--- title: The 5th Circuit Court of Appeals overturned the entire Private Funds rule as promulgated by the SEC description: 5th Circuit Court overturns SEC's Private Funds Rule, challenging the agency's authority over private equity and hedge funds. image: https://blog.stpis.com/hubfs/Blog/Increased%20Transparency,%20Increased%20Scrutiny-%20Private%20Funds%20Navigate%20New%20SEC%20Rules/Increased%20Transparency%2c%20Increased%20Scrutiny-%20Private%20Funds%20Navigate%20New%20SEC%20Rules.jpg --- [![STP\_header\_logo](https://blog.stpis.com/hs-fs/hubfs/STP%20Growth%20Child/STP_header_logo.png?width=75&height=94&name=STP_header_logo.png "STP_header_logo")](http://stpis.com) - [FAQs](https://stpis.com/faqs-fund-administration-compliance-managed-services/) - [About](https://stpis.com/about/) - [About STP](https://stpis.com/about/) - [History](https://stpis.com/history/) - [Team](https://stpis.com/people/) - [STP Careers](https://stpis.com/careers/) - [STP Culture](https://stpis.com/careers/culture/) - [Benefits](https://stpis.com/careers/benefits/) - [Diversite, Equity, Inclusion & Belonging (DEIB)](https://stpis.com/careers/deib/) - [Hiring Process](https://stpis.com/careers/hiring-process/) [Portal Login](https://portal.stpis.com/) [Connect With Us](https://stpis.com/connect-with-us/) - [Who We Serve](https://stpis.com/who-we-serve/) - [Institutional Managers Investment operations services and innovative software for the front, middle, and back office.](https://stpis.com/who-we-serve/institutional-managers/) - [Wealth Managers Custom and turnkey asset management programs to grow assets and support clients.](https://stpis.com/who-we-serve/wealth-managers/) - [Emerging Managers Best-in-class full service solution to springboard your startup to the next level.](https://stpis.com/who-we-serve/emerging-managers/) - [Private Fund Advisors Comprehensive suite of fund administration, compliance, account and investor reporting services](https://stpis.com/who-we-serve/private-fund-advisors/) - [What We Do](https://stpis.com/services/) - [Investment Operations Outsourcing End-to-end investment operations and trading services.](https://stpis.com/services/investment-operations-outsourcing/) - [Fund Services Complete suite of services that deliver best-in-class fund administration.](https://stpis.com/services/fund-administration-services/) - [Compliance Services Get oversight that keeps you compliant and ready for changing regulatory requirements.](https://stpis.com/services/compliance/) - [Managed Services Designed to reduce operational burden, streamline workflows, and help you scale without adding headcount.](https://stpis.com/services/managed-services/) - [Trade Settlements Streamline processes, increase efficiency, and mitigate risk with post-trade settlement services.](https://stpis.com/services/trade-settlements/) - [Reconciliation Services Automate reconciliation tasks and strengthen oversight with reconciliation dashboards.](https://stpis.com/services/reconciliation/) - [BluePrint](https://stpis.com/blueprint/) - [Why STP](https://stpis.com/why-stp/) - [STP Knowledge Hub](https://stpis.com/stp-knowledge-hub/) - [Perspectives Fresh, original STP content written by members of our team, covering a broad range of topics.](https://blog.stpis.com/blog) - [STP in the News Our take on industry articles and topics written by our colleagues across the financial services space.](https://stpis.com/stp-knowledge-hub/in-the-news/) - [Case Studies Explore real-world success stories that highlight how we've helped clients overcome challenges, drive growth, and achieve their goals.](https://stpis.com/stp-knowledge-hub/case-studies/) - [Strategic Insights Stay ahead of regulatory changes, operational challenges, and industry shifts. Download our strategic insights to equip your firm with expert guidance on compliance, operations, and growth strategies.](https://stpis.com/stp-knowledge-hub/strategic-insights/) Jun 2024 # The 5th Circuit Court of Appeals overturned the entire Private Funds rule as