September 1, 2023 - Today, the LSTA joined five other trade associations, NAPFM, NVCA, MFA, AIMA, and AIC, in commencing a lawsuit against the Securities and Exchange Commission (the “SEC”) in connection with its recent adoption of the Private Fund Advisers Rule (the “PFA Rule”).  The LSTA believes that the SEC exceeded its statutory authority and acted arbitrarily and capriciously in adopting the PFA Rule. 

The LSTA did not take the decision to litigate lightly.  The members of the LSTA provide more than $2 trillion in loan capital to growing, job-creating U.S. companies and while the SEC correctly exempted Collateralized Loan Obligations (“CLOs”) from the PFA Rule, private fund managers that manage hundreds of billions of dollars of loans are still covered and will be negatively impacted.

Moreover, the SEC has set a dangerous precedent with its PFA Rule, as it has already proposed two other sweeping and burdensome rules impacting private funds relying on the same dubious statutory authority.

The PFA Rules are inconsistent with the statutory framework governing private funds and the SEC impermissibly relied on sections of the Investment Advisors Act that are inapt.  The SEC failed to make a convincing case for the need for such sweeping, burdensome and unnecessary rules.  Its economic analysis is flawed and fails to give adequate weight to the factors that Congress requires the agency to consider.

Please see this article from Tess Virmani for an analysis of what the PFA Rule says and what it may mean for the loan market.  The LSTA and the other trade associations are being represented by Eugene Scalia and Helgi Walker of Gibson Dunn.

Please reach out to Meredith, Tess, Andrew or Elliot if you have any questions.