Corporate Accountability

National Association of Private Fund Managers v. Securities and Exchange Commission

In National Association of Private Fund Managers v. Securities and Exchange Commission, the Fifth Circuit determined whether Congress granted the SEC the authority to regulate private fund advisers.

Case Summary

In 2023, following an investigation that revealed widespread misconduct in the private equity industry, the Securities and Exchange Commission (SEC) issued new rules for private fund advisors. Investors in private equity include large funds and universities, but also many private and public pension funds and non-profit organizations. The SEC created basic guardrails on the activities of private fund advisors, largely clarifying existing investor protections and requiring transparency and anti-favoritism measures to enable investors to make better-informed decisions. The SEC acted pursuant to its authority under the Investment Advisers Act of 1940 and the Dodd-Frank Act, but a coalition of groups representing private equity fund managers challenged the new rules, invoking the “major questions doctrine.”

In December 2023, CAC filed an amicus brief in support of the SEC. Our brief made two main points.

First, we explained that under Supreme Court precedent the major questions doctrine applies only in “extraordinary” cases, where an agency’s breathtaking assertion of new power reflects a dubious effort to transform the fundamental nature of its authority. Supreme Court decisions have consistently demonstrated that more is needed to implicate the doctrine than economic and political significance alone; other factors must also indicate that the agency is subverting congressional intent by seeking “an unheralded power representing a transformative expansion in its regulatory authority.”

Second, we showed that applying the major questions doctrine too broadly would undermine traditional statutory interpretation and constitutional principles. We discussed how the major questions doctrine is in tension with textualism because it emphasizes pragmatic considerations outside the statutory text. We also explained that the Constitution’s original public meaning does not support the premise underlying the doctrine: the Founders had no qualms about directing the executive branch to handle major policy questions, and history does not suggest that Congress must speak in any particular manner to do so. Finally, we explained why overuse of the major questions doctrine would undermine the separation of powers and thrust the courts beyond their proper role in interpreting the law.

In June 2024, the Fifth Circuit ruled against the SEC and vacated the new rules. The court did not invoke the major questions doctrine. Instead, it concluded based on statutory text and structure that the agency lacked the authority to issue the rules.

Case Timeline

  • December 22, 2023

    CAC files amicus brief in the Fifth Circuit Court of Appeals

    Private Fund Managers CAC Brief
  • February 5, 2024

    The Fifth Circuit hears oral arguments

  • June 5, 2024

    The Fifth Circuit issues its decision