Understanding the Regulatory Landscape for Private Fund Advisers

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Welcome to fedsock Forums, a podcast of the Federal Society's
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Practice groups. I'm Mey kas Merik, vice President and Director
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of Practice Groups at the Federal Society. For exclusive access
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to live recordings of FEDSOC Forum programs, become a Federal
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Society member today at fedsoc dot org.
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Hello everyone, and welcome to this Federalist Society virtual event.
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My name is Edith Harold, and I'm an assistant director
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of Practice Groups with the Federalist Society. Today we're excited
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to host this webinar called Understanding the Regulatory Landscape for
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Private Fund Advisors. Speaking on the panel today, we have
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David Blast, Jennifer Troy and Russ Ryan and Lindsay Kelho
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the kell Yo, the managing director and Associate General Counsel
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and the head of Asset Management Group at SITHMA. We'll
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be moderating today. If you'd like to learn more about
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today's moderator or speakers, their full bios can be viewed
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on our website fedsoc dot org. Throughout the program, we
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may turn to the audience for questions. If you have
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a question, please enter it into the Q and a
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function at the bottom of your zoom window, and we
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will do our best answer as many as we can. Finally,
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I'll note that, as always, all expressions of opinion today
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are those of our guest speakers, not the Federalist Society.
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With that, lindsay, thank you for joining us today, and
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I'll hand things over to you.
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Thank you, Edith, and welcome everyone. Great to see you all.
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We've got a great panel for you today that I'm
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sure we'll provide some very interesting insights into the regulatory
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landscape for private funds and what's next in light of
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the private fund Advisor's rule litigation. But first, before we
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get into the discussion, let me introduce our panelists. As
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Edith mentioned, we've got David Blast, who is a funds
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partner at Simpson Thatcher, where he heads the firm's Asset
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Management regulatory group. He's been involved in SEC policy matters
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almost all of his twenty five year career. As Associate
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General Counsel at the SEC, David was the primary legal
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advisor to the SEC for rulemakings and in particular advice
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on administrative Procedures Act issues. He also wrote rules for
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investment advisors and broker dealers. While serving in leadership roles
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in the division and Investment Management and Trading in Markets,
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and he later served as General Counsel of the Investment
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Company Institute or ICI, which is a frequent commentor to
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the SEC's rule proposals and a common partner for Sigma AMG.
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We also have Jennifer Troy, who is CEO of ILPA,
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the Institutional Limited Partners Association, and she's been with the
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organization for ten years at this point. Before becoming CEO,
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she led ilpa's policy and advocacy efforts, which include ilpa's
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engagement with the SEC and the creation of industry standards
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such as ilpa's feed template, which was first released in
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twenty sixteen. Before her time at ILPA, jenn spent more
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than twenty years in the private equity industry and she
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holds a master's in Law and diplomacy from the Fletcher's
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School at Tufts University. And last, but certainly not least,
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we have Russ Ryan, who is currently Senior Litigation Council
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with the New Civil Liberties Alliance, which is a nonprofit
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that litigates to protect civil liberties from infringements by the
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administrative state and that weighed in on the Private fund
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Advisor's case.
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In the Fifth Circuit.
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Previously, he was a partner at King and Spalding and
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an enforcement lawyer with both the SEC and FENRA. And
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for those who may have just joined in the last minute,
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I'll just remind folks again we do want to make
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this interactive, and so if folks have questions, please do
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put them into the chat and Edith or I will
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go into the chat and check out the questions as
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we go along and interrupt where there's a break in
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the action. Okay, So first I'm going to kick it
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off with Russ Russ. Earlier this summer, the SEC's Private
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Fund Advisor's rule making was overturned by the Fifth Circuit.
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As I think everybody here probably knows. For those who
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may be less familiar with the rulemaking and the court case,
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can you give us a quick summary of what exactly
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happened and why it's so important?
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Sure?
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Yeah.
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I see this case as just sort of an all
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too common example of a zealous federal regulator who really
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really wants to regulate something, but Congress has never given
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them the power to do so, so in some levels
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of frustration, they go off and they go searching for
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some old statute that they can claim gave them.
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The power all along.
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And in this case we're talking about the SEC, of course,
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and for whatever reason, at least, the current SEC seems
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really they really really wanted to regulate private fund managers,
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but Congress never gave them a statute that did so.
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And so they went searching for snippets of other statutes
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that have been on the books for a while to
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see if they could find something that they could claim
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gave them the power. And the two things that they
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found were one from the original Investment Advisors Act of
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nineteen forty and a second purported statutory basis in the
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dot Frank Act.
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Of twenty ten.
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So the rule was adopted about right around a year ago,
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and it imposed some new, reason regularly onerous obligations on
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private fund managers. Now, these private fund managers are people
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that are managing money for the super wealthy and super
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sophisticated investors, typically institutions that have plenty of sophistication. They
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have good lawyers, good advisors, and plenty of bargaining leverage
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when it comes to negotiating the contracts that they have
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with the advisors who advised funds. So they're hardly the
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types of investors who you know, you would think need
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the protection of federal regulators.
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But in any event, the SEC decided to do it.
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A group of fund managers got together, an organization in
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the National Association of Private Fund Managers, challenged the rule
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in the Fifth Circuit. One of the questions, it's really
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not all that relevant to this case is where they
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had standing. Federal regulators liked to challenge standing because that
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means they don't have to deal with the merits of
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the case, and that was no exception here. But the
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Fifth Circuit made pretty late work of that, and a
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paragraph for two just said, look, this is an organization
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that's the membership is affected by this rule, and pretty
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much every member of the organization is affected, so they
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clearly have standing. So then they turned to the merits
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and they found that neither the Investment Advisors Act nor
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died Frank gave the SEC authority to propagate these rules.
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The original Investment Advisors Act does have an anti fraud
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provision in it, and it does give the SEC some
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rulemaking authority, but the courts found that not persuasive because.
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The rules that they were trying to adopt here really weren't.
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The SEC couldn't make any real connection between the rules
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and what the rules were requiring.
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And preventing fraud.
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So they dismissed that basis for the rules. They turned
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to the dot Frank Act, and the SEC was claiming
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that a provision of Dodd Frank, which if you read
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it in context, dealt solely with protection of retail investors,
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not private funds or even sophisticated investors. The SEC was
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claiming that that was another santutary basis that justified these rules.
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But the provision they were relying on not only was
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it in a section that deals with retail investors, but
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it was hundreds of pages from another part of Dodd
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Frank that explicitly dealt with private fund managers and imposed
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some limited registration and record keeping obligations. But the Court,
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i think correctly found that there's no way that Congress
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would have put in a section titled in effect regulation
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of private fund Managers and it and then hidden in
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a mousehole hundreds of pages later in the same legislation
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would have varied some statutory authority for the SEC to
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do sweeping regulation of private fund managers. So the Court
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unanimously three to zero vacated rule and that's where it
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stands now.
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The time to seek rehearing has expired.
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I don't think the time to seek sert has but
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it's about to expire, I think, and I've seen no
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evidence that the SEC is going to try to keep
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this alive.
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I think they're going to lick their wounds and.
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Move on, perhaps trying to redo it, but time is
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running short.
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I think.
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Thanks Ross, so Jen, I think you might have a
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little bit of a different perspective on some of what
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Russ had to say.
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So why don't I turn to you next?
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Do you want to talk both about maybe how you
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our members received the verdict and then anything else Do
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you want to add on background or add to what
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Rus said?
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Thanks so much, Lindsay, great to be with all of you,
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and maybe just for the benefit of this audience who
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may not be as familiar with ILBA or who we serve.
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We're a trade association representing about six hundred different institutional
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investor asset owners allocators across fifty countries, the bulk of
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which sit in North America. But that includes all the
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folks you'd expect, the private and public pension funds and downments, foundations,
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sovereign wealth funds, family offices, insurance companies, and so that's
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sort of the prism through which we've engaged with the
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SEC over the last decade and specifically around these rules.
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And as you can imagine, everything that we've put on paper,
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everything that we have said publicly and to the SEC directly,
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is very much informed by what our members are telling
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us directly, and and that includes a lot of both
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what they're experiencing over the life of the relige relationship
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that they have with their general partners, the kinds of
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information that they are receiving, the kinds of governance matters
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that might be coming up, or how conflicts of interests
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are addressed, but also as relates to what's in the
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contracts to which they are agreeing and what is the
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process wrapper around getting to those negotiated agreements. And so
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that really informs a lot of how we're responding to
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the conversation today and everything that led up to it.