promulgated by the SEC ![Picture of STP Perspectives](https://blog.stpis.com/hs-fs/hubfs/STP_Logo_Color_Tag-2.png?width=50&name=STP_Logo_Color_Tag-2.png) [STP Perspectives](https://blog.stpis.com/blog/author/stp-perspectives) Share: [facebook-f icon](http://www.facebook.com/share.php?u=https://blog.stpis.com/blog/the-5th-circuit-court-of-appeals-overturned-the-entire-private-funds-rule-as-promulgated-by-the-sec) [linkedin-in icon](http://www.linkedin.com/shareArticle?mini=true&url=https://blog.stpis.com/blog/the-5th-circuit-court-of-appeals-overturned-the-entire-private-funds-rule-as-promulgated-by-the-sec) [Twitter icon](https://twitter.com/intent/tweet?url=https://blog.stpis.com/blog/the-5th-circuit-court-of-appeals-overturned-the-entire-private-funds-rule-as-promulgated-by-the-sec) [pinterest-p icon](http://pinterest.com/pin/create/link/?url=https://blog.stpis.com/blog/the-5th-circuit-court-of-appeals-overturned-the-entire-private-funds-rule-as-promulgated-by-the-sec) [envelope icon](mailto:?body=https://blog.stpis.com/blog/the-5th-circuit-court-of-appeals-overturned-the-entire-private-funds-rule-as-promulgated-by-the-sec) The 5th Circuit Court of Appeals overturned the entire Private Funds rule as promulgated by the SEC 3:20 In a decision released on Wednesday, June 6th, the New Orleans-based 5th U.S. Circuit Court of Appeals ruled in favor of six private equity and hedge fund groups, finding the SEC exceeded its authority when it adopted the Private Funds Rule in August 2023. The Court essentially found that: 1. The SEC did not have rule-making authority over *private* funds for the areas covered by the enacted rules. 2. Any rule-making authority that *did* exist to address fraud or deceptive practices specifically did not articulate the nature of those potential hazards well enough in the rule. The SEC had argued that the 1940 Acts (Investment Company Act and the Investment Advisers Act), as amended by Dodd-Frank, gave it rulemaking authority over the topics covered.   ## **What does this mean for the industry?** The rule is vacated (and therefore precluded from enforcement) in the states located in the 5th Circuit (Texas, Louisiana, Mississippi).  Due to the complexities and interstate nature of the issue, that is likely a nationwide restriction on enforcement as a practical matter.   ## **Can the SEC appeal this ruling? Or will it seek to rework and reproposed the rule altogether?** The SEC can appeal to the US Supreme Court.  The SEC might go back to the drawing board under its authority to regulate fraud or deceptive practices.  The nature of the risk would have to be more specifically detailed, and the types of requirements placed on funds might be much narrower than the rule as issued.  That approach still might fail, as the Court’s opinion on the SEC’s lack of authority to govern the private fund space was fairly broad.   ## **What does this mean for other rules that are being challenged?** The 5th Circuit has generally held a narrow view of the SEC’s powers and its rulemaking process.  However, the 5th Circuit’s decisions are not always upheld:  in 2022, it issued a broad decision finding that the entire funding structure of the CFPB was unconstitutional; that case was eventually revered by the US Supreme Court.   ## **What were some of the more contentious parts of the rule? Accelerated monitoring fees?** The Court did not specifically parse out the individual elements of the rule in that fashion, but clearly the cost and limited scope of the alleged problem to be solved figured in its decision: - The Court noted in the opinion that the SEC “estimated that the Final Rule will cost $5.4 billion and require millions of hours of employee time.” - The Court also noted that the SEC’s basis for issuing the rule as a fraud protection measure did not hold up as it only “observed misconduct by about 0.05% of advisors.” ## **Will the SEC fight here or might it instead still enforce as many provisions as it can of the rule under existing enforcement capabilities?