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By U.S. law firm Alston & Bird.

The private funds industry received welcome news early yesterday when the U.S. Court of Appeals for the Fifth Circuit overturned the Securities and Exchange Commission's (SEC) Private Funds Rules, a sweeping set of proposed reforms designed to protect private fund investors by expanding the regulatory compliance requirements for private fund advisers, defined as investment advisers that advise entities that would be investment companies but for Section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940, commonly known as "private funds."

The Private Funds Rules were one of many ambitious rule proposals by the SEC in recent years, affecting not just retail and individual investors, but increasingly sophisticated and institutional investors. The SEC stated its decision to adopt the Private Funds Rules was aimed at protecting the interests of Americans who have "indirect exposure to private funds through their participation in public and private pension plans, endowments, foundations, and certain other retirement plans" and at curtailing certain practices, including those arising out of conflicts of interest, that "have the potential to lead to investor harm."

U.S. asset managers, financial services companies, and trade groups, including the American Investment Council, Managed Funds Association, and the National Association of Private Fund Managers, swiftly objected to the Private Funds Rules, claiming they "exceed the ......................

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