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And I would say that, you know, it's also important
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to call out that when Dodd Frank first came into effect,
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LPs weren't necessarily tracking it as closely. They hadn't been
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exceedingly engaged in the DoD Frank dect itself and implications
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for private funds, you know, more than a decade ago.
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And so like the GP community, the LPs were.
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Coming along in a learning journey and really understanding is
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this is this in that positive for us and for
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the industry. And so in the very early days i'vevers
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joined ILBA, there was not the deep level of awareness
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of what does this mean for us? How will it
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impact us, how will it impact disclosures? What should we
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expect from the regulator? And so it took a period
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of educational I think, for everyone to settle into what
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does it mean that now gps have to provide mandated
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disclosures to the SEC through form ADV for example? What
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does it mean that managers now have to go through
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compliance based or risk based examinations or surprise examinations based
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on risk themes. And so now a decade later, I
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think LPs have gotten very accustomed to what those beneficial
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impacts were. Leading up to February of twenty two when
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the rules were first proposed, we certainly saw at the
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outset some things that LPs have been interested in for
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a long time. One being more consistent presentation of information
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on fees and expenses. That's been something really hard for
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even the most sophisticated, deepest pocketed LPs to obtain through negotiation.
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I have loads and loads of statistics about it if
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people were interested, But we're always serving the members around.
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What are you getting?
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Are you happy with the quality of disclosures you're getting
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on costs from your managers? And the answer is consistently unsatisfied,
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not sufficient. We want more. Well, how do you get
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more information? You negotiate for it. Yes, you get those
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rights in the contract to a degree, yes, But what
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tends to happen is if they get a commitment from
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a manager to provide those disclosures, it's done in a
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very bilateral way, in a very bespoke fashion that only
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accrues to them. So they may get a commitment to
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get those disclosures, but it may not be codified in
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the contracts, it may not be codified in the side letter,
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it's certainly not going to be codified in the LPA,
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the limited Partnership Agreement, and it may not be documented anywhere.
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So one of the benefits that our members saw, at
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least in the original proposal was the notion that the
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friction created by having to negotiate for something that seems
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very common sense, which is how much am I paying
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you and what does it cost me, is removed if
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everyone is being held to the same standard. So that
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was beneficial. When we learned of the verdict from the
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Fifth Circuit, it was days after we had started a
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comment period process around a set of templates that would
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have complied with the new rules, and I think our
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members appreciated that now we have to really rely on
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the industry's will to embrace standardization, which is not a guarantee,
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but we have to go back to something that's entirely
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industry driven without any catalyst or momentum behind it. At
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the same time, there were elements in the package of
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rule proposals that were finalized in August of twenty twenty
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three that would have posed potentially large problems or challenges
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operationally and mechanically for lpsg excuse me, GPS and their
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legal advisors as far as how do you negotiate five
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letter agreements with the requirements around disclosure or prohibitions on
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preferential treatment.
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So that was.
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A very long winded answer lindsay, but lots to say
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about how LP's felt about the rules.
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No, that's super helpful context. Jen, thank you very much.
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We do have a first question in the chat. I think, actually, David,
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you're probably best suited to answer it, and it can
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then sort of lead into where we were going.
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To go next. So let me just read out this
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question and then we'll talk.
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So the question is I understand that all of this
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applies to private funds whose limited partners are accredited investors.
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If an unaccredited investor invests in a private fund, do
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they have an automatic right of recision under federal securities
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laws even if there's no available fraud related cause of action.
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So maybe, as you're talking about some of your thoughts here,
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let's just keep that in mind and maybe we can
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weave it into the answer. But where I'd like to
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take the conversation now is to talk a bit about
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how this rule making generally fits within the broader sec
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rulemaking agenda and building upon what Russ and Jen also
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said about, you know, the authorities here and sort of
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the history. Get your thoughts on the broader sort of
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narrative here in the context of the securities laws.
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Yeah, I'm happy to answer both of those questions, Lindsey,
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but maybe I'll start with a question you didn't ask me,
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if that's okay, and just comment on the rule itself,
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like from a slightly different perspective, if that's okay, because.
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I work, Oh yeah, yeah, no, that's great, that's great.
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I work a lot with the general partners, the private
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fund sponsors, and you know, I think about what my
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life today on August twenty ninth would be like if
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this rule had not been vacated. It was set to
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go into effect next month, and there was a mad
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scramble before the verdict came out from the Fifth Circuit
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at vacating the role getting ready for the roles of implementation,
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and through that exercise, I have a couple of observations
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on this role. The rule effectively has three components to it.
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It's a complicated set of rules. It's really a hodgepodge
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of rules built into one package. One set of obligations
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is substance of regulation of the relationship between a general partner,
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the fund manager and the fund and limited partners. Another
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is reporting it, as Jennifer pointed out, reporting to limited partners.
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I will say the reporting regime that was established was
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partly like understandable, partly inscrutable because it would have required
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reporting both at the fees and expenses at the fund level,
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which you can kind of understand, and which I think
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I built this template addresses that are also imposed out.
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Reporting a portfolio of company.
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Levels that in all, honestly what I still today don't
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understand how that regime was meant to work. There's a
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third component to it that's pretty fascinating to me, and
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I don't know that I can point to another example
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at the SEC of this. So the third part of
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this rule kind of address the relationship of limited partners,
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so the investors and the funds one to another, and
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assume that larger, more sophisticated limited partners would win advantages
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at the expense of smaller limited partners.
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So I just point that out as an observation.
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I'm not going to make much of it, but it's
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just interesting to see that in an SEC rulemaking, because
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you don't often see the SEC distinguish between types of
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investors and regulate the relationship as it leads to them
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in different categories. The other observation I make is, you know,
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this is not the first time the SEC has been
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through exactly this situation where they've gone out with a big,
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ambitious rulemaking package only to have the courts question.
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Their ability to cute on that package.
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I would live through it in the two thousands before
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the financial crisis, where the SEC pushed through to Russ's
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point rules on suspect authority or suspect rationale like economic
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analysis or just market problems of the SEC's looking to address.
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Some examples are rulemaking.
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Under the Investment Company Act, pushing out independence requirements for
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fund boards through the SEC's exemptive process, so they issue
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exemptive rules, and the SEC would said, well, you can't
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have the exemptive rule even though it's unrelated to the
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fund governance unless you have an independent chair as your
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fund on your fund and other independence or requirements. There's
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a famous decision called the Goldstein decision. Bill Goldstein of
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Bulldog Investors challenge the SEC's rule requiring edge fund managers
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to register. The SEC changed a long standing interpretation of
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what investment advisors required to register. Phil Goldstein challenged that
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change of interpretation and one and that rule was vacated.
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I will say, though those rules, if you look back
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at that period, of time led to either market changes
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or legislative changes. A legislative in the god Frank acts
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requiring hitch fund managers and private equity fund managers to
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register even though they had nothing that I can see
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to do with the financial crisis.
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In market changes because you do see.
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More independent boards, more independent chairs today for funds. So
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the point I'm making is rules can be overly aggressive,
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they could be challenged, and you can have a regulator
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with THEIRS slapped. And that's exactly what happened here with
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the SEC. It's an embarrassing day for the SEC to
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have a rule overturned in this fashion. But those types
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of rule changes where you have efforts to get into
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compliance can often have lingering effect that they're vacated. The
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question about accredited investor, so we are talking about private funds.
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These are funds offered to accredited investors, qualified purchasers, but
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a whole waterfall of standards and types of investors across
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the regulatory regime. The accredited investor standard is important because
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if you limit a fund or a company's offering to
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accredited investors, the offering accel itself as exemp, can be
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exempt from the securities that requirement to register the offering.
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That's where a credited investor comes in. If you have
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a person who's not an accredited investor that's invested in
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a private fund, you may have a decision right for
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that investor. The offering presumably should have been registered or
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maybe another exemption was available for it. But you've kind
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of got a problem you need to sort out if
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you have a non accredited investor in your fund. So
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the short interest maybe there, maybe not. It depends on
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if there's another exemption for that offering available. Many private
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funds that we're talking about offer and have investors who
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meet a higher threshold and credit investor. Credit investors about
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a million dollars in network, putting aside your home the
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value of your home. Qualified purchasers at a five million
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dollars or higher investment assets mark for human being investors,
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higher for some institutional investors, so it's a step up
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for the most part. Those are the types of funds
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we're talking about that it would have been subject to
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this rule. Lindsay, I'm going to come back to your question.