** The Opinion vacated all parts of the rule.  Whether the SEC appeals depends on how strong it thinks its Congressional authority is under existing laws – and whether the US Supreme Court is bound to agree that the 5th Circuit got it wrong.   ## **What should private fund managers do now, and how does this impact connections to the marketing rule?** This is very new, so we’ll have to wait for the dust to settle and gauge the SEC’s reaction. [![compliance checklist cta](https://no-cache.hubspot.com/cta/default/20095280/interactive-183601072017.png)](https://blog.stpis.com/hs/cta/wi/redirect?encryptedPayload=AVxigLLGci2duQg8af1%2FqsDnlDHCYHT%2BPBrDkzX%2FbHBnVg7ifg2n%2Bey36VF9reG4h%2BRc%2BZK8TuCbA0UPRdpqlGZRw4H7z%2BROlle9%2BUi%2BabtG33g6cGkAzRDL6EOcEiXHfNKwvAWIz%2FO8bg8%2FL%2F9HRXO7%2F%2Bc0EWAPcrgy0EGgxrJ0%2Bahqho%2F5aZUyRs0sYNOMWWGXaFhgFGxbN9aqguLoLnWGV4%2FOGeKhzw%3D%3D&webInteractiveContentId=183601072017&portalId=20095280) ## Related posts [![](https://blog.stpis.com/hs-fs/hubfs/Integrating%20The%20Digital%20Subscription%20Process%20in%20Private%20Funds.jpg?height=200&name=Integrating%20The%20Digital%20Subscription%20Process%20in%20Private%20Funds.jpg)](https://blog.stpis.com/blog/integrating-the-digital-subscription-process-in-private-funds) ## [Integrating The Digital Subscription Process in Private Funds](https://blog.stpis.com/blog/integrating-the-digital-subscription-process-in-private-funds) ![Picture of STP Perspectives](https://blog.stpis.com/hs-fs/hubfs/STP_Logo_Color_Tag-2.png?width=50&name=STP_Logo_Color_Tag-2.png) [STP Perspectives](https://blog.stpis.com/blog/author/stp-perspectives) Nov 2024 In the fast-paced evolving landscape of private funds, the need for a digital subscription process... [Read more](https://blog.stpis.com/blog/integrating-the-digital-subscription-process-in-private-funds) [![](https://blog.stpis.com/hs-fs/hubfs/Blog/Increased%20Transparency,%20Increased%20Scrutiny-%20Private%20Funds%20Navigate%20New%20SEC%20Rules/Increased%20Transparency%2c%20Increased%20Scrutiny-%20Private%20Funds%20Navigate%20New%20SEC%20Rules.jpg?height=200&name=Increased%20Transparency%2c%20Increased%20Scrutiny-%20Private%20Funds%20Navigate%20New%20SEC%20Rules.jpg)](https://blog.stpis.com/blog/increased-transparency-increased-scrutiny-private-funds-navigate-new-sec-rules) ## [Increased Transparency, Increased Scrutiny: Private Funds Navigate New SEC Rules](https://blog.stpis.com/blog/increased-transparency-increased-scrutiny-private-funds-navigate-new-sec-rules) ![Picture of STP Perspectives](https://blog.stpis.com/hs-fs/hubfs/STP_Logo_Color_Tag-2.png?width=50&name=STP_Logo_Color_Tag-2.png) [STP Perspectives](https://blog.stpis.com/blog/author/stp-perspectives) May 2024 The landscape of private fund investing underwent a significant shift in August 2023, when the... [Read more](https://blog.stpis.com/blog/increased-transparency-increased-scrutiny-private-funds-navigate-new-sec-rules) [![](https://blog.stpis.com/hs-fs/hubfs/imgi_1_shutterstock_1043108527-1024x683.jpeg?height=200&name=imgi_1_shutterstock_1043108527-1024x683.jpeg)](https://blog.stpis.com/blog/challenges-of-fund-administration-open-end-and-closed-end-structures) [Fund Admin](https://blog.stpis.com/blog/tag/fund-admin) ## [Challenges of Fund Administration: Open-End and Closed-End Structures](https://blog.stpis.com/blog/challenges-of-fund-administration-open-end-and-closed-end-structures) ![Picture of Darrell Sooy](https://blog.stpis.com/hs-fs/hubfs/Darrell%20Sooy%20(1).jpg?width=50&name=Darrell%20Sooy%20(1).jpg) [Darrell Sooy](https://blog.stpis.com/blog/author/darrell-sooy) Jul 2025 In the world of alternative investments, two common fund structures dominate institutional and... [Read more](https://blog.stpis.com/blog/challenges-of-fund-administration-open-end-and-closed-end-structures) ## Sign up for our newsletter to get the latest industry insights. #### [Who We Serve](https://stpis.com/who-we-serve/) - [Institutional Managers](https://stpis.com/who-we-serve/institutional-managers/) - [Wealth