Hedge funds and private equity firms are laying the groundwork for a legal clash with the U.S. Securities and Exchange Commission over its bid to tighten rules on disclosing fees and dealing with investors, Bloomberg News reported. The Managed Funds Association recently told members that the trade group could sue the SEC within two weeks of the new regulations being finalized, unless they’re softened significantly from what the agency proposed in February 2022. The email message, which was obtained by Bloomberg News, spotlights rising industry angst around a cornerstone of Chair Gary Gensler’s regulatory agenda. As proposed, the new rules would require hedge funds and private equity firms to disclose details of what they charge investors, while blocking certain types of fee arrangements. It would also be easier for pensions and endowments to successfully sue managers over investment decisions. Trade groups and investment firms, including Citadel and Andreessen Horowitz, have sent the SEC comments opposing the plan since the regulator released its initial proposal. The SEC hasn’t announced a date to implement the plan, but a near-final version is now circulating between the offices of the agency’s five commissioners, according to people familiar with the status, who asked not to be identified discussing non-public matters. That typically means a final vote could come in a month, or less.