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Apologies for my diversion. So yes, the short answer is yes,
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this challenge clearly affects the SEC's rulemaking. And you know,
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the Fifth Circuit decision on the Private Fund Advisor rule
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comes in the context of a larger set of developments
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addressing agency rules beyond the SEC. You have the challenge
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to the Chevron deference. That's not really an issue for
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the SEC, because is the SEC never really got Chevron defference.
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The secs set of statutes that it administers are of
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a sort that for the most part, a judge can
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assess for theirselves themselves. It doesn't require like special specialized
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technical knowledge like the EPA, the Environmental Protection Act type
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statutes which require like scientific background to be able to interpret.
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So the SEC never counted on Chevron difference. If you
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look at the Circus decision, it never even talks about
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Chevron difference. But there's this atmosphere of courts viewing the
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agencies as overstepping and the Private Fund Advisor rule is
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a great example of an SEC overstepping its legal authority.
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As Rest pointed out, that has to have an effect
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on the SEC because.
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They've had this rule challenge. They had another one challenge.
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In the Fifth Circuit having to do a prodxy rules,
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and they've got others that are currently being challenged, including
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a very controversial one in my opinion, reassessing long standing
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interpretation of what it means to be a dealer in
396
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the securities market. So, if you look at the sec
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s wole making agenda, some that come immediately to mine.
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First of all, we just had a rule adopted yesterday
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00:24:29.160 --> 00:24:32.559
on liquidity risk management for registered investment companies.
400
00:24:32.920 --> 00:24:33.960
The SEC had some.
401
00:24:34.160 --> 00:24:41.480
Very controversial, incredibly impactful requirements in its original proposal. For
402
00:24:41.559 --> 00:24:44.519
those of you familiar with that area, the swing pricing
403
00:24:44.720 --> 00:24:48.759
was a big one, which would have upended how mutual
404
00:24:48.799 --> 00:24:54.119
funds are priced and how they provide liquidity to their investors.
405
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The SEC dialed that back a lot.
406
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They ended up not address or not adopting that swing
407
00:25:01.799 --> 00:25:04.480
price in the controversial part of that proposal at all,
408
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and instead did more of a reporting regime for liquidity
409
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as part of the risk management changes to doll dramatically back.
410
00:25:16.279 --> 00:25:18.599
Do I know that the private fund advisor rule and
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the other litigation.
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Resulted in these changes?
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I don't know, but it had to have been on
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their minds that litigation challenge.
415
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One little tidbit you like.
416
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If you're adopting you're an agency adopting rules, and you
417
00:25:32.920 --> 00:25:34.960
think you're going to be challenged, you have to have
418
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litigators at the agency. They're able to defend those challenges.
419
00:25:40.519 --> 00:25:42.759
I don't know how many litigators the SEC has, but
420
00:25:42.799 --> 00:25:45.599
they must be overstretched of these days. So one would
421
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think that would factor in just a staffing could factor
422
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in decisions as well, more relevant to private fund advisors.
423
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So you've got a few others that were outstanding. Proposals
424
00:25:56.079 --> 00:25:59.640
that were outstanding that many of us scratch our head
425
00:25:59.640 --> 00:26:02.839
about what they what the SEC thought about them when
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00:26:02.839 --> 00:26:07.279
they issued the proposal. There's outsourcing by investment advisors. There's
427
00:26:07.319 --> 00:26:10.079
a big custody rule that the SEC refers to as
428
00:26:10.079 --> 00:26:16.960
safeguarding very controversial proposal called a predicted Data Analytics. It's
429
00:26:17.000 --> 00:26:20.039
a proposal meant to address the use of artificial intelligence
430
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and nudging investor behavior. But they defined the cover technology
431
00:26:25.319 --> 00:26:28.400
so broadly it would include things like using a cell
432
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spreadsheet to prepare marketing materials. All of those even before
433
00:26:33.880 --> 00:26:38.200
the Fifth Circuit decision came out. The SEC, I think
434
00:26:38.279 --> 00:26:42.599
because of the litigation challenges and the robust challenges in
435
00:26:42.680 --> 00:26:47.079
the common file, all of those have slowed down as
436
00:26:47.079 --> 00:26:49.079
far as I can tell that the SEC had originally
437
00:26:49.160 --> 00:26:53.000
set a pretty aggressive adrenda agenda for adopting those rules,
438
00:26:53.480 --> 00:26:57.200
and the SECS indicated some of them predicted data analytics.
439
00:26:58.599 --> 00:27:02.640
The safeguarding propose would be reproposed if they move forward
440
00:27:02.680 --> 00:27:05.640
at all with those So I think the Fifth Circus
441
00:27:05.680 --> 00:27:09.279
decisions clearly have had an effect, even if the SEC
442
00:27:09.279 --> 00:27:12.480
doesn't say it publicly on its torulemaking Agena in the
443
00:27:12.519 --> 00:27:17.279
investment advisor space, lindsay all parts here and Kishev follow up, Yeah.
444
00:27:17.079 --> 00:27:17.680
So I do.
445
00:27:17.759 --> 00:27:19.200
Actually, I'm going to come to you in a minute,
446
00:27:19.279 --> 00:27:21.559
Jen to talk about I think your folks are focused
447
00:27:21.599 --> 00:27:24.640
on the marketing rule and how this could all sort
448
00:27:24.640 --> 00:27:26.200
of play together when it comes to that. But before
449
00:27:26.240 --> 00:27:28.319
we get there, we do two questions for you, David
450
00:27:28.960 --> 00:27:32.279
in the chat. The first is building upon a comment
451
00:27:32.359 --> 00:27:35.960
that you made about the Investment Company Act and asking
452
00:27:36.000 --> 00:27:38.799
you to briefly explain the context of this rule in
453
00:27:38.839 --> 00:27:42.680
relation to the Investment Company Act. In other words, how
454
00:27:42.720 --> 00:27:45.160
are there many Investment Company Act like provisions and the
455
00:27:45.240 --> 00:27:48.160
p far the private fund Advisor's rule, but private funds
456
00:27:48.200 --> 00:27:51.440
were explicitly exempted from the prescriptive requirements of that statute.
457
00:27:51.640 --> 00:27:53.839
And the SEC was attempting an end around is what
458
00:27:53.880 --> 00:27:56.599
it looked like to many in the industry. And the
459
00:27:56.680 --> 00:27:59.200
question is whether or not you think that colored the
460
00:27:59.279 --> 00:28:00.000
courts analysis.
461
00:28:01.119 --> 00:28:04.039
Oh, on the latter point, it clearly did call it
462
00:28:04.119 --> 00:28:06.839
the court's views of what the SEC was doing. So,
463
00:28:07.559 --> 00:28:10.920
just to level set everyone on what this question is about.
464
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Under the Investment Company Act, if you're an investment company,
465
00:28:14.480 --> 00:28:17.000
you have to register. It's mutual funds, exchange trade of funds,
466
00:28:17.000 --> 00:28:20.240
closing funds. You have to register and comply with a
467
00:28:20.519 --> 00:28:25.440
very robust set of obligations that affect the fund. Private funds,
468
00:28:25.480 --> 00:28:30.039
the funds we're talking about are completely exempt. They're statutorily
469
00:28:30.079 --> 00:28:33.960
exempt from the Investment Company Act. They're not they're definitionally
470
00:28:34.039 --> 00:28:36.759
not investment companies. They would be investment companies but for
471
00:28:36.799 --> 00:28:41.519
their exemption, so none of that regime applies. There were
472
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some portions of the Private Fund Advisor Rule that were
473
00:28:45.000 --> 00:28:50.039
clearly based on the Investment Company Acts regime, including performance reporting.
474
00:28:50.559 --> 00:28:54.480
The SEC basically incorporated some of the performance reporting requirements
475
00:28:55.640 --> 00:28:58.440
from the Investment Company Act regime into the Private Fund
476
00:28:58.480 --> 00:29:03.279
Advisor rule, and a lot of the fee disclosure had
477
00:29:03.359 --> 00:29:07.200
hallmarks of types of disclosure. You'd see too investment companies
478
00:29:07.200 --> 00:29:10.839
that are registered and I should say those registered investment companies,
479
00:29:10.880 --> 00:29:14.039
those are offered to retail investors, so not accredited, not
480
00:29:14.160 --> 00:29:19.000
qualified purchasers. There's a retail oriented investments and the SEC
481
00:29:19.119 --> 00:29:22.640
was incorporating some of those requirements into an institutional setting,
482
00:29:23.000 --> 00:29:25.799
which the Court expressly said, can't.
