups questioned whether the regulation would increase compliance costs and alter the operational model of the industry. Bill Hughes, a senior attorney at ConsenSys, stated that the SEC's performance over the past three years has been out of sync. In the cryptocurrency space, the SEC believes that many cryptocurrencies fall under its regulatory purview as securities, but cryptocurrency companies argue that the SEC lacks the authority to regulate unless explicitly authorized by Congress.