WASHINGTON, DC -- Today, after a three-judge panel of the U.S. Fifth Circuit Court of Appeals in Louisiana sided with industry groups over the U.S. Securities and Exchange Commission (SEC) in its decision in National Association of Private Fund Managers v. SEC, vacating the SEC’s Private Fund Advisers rule, U.S. Senator Jack Reed (D-RI), a senior member of the Banking Committee, issued the following statement:

“This ruling is a real blow to consumers, reduces transparency in the private funds industry, and could hurt the retirement accounts of hardworking Americans.  It’s a shame that the Fifth Circuit has become a rubber stamp for special interests instead of everyday American citizens.

“Private equity funds and hedge funds have grown exponentially since the passage of Dodd-Frank due to huge inflows of money from retirees and pensioners. And yet, the Fifth Circuit has struck down the SEC’s efforts to make sensible and reasonable updates to keep pace with the market.

“These rules would have required private equity funds and hedge funds to undergo annual audits, disclose all fees and expenses to investors, use realistic performance metrics, and disclose any sweetheart deals they give to preferential investors.

“Wall Street fought tooth and nail to oppose these sensible protections against fraudulent and abusive practices.  This decision means higher fees and expenses for ‘mom and pop’ investors.  It means they will get lower returns in retirement.  And it means even more money for those who already get enormous benefits under the tax code and are lavishly compensated without these excessive add-on fees.

“This rule is well within the SEC’s authority to protect investors, relying on statutes that Congress enacted after the Great Depression and the 2008 Financial Crisis to make sure that advisors deal with their clients fairly, honestly, and without major conflicts of interest. I am disappointed in the Fifth Circuit’s decision to micromanage agency rulemaking and undermine crucial Wall Street reforms.

“If this wrongly decided ruling is allowed to stand it could severely imperil other investor protections.  I hope it will be swiftly overturned.”