483
00:29:25.799 --> 00:29:26.519
You can't do that.
484
00:29:26.559 --> 00:29:30.160
You can't find an end run as a question asked
485
00:29:30.880 --> 00:29:35.519
through the Advisors Act to substantially regulate the investment the
486
00:29:35.599 --> 00:29:39.960
private funds where the Congress didn't give you authority.
487
00:29:39.559 --> 00:29:40.960
Did I cover that question?
488
00:29:41.319 --> 00:29:42.839
Yeah, yeah, yeah, that was a great answer.
489
00:29:42.880 --> 00:29:45.039
And just one other quick question related to what you
490
00:29:45.079 --> 00:29:48.400
were talking about. We mentioned the dealer rule and the
491
00:29:48.440 --> 00:29:52.880
litigation happening there. You're being asked to handicap the potential
492
00:29:52.920 --> 00:29:56.079
outcome of the litigation and give a status update as
493
00:29:56.079 --> 00:29:57.119
to where that case stands.
494
00:29:57.680 --> 00:30:03.039
Sure, and I'm never to make predictions. So the dealer
495
00:30:03.119 --> 00:30:08.279
rule it's been adopted. The SEC reformulated its guidance on
496
00:30:08.359 --> 00:30:11.559
who is and who is not a dealer. I don't
497
00:30:11.599 --> 00:30:15.720
think Jennifer, your members or your organization focuses as much
498
00:30:15.720 --> 00:30:19.640
in the space, but the Lindsay yours probably does, and heads.
499
00:30:19.440 --> 00:30:21.000
From very focused on it can do.
500
00:30:22.359 --> 00:30:26.559
The rule would require the funds themselves. This is a
501
00:30:26.599 --> 00:30:30.359
dealer rule, so it's someone who's buying and selling in
502
00:30:30.440 --> 00:30:34.720
the marketplace for their own account, that's the fund in
503
00:30:34.759 --> 00:30:38.359
our space. Would require funds themselves to register with the
504
00:30:38.440 --> 00:30:41.200
SEC as dealers and to profound members of the self
505
00:30:41.240 --> 00:30:45.559
regulatory organization of the space fenrun. That has knock on effects.
506
00:30:45.559 --> 00:30:47.799
It's not just like an easy thing to register, and
507
00:30:47.799 --> 00:30:51.599
you're often running as a dealer. You're prohibited, for example,
508
00:30:51.640 --> 00:30:56.200
from investing in IPOs net capital set aside, So there's
509
00:30:56.200 --> 00:30:59.440
a drag on performance for a fund and generally you're
510
00:30:59.480 --> 00:31:01.880
regulated in a way that's not natural for a fund.
511
00:31:03.720 --> 00:31:08.640
The SEC changed the guidance lowered thresholds. I think it's
512
00:31:08.640 --> 00:31:10.759
a twenty five million dollars threshold off the top of
513
00:31:10.799 --> 00:31:13.480
my head for buying and selling in the marketplace and
514
00:31:13.559 --> 00:31:16.880
during certain periods of time. So you'd have a lot
515
00:31:16.920 --> 00:31:21.599
of obligations to come into registration under that rule. As
516
00:31:21.640 --> 00:31:24.359
I said, the rule is adopted, it's been challenged. There's
517
00:31:24.400 --> 00:31:27.400
been a hearing at least on the papers. There have
518
00:31:27.440 --> 00:31:29.640
been filings. I think there's been a hearing already I
519
00:31:29.680 --> 00:31:34.440
can't recall, and it's being challenged by a group in
520
00:31:34.480 --> 00:31:35.240
the Fifth Circuit.
521
00:31:36.160 --> 00:31:38.359
If you look at the Fifth Circuits record on.
522
00:31:38.400 --> 00:31:42.400
The SEC where it's been aggressive and its rule making agenda.
523
00:31:43.359 --> 00:31:46.640
If you look at the Goldstein decision that I mentioned earlier,
524
00:31:46.640 --> 00:31:50.240
which was a DC Circuit Court of Appeals decision but
525
00:31:50.400 --> 00:31:53.359
has to be influential in the Fifth Circuit, where the
526
00:31:53.440 --> 00:32:00.839
SEC changes guidance on decades long interpretations for scandence of
527
00:32:00.880 --> 00:32:04.640
a need for the change, I would expect the SEC
528
00:32:04.799 --> 00:32:07.200
to have another embarrassing day on its hand with the
529
00:32:07.240 --> 00:32:10.880
rule that's again vacated. I don't know that, but that
530
00:32:10.920 --> 00:32:14.920
would be my sitting here today, if I was forced
531
00:32:15.119 --> 00:32:16.799
to make a prediction, that would be my prediction.
532
00:32:17.319 --> 00:32:20.799
That's your handicap, Okay.
533
00:32:20.839 --> 00:32:23.000
Moving back to the Private fund Advisor's rule.
534
00:32:23.119 --> 00:32:26.480
Jen David mentioned the marketing rule, and I know that
535
00:32:26.640 --> 00:32:29.839
your organization has been focused on the interplay between the
536
00:32:29.839 --> 00:32:32.720
Private Fund Advisor's rule and the marketing rule, which was
537
00:32:32.720 --> 00:32:36.000
finalized last year. I guess at this point do you
538
00:32:36.000 --> 00:32:38.680
want to comment maybe about how you sort of see
539
00:32:38.680 --> 00:32:42.759
the interplay there and the effects it could have, sure.
540
00:32:42.799 --> 00:32:45.240
And not understanding is, and David can correct me if
541
00:32:45.279 --> 00:32:47.880
I've got the timeline wrong, but that the rule actually
542
00:32:47.880 --> 00:32:50.200
went into effect November of twenty two, is that right?
543
00:32:50.359 --> 00:32:53.279
So it's been in place for a while.
544
00:32:54.000 --> 00:32:56.160
And so we're now at the point in the rule
545
00:32:56.160 --> 00:32:59.920
making cycle where we're getting FAQs and for the clarification
546
00:33:00.039 --> 00:33:03.000
and then statements from the set to help to aid
547
00:33:03.039 --> 00:33:06.720
everyone with the interpretation of the rule, including in a
548
00:33:06.759 --> 00:33:11.759
private funds context. So when the Private Fund Advisor's rule
549
00:33:12.720 --> 00:33:15.839
had prior to the Fifth Circuit's decision, let's say, so
550
00:33:15.880 --> 00:33:19.240
when it was still in litigation, we had to operate
551
00:33:19.480 --> 00:33:24.200
under the expectation that GPS we're scrambling to figure out
552
00:33:24.240 --> 00:33:26.440
how they were going to comply with certain elements of
553
00:33:26.480 --> 00:33:29.119
the rule, you know, and critically important to us and
554
00:33:29.160 --> 00:33:31.920
our members of the quarterly statements pieces, the vis and
555
00:33:31.960 --> 00:33:36.119
expenses pieces, the performance reporting, and the changes necessary to comply.
556
00:33:37.039 --> 00:33:40.079
And so when you're talking about performance reporting under the
557
00:33:40.920 --> 00:33:43.599
PFA rule in the you have to look at it
558
00:33:43.599 --> 00:33:46.240
in the context of the marketing rule as well, obviously,
559
00:33:46.759 --> 00:33:49.839
and they didn't necessarily perfectly line up.
560
00:33:50.440 --> 00:33:52.599
Something that was consistent.
561
00:33:52.039 --> 00:33:55.519
In both the Marketing rule and in the PFA rule
562
00:33:56.400 --> 00:33:58.799
was the notion that you have to present gross in
563
00:33:58.880 --> 00:34:01.200
net and you have to present it with and without
564
00:34:01.200 --> 00:34:04.920
the impact of subscription lines of credit, which, for those unfamiliar,
565
00:34:05.799 --> 00:34:09.199
is a tool utilized basically for cash flow management, but
566
00:34:09.239 --> 00:34:12.320
it has a very distinctive impact on reported performance and
567
00:34:12.360 --> 00:34:17.119
specifically the ir the internal rate of return. So if
568
00:34:17.639 --> 00:34:20.199
it's effectively like a credit card, if a general partner
569
00:34:20.239 --> 00:34:23.280
is utilizing one of these subscription lines, they have the
570
00:34:23.320 --> 00:34:27.039
ability to make the investment without calling any capital from
571
00:34:27.079 --> 00:34:30.280
their LPs, and of course that has a distinct impact
572
00:34:30.559 --> 00:34:34.280
on the time component of the IRR calculation, and so
573
00:34:34.320 --> 00:34:36.480
they are ability to make their ability to make the
574
00:34:36.519 --> 00:34:40.360
investment and then return capital to the investors sometimes without
575
00:34:40.360 --> 00:34:45.280
even calling capital can create an astronomically high IRR.