Managers](https://stpis.com/who-we-serve/wealth-managers/) - [Emerging Managers](https://stpis.com/who-we-serve/emerging-managers/) - [Private Fund Advisors](https://stpis.com/who-we-serve/private-fund-advisors/) #### [What We Do](https://stpis.com/services/) - [Investment Operations Outsourcing](https://stpis.com/services/investment-operations-outsourcing/) - [Fund Services](https://stpis.com/services/fund-administration-services/) - [Trade Settlements](https://stpis.com/services/trade-settlements/) - [Reconciliation Services](https://stpis.com/services/reconciliation/) - [Portfolio Accounting](https://stpis.com/services/portfolio-accounting/) - [Compliance Services](https://stpis.com/services/compliance/) #### [Blueprint](https://stpis.com/blueprint-investment-operations-platform/) #### [Why STP](https://stpis.com/why-stp/) #### [STP Knowledge Hub](https://stpis.com/stp-knowledge-hub/) - [Perspectives](https://blog.stpis.com/blog) - [STP In The News](https://stpis.com/stp-knowledge-hub/in-the-news/) #### [Company](https://stpis.com/why-stp/stp-an-award-winning-company/) - [About STP Investment Services](https://stpis.com/about/) - [STP Careers](https://stpis.com/careers/) - [Connect With Us](https://stpis.com/connect-with-us/) - [Portal Login](https://portal.stpis.com/Login) - [Terms of Use](https://stpis.com/terms-of-use/) - [Privacy Policy](https://stpis.com/privacy-policy/) - [Security Policy](https://stpis.com/security-policy/) STP Investment Services is a technology‑enabled investment operations and compliance partner for registered investment advisers, alternative asset managers, and institutional firms. We provide middle‑ , back‑office, and compliance services — including fund administration, investment operations, trade support, and regulatory consulting — all supported by our proprietary BluePrint platform. Founded in 2008, STP serves investment advisors overseeing hundreds of billions in assets, with a global team across the U.S. and India. As practitioner‑led operators embedded in the day‑to‑day work of our clients, we bring a best‑practice perspective informed by our unique position in the market — combining real‑world execution, institutional scale, and hands‑on expertise. [CONTACT US](https://stpis.com/connect-with-us/) - [![LinkedIn](https://blog.stpis.com/hubfs/STP%20Growth%20Child/LinkedIn.svg)](https://www.linkedin.com/company/stp-investment-services-inc-/) - [![x](https://blog.stpis.com/hubfs/STP%20Growth%20Child/x.svg)](https://x.com/STPIS) - [![youtube](https://blog.stpis.com/hubfs/STP%20Growth%20Child/youtube.svg)](https://www.youtube.com/channel/UCTtJjd7mbjm63LbAR6a2GEw) #### United States 44 W. Gay Street Suite 300 West Chester, PA 19380 [1-610-363-5684](tel:1-610-363-5684) #### India Ground Floor, “Mobius” Tower 1 SJR I Tech Park, Road No. 9 EPIP Zone, Whitefield Bangalore 560066, India [91-80-49400 300](tel:91-80-49400%20300) [![STP Footer Logo](https://blog.stpis.com/hs-fs/hubfs/STP%20Growth%20Child/STP%20Footer%20Logo.png?width=108&height=132&name=STP%20Footer%20Logo.png "STP Footer Logo")](http://stpis.com) --- Copyright © 2026 STP Investment Services ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "STP Perspectives", "url" : "https://blog.stpis.com/blog/author/stp-perspectives" }, "dateModified" : "2025-12-05T19:01:47.104Z", "datePublished" : "2024-06-06T14:00:00.000Z", "headline" : "The 5th Circuit Court of Appeals overturned the entire Private Funds rule as promulgated by the SEC", "image" : [ "https://blog.stpis.com/hubfs/Blog/Increased%20Transparency,%20Increased%20Scrutiny-%20Private%20Funds%20Navigate%20New%20SEC%20Rules/Increased%20Transparency%2c%20Increased%20Scrutiny-%20Private%20Funds%20Navigate%20New%20SEC%20Rules.jpg" ], "mainEntityOfPage" : { "@id" : "https://blog.stpis.com/blog/the-5th-circuit-court-of-appeals-overturned-the-entire-private-funds-rule-as-promulgated-by-the-sec", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://blog.stpis.com/hubfs/STP_Logo_Color_Tag.png" }, "name" : "STP Investment Services" } } ```