576
00:34:45.920 --> 00:34:48.079
So that was addressed within the marketing role.
577
00:34:48.159 --> 00:34:50.920
It was a component of the PFA role as well,
578
00:34:51.880 --> 00:34:55.400
but we have always innovation in the marketplace and in
579
00:34:55.480 --> 00:35:00.599
a time of challenge fundraising, in part because distribute cash
580
00:35:00.639 --> 00:35:03.360
back to lp to slowed down quite a lot. Other
581
00:35:03.440 --> 00:35:06.960
tools have emerged, such as NOV based facilities, which is
582
00:35:07.199 --> 00:35:11.440
another form of leverage the gps are beginning to employ
583
00:35:11.599 --> 00:35:15.039
that allows them to give cash back sometimes early distributions
584
00:35:15.039 --> 00:35:18.639
to LPs secured by underlying assets in the portfolio or
585
00:35:18.760 --> 00:35:23.719
multiple portfolios. And the question is whether the marketing rule,
586
00:35:23.719 --> 00:35:28.079
which still stands, will also extend to something like application
587
00:35:28.199 --> 00:35:31.360
or impact of now based facilities in with and without
588
00:35:31.840 --> 00:35:35.599
impact of leverage requirement. So, as a standard setter in
589
00:35:35.639 --> 00:35:38.400
the industry, as a group that's now working on our
590
00:35:38.440 --> 00:35:41.760
own performance templates, which we can talk more about, we
591
00:35:41.920 --> 00:35:44.199
have to read between the lines. We don't have a
592
00:35:44.199 --> 00:35:48.400
clear signal from the SEC aside from some statements made
593
00:35:48.480 --> 00:35:49.960
or signals provided.
594
00:35:50.239 --> 00:35:53.480
And so in this environment that David.
595
00:35:53.199 --> 00:35:57.159
Has described and Rests alluded to, there is uncertainty as
596
00:35:57.159 --> 00:35:59.480
to which of the existing rules will stand and how
597
00:35:59.519 --> 00:36:02.039
they should be interpreted in light of the fact that
598
00:36:02.360 --> 00:36:06.280
the PFA rule was vacated by the Fifth Circuit. So
599
00:36:07.159 --> 00:36:10.079
I think it puts the industry in a challenging place
600
00:36:10.239 --> 00:36:16.239
for a fairly important body of information for LPs who
601
00:36:16.239 --> 00:36:19.599
are making decisions as to whether or not to invest
602
00:36:19.639 --> 00:36:20.079
in a GP.
603
00:36:21.159 --> 00:36:23.400
Yeah, and maybe just to follow up on that, Jen,
604
00:36:23.800 --> 00:36:25.519
you know, I don't know about if this has been
605
00:36:25.519 --> 00:36:28.119
ilpa's experience, but at least at sifma AMG we found
606
00:36:28.159 --> 00:36:31.480
this SEC far more reticent to provide the guidance that
607
00:36:31.519 --> 00:36:35.119
you're talking about once rulemakings go live. And also we've
608
00:36:35.159 --> 00:36:39.480
been more careful about when we approach the Commission asking
609
00:36:39.480 --> 00:36:43.119
them for guidance when we're not necessarily sure you know
610
00:36:43.199 --> 00:36:45.440
that they will work with us on what that looks like,
611
00:36:45.800 --> 00:36:48.400
or what would be included, or what the answers to
612
00:36:48.440 --> 00:36:52.440
the questions we have would be has ilput gone back
613
00:36:52.480 --> 00:36:55.760
to the Commission asking for guidance? Here, where does your
614
00:36:55.920 --> 00:36:57.599
actual advocacy stand at this point?
615
00:36:59.199 --> 00:37:01.840
Without getting into a lot of detail, you know, of
616
00:37:01.880 --> 00:37:05.239
course we respect that while the litigation was pending, there
617
00:37:05.280 --> 00:37:08.159
was very little that they could say to guide us
618
00:37:08.159 --> 00:37:11.239
on some of these pending matters. And so now that
619
00:37:11.360 --> 00:37:15.119
the PFA rule has been vacated, you know, if the
620
00:37:15.440 --> 00:37:18.079
pivot is to how should we interpret existing rules in
621
00:37:18.119 --> 00:37:21.519
the private funds context? You know, we are making requests
622
00:37:21.519 --> 00:37:27.239
for more detail, not necessarily seeing statements on the record
623
00:37:27.760 --> 00:37:30.599
that we could point to as we finalize our own
624
00:37:30.639 --> 00:37:34.039
guidance to the industry. So hopeful that that will come,
625
00:37:34.320 --> 00:37:36.320
but that's the current state of things.
626
00:37:38.039 --> 00:37:40.360
That's great, And David, I saw you talking you well, we're.
627
00:37:40.239 --> 00:37:44.039
Just kind of emphasize something you said, Lindsay about like
628
00:37:44.119 --> 00:37:46.159
be careful with you ask for in terms of guidance,
629
00:37:46.239 --> 00:37:49.440
because the limited FAQs that did come out on the
630
00:37:49.480 --> 00:37:53.159
marketing rule, almost every one of those had the worst
631
00:37:53.159 --> 00:37:56.800
possible answer, like kind of non intuitive answer to them.
632
00:37:56.880 --> 00:37:59.039
So you kind of do have to be careful of
633
00:37:59.079 --> 00:38:01.840
what you put at play with an FAQ request.
634
00:38:03.440 --> 00:38:04.280
I couldn't agree with that.
635
00:38:04.400 --> 00:38:07.000
More better said from outside council, but I couldn't agree
636
00:38:07.039 --> 00:38:10.679
with that, all right, Russ, turning back to you here,
637
00:38:11.360 --> 00:38:13.679
I would love your thoughts on how you think the
638
00:38:13.679 --> 00:38:16.519
PFA rule making fits within the broader context of the
639
00:38:16.559 --> 00:38:19.719
rule making agenda and how your organization is looking at it.
640
00:38:20.840 --> 00:38:23.599
In particular, do you see the SEC reacting to this
641
00:38:23.960 --> 00:38:28.000
series of litigation losses? Are you sort of approaching your
642
00:38:28.039 --> 00:38:33.599
advocacy here differently based on this win with the courts?
643
00:38:33.760 --> 00:38:33.960
You know?
644
00:38:34.000 --> 00:38:35.239
Where does that sort of stand for you?
645
00:38:35.280 --> 00:38:37.119
All? Yeah?
646
00:38:36.480 --> 00:38:42.039
And David covered a lot of the sort of collateral
647
00:38:42.840 --> 00:38:47.480
rules that this may impact. I understand that Fifth Circuit
648
00:38:47.519 --> 00:38:52.159
also struck down the SEC's stock buyback rule.
649
00:38:52.000 --> 00:38:54.360
A few months ago.
650
00:38:55.559 --> 00:39:00.679
That's not one that effects advisors, but and there's also
651
00:39:01.440 --> 00:39:05.360
right now pending litigation. It's all been consolidated in the
652
00:39:05.360 --> 00:39:10.239
Eighth Circuit challenging the SEC's climate disclosure rules, And I
653
00:39:10.280 --> 00:39:13.800
think that's another example where I think the SEC is
654
00:39:13.920 --> 00:39:18.199
very vulnerable to the charge that this goes well beyond
655
00:39:18.800 --> 00:39:24.400
their statutory power and their statutory mandate. So and just
656
00:39:24.800 --> 00:39:29.039
for an even broader context, the SEC has not been
657
00:39:29.039 --> 00:39:32.320
doing well, at least with the Supreme Court in the
658
00:39:32.360 --> 00:39:37.400
past decade. When I was a younger lawyer, you know,
659
00:39:37.760 --> 00:39:40.320
back in the eighties and nineties, it seemed like the
660
00:39:40.360 --> 00:39:45.920
SEC was just almost bulletproof at least at the higher courts,
661
00:39:47.639 --> 00:39:51.400
especially in the enforcement context. You never really saw the
662
00:39:51.440 --> 00:39:54.960
Supreme Courty of taking on enforcement cases. But in the
663
00:39:55.000 --> 00:39:58.360
past decade they've taken on at least a half a dozen,
664
00:39:59.039 --> 00:40:01.599
and I think with one exception, the SEC has lost,
665
00:40:02.199 --> 00:40:03.519
sometimes unanimously.
666
00:40:04.199 --> 00:40:06.800
So I think I'd like to believe at least that
667
00:40:08.519 --> 00:40:09.440
when you get.
668
00:40:10.760 --> 00:40:13.199
You know, when you get these losses one after the
669
00:40:13.239 --> 00:40:18.360
other by the top courts in the country, that deters
670
00:40:18.400 --> 00:40:21.960
you a little bit from overreaching. I'm not seeing evidence
671
00:40:21.960 --> 00:40:26.719
of that yet, but you know, our organization is very
672
00:40:27.920 --> 00:40:34.840
optimistic based on not just the the Chevron deference, case
673
00:40:34.880 --> 00:40:40.599
that David mentioned, but the case where they basically the
674
00:40:40.639 --> 00:40:46.599
court said the SEC's administrative adjudication system needs to be
675
00:40:47.280 --> 00:40:52.239
essentially stopped for most fraud cases and cases seeing penalties.
676
00:40:52.440 --> 00:40:54.880
So it's a much broader context where I think.
677
00:40:56.119 --> 00:40:58.360
The SEC is just not doing well in court and
678
00:40:58.639 --> 00:41:01.920
at a certain point you like to believe that there'd
679
00:41:01.920 --> 00:41:05.960
be some intersection and maybe some uh you know, some
680
00:41:07.000 --> 00:41:11.239
pulling back of things that are objectively overreaching.
681
00:41:13.599 --> 00:41:16.280
I mean, Russ, it feels like we have like almost
682
00:41:16.280 --> 00:41:18.559
say yu U effect at the SEC. You've got like
683
00:41:18.719 --> 00:41:21.039
eras where you go through where you know things are
684
00:41:21.079 --> 00:41:26.679
like really uhuh solidly built, you're addressing market impacts. Think
685
00:41:26.679 --> 00:41:29.360
about it like the years immediately after dot Frank was
686
00:41:29.360 --> 00:41:34.400
passed where the SEC had ninety something rule making mandates
687
00:41:34.760 --> 00:41:39.039
by Congress that it did a very good job in
688
00:41:39.079 --> 00:41:42.800
my opinion, implementing. And then you go through periods where
689
00:41:42.800 --> 00:41:45.800
you have leadership come in and feel that the SEC
690
00:41:45.840 --> 00:41:48.400
has been two lacks and they go with a big agenda.
691
00:41:49.000 --> 00:41:50.960
That's the era like what I was talking about the
692
00:41:50.960 --> 00:41:53.519
Investment Company Act before in the gold Steam decision with
693
00:41:53.599 --> 00:41:58.800
Hitchman Managers, there was no mandate by Congress to do
694
00:41:58.840 --> 00:42:01.360
any of that. In fact, a lot in a very
695
00:42:01.400 --> 00:42:04.119
clear lack of a mandate here. You've got the same
696
00:42:04.199 --> 00:42:07.559
thing with the private fund advisor rule, in my opinion,
697
00:42:07.559 --> 00:42:10.000
the dealer role. If there's no congressional mandate for the
698
00:42:10.000 --> 00:42:13.519
private fund advisor rule under the Advisors Act, there definitely
699
00:42:13.519 --> 00:42:17.199
is not a mandate under the dealer regime for bringing
700
00:42:17.239 --> 00:42:22.480
private funds into dealer registration. And you just have this environment.
701
00:42:22.519 --> 00:42:25.079
And I agree with you ar Res like the I
702
00:42:25.119 --> 00:42:29.119
think unfortunately the reputation of the SEC has suffered. When
703
00:42:29.119 --> 00:42:32.760
you have these kind of challenges, you become more vulnerable
704
00:42:32.800 --> 00:42:36.000
when you are being aggressive. The courts look for it
705
00:42:36.079 --> 00:42:40.440
and expect it and don't like it. So I feel
706
00:42:40.480 --> 00:42:46.440
like the challenges to the rules need to happen. The
707
00:42:46.440 --> 00:42:48.800
private fund advisor ule had to be challenged because the
708
00:42:48.840 --> 00:42:52.679
SEC was asserting such broad authority. It was basically blank
709
00:42:52.800 --> 00:42:55.800
check authority for future rule making. It had to be challenged,
710
00:42:56.239 --> 00:42:58.400
even if a lot of it could have been a
711
00:42:58.480 --> 00:43:01.599
managed livable. But when you have this kind of an era,
712
00:43:02.039 --> 00:43:06.159
the reputation of the SEC unfortunately suffers and makes it harder.
713
00:43:05.920 --> 00:43:08.000
To do things that it might need to do later on.
714
00:43:08.360 --> 00:43:11.559
Yeah, I'm glad you made that point, because I think
715
00:43:11.559 --> 00:43:14.199
it really does affect the reputation of the agency.
716
00:43:14.199 --> 00:43:17.519
And I think, you know, I agree with you.
717
00:43:17.920 --> 00:43:21.199
We go through ears here where at times the SEC
718
00:43:21.239 --> 00:43:25.960
seems had, you know, among the highest credibility in government,
719
00:43:26.480 --> 00:43:29.199
and I think they've squandered some of that over the
720
00:43:29.239 --> 00:43:34.880
past decade by a series of significant court defeats that
721
00:43:36.119 --> 00:43:40.599
expose sort of overreach and I think of, as you say,
722
00:43:41.000 --> 00:43:43.320
damage the agency's overall credibility.
723
00:43:44.480 --> 00:43:47.440
Maybe maybe just And we've talked about this, We've hit
724
00:43:47.480 --> 00:43:48.880
it in a couple different times, but I'd love to
725
00:43:48.920 --> 00:43:50.400
drill down for this grip a bit more.
726
00:43:50.880 --> 00:43:51.119
David.
727
00:43:51.239 --> 00:43:54.079
Could you just find another minute on the fact that,
728
00:43:54.559 --> 00:43:58.239
as Russ pointed out, there were several different authorities that
729
00:43:58.360 --> 00:44:01.880
were cited in the PFEST rule, but the anti fraud
730
00:44:02.679 --> 00:44:05.960
piece in particular, I think is super important because it's
731
00:44:06.000 --> 00:44:08.119
also the basis for some of the other rulemakings that
732
00:44:08.159 --> 00:44:12.960
you mentioned, where it's not only right that DIRA and
733
00:44:13.039 --> 00:44:15.719
others need to be further involved in the rule making process.
734
00:44:15.760 --> 00:44:18.159
Make sure they're shoring up their cost benefit analysis, make
735
00:44:18.199 --> 00:44:18.960
sure that they're on.
736
00:44:20.599 --> 00:44:21.480
Solid ground.
737
00:44:22.079 --> 00:44:24.960
Russ said that it's unlikely that this will be that
738
00:44:25.000 --> 00:44:29.239
they will appeal this this decision. The one piece why
739
00:44:29.280 --> 00:44:32.440
we were focused on the appeal so closely was exactly
740
00:44:32.480 --> 00:44:34.199
this piece that we're sort of talking about here in
741
00:44:34.280 --> 00:44:37.760
terms of the authority and the blank check nature of
742
00:44:37.800 --> 00:44:39.679
the anti fraud authority in terms of what they were
743
00:44:39.679 --> 00:44:40.360
doing in the past.
744
00:44:40.440 --> 00:44:42.400
So maybe spend another minute or so on that. I
745
00:44:42.440 --> 00:44:44.079
think that'd be helpful for this audience.
746
00:44:44.400 --> 00:44:46.559
Yeah, so let me let me dispose of the blank
747
00:44:46.639 --> 00:44:49.840
check authority really quickly. Russ did a great job explaining it,
748
00:44:49.880 --> 00:44:52.480
and basically, if you read the words, would allow the
749
00:44:52.559 --> 00:44:56.400
SEC to adopt the rules addressing compensation, conflicts of interest
750
00:44:56.599 --> 00:45:00.760
business practices of a private fund advisor, if you accepted
751
00:45:00.800 --> 00:45:04.800
the SEC's interpretation of the statute, clearly was written in
752
00:45:04.840 --> 00:45:09.280
the context of retail matters, so dealings with retail investors,
753
00:45:09.760 --> 00:45:12.159
and it was under the label other matters and the
754
00:45:12.199 --> 00:45:17.840
statute that's the authority that basically forced the industry to
755
00:45:17.920 --> 00:45:21.280
challenge the rule because if the SEC was allowed to
756
00:45:21.400 --> 00:45:24.239
adopt this rule package under that authority.
757
00:45:24.159 --> 00:45:28.119
They have blank check authority. Later on you're pointing out
758
00:45:28.119 --> 00:45:29.000
a different authority.
759
00:45:29.079 --> 00:45:31.079
So the SEC said, all right, if you don't think
760
00:45:31.679 --> 00:45:34.960
the Fifth Circuit don't think we have the blank check authority.
761
00:45:35.480 --> 00:45:39.239
We have other authority under the Advisors Act that we've
762
00:45:39.239 --> 00:45:42.320
relied on for decades to adopt rules. That's a section
763
00:45:42.480 --> 00:45:44.920
two of sixty four of the Advisors Act, which is
764
00:45:45.000 --> 00:45:48.199
anti fraud authority. The SEC has adopted a lot of
765
00:45:48.280 --> 00:45:52.239
rules under that authority. The Marketing Rule is the most
766
00:45:52.760 --> 00:45:55.800
recent one, but some big rules. The Compliance Program Rule
767
00:45:56.599 --> 00:46:02.400
Form ADV is the disclosure rule that Jim referred to earlier,
768
00:46:02.559 --> 00:46:06.280
was adopted in part under that authority. A large part
769
00:46:06.320 --> 00:46:08.559
of the SEC's regime Paid a Play Role is another
770
00:46:08.559 --> 00:46:11.480
example that was adopted under that authority. A large part
771
00:46:11.519 --> 00:46:15.079
of the SEC's regime for investment advisors was adopted under
772
00:46:15.079 --> 00:46:15.800
that authority.
773
00:46:16.519 --> 00:46:19.079
The Fifth Circuit rejected the.
774
00:46:18.960 --> 00:46:22.239
SEC's argument that it could rely on that authority for
775
00:46:22.280 --> 00:46:25.440
the Private Fund Advisor rule, and in a major lesson
776
00:46:25.519 --> 00:46:30.199
to an agency that's being very aggressive, they actually lost
777
00:46:30.400 --> 00:46:35.840
turf like. The Fifth Circuit interpreted that authority more narrowly
778
00:46:35.920 --> 00:46:38.840
than the SEC ever had in the past and may
779
00:46:38.840 --> 00:46:41.559
make it difficult for the SEC to adopt.
780
00:46:41.280 --> 00:46:45.559
Future rules under that authority. Specifically, the Fifth Circuit said,
781
00:46:45.599 --> 00:46:51.559
you can't adopt rules for disclosure in reporting under the
782
00:46:51.599 --> 00:46:55.159
Anti fraud authority under Section two A sixty four, which
783
00:46:55.400 --> 00:46:58.920
the SEC has gone they have disclosure reporting roles adopted
784
00:46:58.960 --> 00:46:59.880
Intersection to A six.
785
00:47:00.760 --> 00:47:04.719
Now, Jen was alluding to the marketing rule which was
786
00:47:04.760 --> 00:47:07.920
adopted under that authority. I don't know of anybody who's
787
00:47:07.920 --> 00:47:10.440
going to say I'm not going to follow the marketing role.
788
00:47:11.000 --> 00:47:14.199
That's a very brave investment advisor to say, I'm going
789
00:47:14.199 --> 00:47:19.719
to assume that that rule is invalid. But in the future,
790
00:47:20.559 --> 00:47:23.480
it'll be difficult for the SEC to adopt rules under
791
00:47:23.480 --> 00:47:26.880
that authority at their disclosure and reporting rules because of
792
00:47:26.880 --> 00:47:29.599
what the Fifth Circuit said. They'll have a very clear
793
00:47:29.800 --> 00:47:32.199
liability risk if they move forward with that kind of
794
00:47:32.239 --> 00:47:34.960
a rule under that authority. And if the marketing role
795
00:47:35.480 --> 00:47:39.679
revisions hadn't been adopted before the Fifth Circuit's decision, they'd
796
00:47:39.719 --> 00:47:41.079
have to grapple with the.
797
00:47:41.079 --> 00:47:42.159
Fifth Circuit's decision.
798
00:47:42.199 --> 00:47:46.639
And it's a challenge, And it's another example an agency
799
00:47:46.679 --> 00:47:51.159
that's being too aggressive can not only lose the aggressive
800
00:47:51.199 --> 00:47:54.599
authority that they're citing, but they could lose traditional authority
801
00:47:54.639 --> 00:47:57.239
that they thought they had all along and make their
802
00:47:57.519 --> 00:47:59.039
rule making orgame more challenging.
803
00:48:01.320 --> 00:48:03.599
Ye know, that's super helpful, and thanks for the clarification
804
00:48:03.679 --> 00:48:05.440
on the what we've called a blank check in our
805
00:48:05.519 --> 00:48:06.920
organization for quite some time.
806
00:48:07.320 --> 00:48:09.079
You're right, it is losing ground for them.
807
00:48:10.079 --> 00:48:12.519
We have a question that came through the chat for
808
00:48:13.519 --> 00:48:17.159
either me, David, or Jennifer, maybe all of us, given
809
00:48:17.280 --> 00:48:20.559
our leadership and experience at trade associations, it seems like
810
00:48:20.639 --> 00:48:22.920
members have had to rely on their trades to challenge
811
00:48:22.920 --> 00:48:26.000
these rules in court, which for years trades were reluctant
812
00:48:26.039 --> 00:48:28.840
to do. Has that impacted your ability to work or
813
00:48:28.880 --> 00:48:31.440
advocate with the Commission or its staff? Do you think
814
00:48:31.480 --> 00:48:34.000
the SEC will be more willing to listen to market
815
00:48:34.000 --> 00:48:39.719
participants to potentially stave off litigation. So who wants to
816
00:48:39.760 --> 00:48:41.480
start on that gen? Do you want to kick us off?
817
00:48:43.880 --> 00:48:47.639
I'm maybe not the most appropriate given you know we
818
00:48:47.719 --> 00:48:52.519
submitted it start submitted an ascrief in support of the
819
00:48:52.599 --> 00:48:55.760
SEC in this particular instance. But I would just comment
820
00:48:55.840 --> 00:49:00.559
more broadly that to the extent that we see more
821
00:49:00.639 --> 00:49:04.679
rule making in future end up in litigation, I see
822
00:49:04.760 --> 00:49:09.800
one of the detrimental impacts to that of creating more
823
00:49:09.960 --> 00:49:14.159
uncertainty LPs. My members hate uncertainty. David knows as well.
824
00:49:14.199 --> 00:49:17.559
They hate regulatory uncertainty because with private funds they're making ten,
825
00:49:17.679 --> 00:49:20.519
in some cases fifteen year bets, and so when they
826
00:49:20.519 --> 00:49:23.199
make that commitment to a fund, it's very hard to
827
00:49:23.239 --> 00:49:25.760
extricate yourself without taking a haircut.
828
00:49:27.239 --> 00:49:28.280
Or at least the.
829
00:49:28.079 --> 00:49:30.679
Likelihood of a haircut on trying to sell your interests.
830
00:49:30.800 --> 00:49:33.159
So you want to know going in that the regime
831
00:49:33.239 --> 00:49:36.440
that surrounds the investment that you're making will more or
832
00:49:36.559 --> 00:49:39.320
less be in place over the life of your investment
833
00:49:39.400 --> 00:49:42.800
in that fund. So anything that's creating uncertainty when the
834
00:49:42.880 --> 00:49:46.079
rules were pending, when the litigation was pending, we saw
835
00:49:47.320 --> 00:49:49.599
a real impact on how do we think of that
836
00:49:49.800 --> 00:49:54.039
negotiating the contracts that are live right now? How does
837
00:49:54.039 --> 00:49:57.000
this impact live negotiations while we're waiting for a court
838
00:49:57.039 --> 00:49:59.840
to make a decision on what the GPS must do
839
00:50:00.239 --> 00:50:03.039
in what the SEC will require versus what we have
840
00:50:03.119 --> 00:50:05.880
to try to negotiate for the contract. So that I
841
00:50:05.920 --> 00:50:09.800
think that that is one dutrimental impact of every single
842
00:50:09.880 --> 00:50:13.880
rulemaking from the SEC from this point hence is caught
843
00:50:13.960 --> 00:50:17.480
up in the courts because the industry needs clear signals,
844
00:50:18.079 --> 00:50:20.719
you know, particularly when there's not a mandate or a
845
00:50:20.760 --> 00:50:25.000
standing issue in doubt, where there's clearly a market need
846
00:50:25.039 --> 00:50:28.280
and the SEC has been mandated to address it. We
847
00:50:28.320 --> 00:50:33.000
don't want the time from proposal final rule to implementation
848
00:50:33.360 --> 00:50:37.000
to be delayed by an additional twelve months every time.
849
00:50:37.079 --> 00:50:40.280
That would just be challenging operationally. Yeah, I'll just add
850
00:50:40.280 --> 00:50:41.599
from Sigma's perspective.
851
00:50:42.079 --> 00:50:44.559
You know, we obviously we're very careful about when we
852
00:50:44.599 --> 00:50:46.719
decide to see the agency, but it's often more for
853
00:50:46.760 --> 00:50:49.719
the reasons that Gen is articulating about.
854
00:50:50.239 --> 00:50:51.920
You know, people in the market.
855
00:50:52.079 --> 00:50:55.519
Our members need to work toward implementation when a rule
856
00:50:55.519 --> 00:50:57.679
making goes final, and if it's caught up in litigation,
857
00:50:57.760 --> 00:51:00.760
if we don't get a stay in particular, still working
858
00:51:00.840 --> 00:51:04.599
toward the implementation deadlines and spending the money and the
859
00:51:04.599 --> 00:51:07.280
cost and the build out to do so with the
860
00:51:07.400 --> 00:51:11.440
uncertainty still being sort of out there with the rulemaking.
861
00:51:11.519 --> 00:51:15.119
So often they are making the calculation when we talk
862
00:51:15.199 --> 00:51:17.800
to our members about whether or not litigation would be appropriate,
863
00:51:18.000 --> 00:51:20.199
they're making the calculation that by the time they were
864
00:51:20.239 --> 00:51:22.679
to figure it out, they'd probably have made the spend anyway.
865
00:51:22.719 --> 00:51:25.960
And so maybe it just makes sense to ask for guidance,
866
00:51:26.079 --> 00:51:29.239
make changes around the edges where it's impossible to implement,
867
00:51:29.559 --> 00:51:32.639
and let the rulemaking stand unless it's so egregious or
868
00:51:32.679 --> 00:51:35.039
there's issues with the authority that could affect us down
869
00:51:35.079 --> 00:51:37.119
the line, or whatever the case may be. Now that
870
00:51:37.199 --> 00:51:40.000
being said, I do think that all of the trades
871
00:51:40.119 --> 00:51:45.280
SIFMA included, have seen this as a more active tool
872
00:51:45.320 --> 00:51:47.320
in our tool belt than maybe we did in the past.
873
00:51:47.519 --> 00:51:49.639
And you know, in terms of how it affects our
874
00:51:49.679 --> 00:51:53.599
engagement with the SEC or other agencies. I think the
875
00:51:53.639 --> 00:51:57.280
agencies recognize, and David having been at the SEC, maybe
876
00:51:57.280 --> 00:51:59.119
he could speak to this piece as well. I think
877
00:51:59.159 --> 00:52:01.360
they recognize is that that is one of the rules
878
00:52:01.360 --> 00:52:04.360
of a trade association that there is a clear role
879
00:52:04.559 --> 00:52:08.639
for trades to allow the industry to aggregate. Have it
880
00:52:08.719 --> 00:52:10.760
not be where an individual firm has to take on
881
00:52:10.800 --> 00:52:14.400
the agency themselves. We've obviously we've been in litigation with
882
00:52:14.440 --> 00:52:17.880
Sharegensler when he was at the CFTC now at the SEC,
883
00:52:18.719 --> 00:52:21.880
so there's obviously history there. We joke about it with him.
884
00:52:21.880 --> 00:52:23.639
I think he sort of understands some of that. But
885
00:52:23.719 --> 00:52:26.400
I do think that the SEC, to the point we've
886
00:52:26.400 --> 00:52:29.280
made sort of all along in the last hour, the
887
00:52:29.320 --> 00:52:32.159
SEC has been sort of looking a bit more deliberately
888
00:52:32.199 --> 00:52:34.400
at the rule makings, and we continue at least to
889
00:52:34.400 --> 00:52:36.599
make the point to them that if they came to
890
00:52:36.679 --> 00:52:39.519
us earlier on in the process before proposing rule makings
891
00:52:39.920 --> 00:52:42.960
and sort of talk through with us their end policy goals,
892
00:52:43.519 --> 00:52:46.360
we would always come to the table to help them
893
00:52:46.519 --> 00:52:50.400
figure out if they're sort of understanding the markets correctly
894
00:52:50.719 --> 00:52:52.880
and assuming that they are, how to get to their
895
00:52:52.920 --> 00:52:56.039
policy goals in a way that doesn't sort of have
896
00:52:56.159 --> 00:52:58.960
collateral damage attached to, which is a lot of what
897
00:52:59.000 --> 00:52:59.920
we're talking about.
898
00:52:59.719 --> 00:53:01.239
In some of these rule makings as well.
899
00:53:01.760 --> 00:53:04.039
I don't know, David, if you've got anything to add there,
900
00:53:04.719 --> 00:53:05.840
I completely agree.
901
00:53:06.119 --> 00:53:09.119
I do want to, like, just from an SEC perspective,
902
00:53:09.119 --> 00:53:12.119
to say, like the US, like I love America, the
903
00:53:12.239 --> 00:53:16.559
US has benefited tremendously from the regulatory environment that the
904
00:53:16.599 --> 00:53:19.559
SEC administers, like it's the capital markets of the crown
905
00:53:19.639 --> 00:53:22.440
jewel of our economy, and a lot of that is
906
00:53:22.480 --> 00:53:25.880
because of the regulatory environment, the certainty to Gen's point
907
00:53:25.920 --> 00:53:28.880
that you feel and investing in the US the cop
908
00:53:28.920 --> 00:53:31.440
on the beat aspect of what the SEC does, so
909
00:53:31.519 --> 00:53:36.280
it's very important to have a robust, highly competent regulator
910
00:53:36.320 --> 00:53:39.159
in the space. And that's the challenge with these rule
911
00:53:39.159 --> 00:53:44.480
makings that forced litigation effectively and have diminished the SEC
912
00:53:44.599 --> 00:53:48.000
standing a bit with the courts and in public perception.
913
00:53:49.760 --> 00:53:53.559
The SEC itself will never stop talking to an agency
914
00:53:53.599 --> 00:53:56.840
because its sues. It may stop during the litigation, but
915
00:53:56.920 --> 00:53:59.599
it's not going to stop talking to a trade association
916
00:53:59.719 --> 00:54:02.599
because it litigates for the reasons Lindsay lays out, it
917
00:54:02.639 --> 00:54:06.840
is an aggregation of number voices and they need to
918
00:54:06.920 --> 00:54:09.800
understand and they've should have done a better job of
919
00:54:09.840 --> 00:54:13.800
outreach in my opinion, on the rulemaking agenda over the
920
00:54:13.880 --> 00:54:16.880
last couple of years, and understanding where those red lines
921
00:54:16.880 --> 00:54:19.199
a lock, like what is the concern that's going to
922
00:54:19.280 --> 00:54:22.079
lead to litigation? Is there a way to manage a
923
00:54:22.199 --> 00:54:27.119
rule set that's needed around those concerns. And that's the
924
00:54:27.199 --> 00:54:30.840
back and forth you have with commenters and trade associations
925
00:54:31.360 --> 00:54:34.159
to understand what's the market problem that the rule is
926
00:54:34.199 --> 00:54:36.679
trying to address and what's going to be the reaction
927
00:54:37.280 --> 00:54:41.920
of industry participants, in particular trade associations if we adopt
928
00:54:41.920 --> 00:54:43.880
a role and you try to find a good fit
929
00:54:44.000 --> 00:54:47.239
for addressing the problem, but not going so far as
930
00:54:47.320 --> 00:54:48.800
too as the trigger litigation.
931
00:54:49.239 --> 00:54:50.079
That'll continue.
932
00:54:50.360 --> 00:54:52.599
Hopefully they'll do a better job of it in the future,
933
00:54:52.639 --> 00:54:55.559
but if they don't, it won't be because someone suit,
934
00:54:56.239 --> 00:54:58.440
it'll be for other reasons, just a rush to get
935
00:54:58.440 --> 00:55:00.880
things out the door, Which is how I interpret the
936
00:55:01.159 --> 00:55:03.599
rulemaking package over the past couple of years.
937
00:55:04.960 --> 00:55:07.440
Okay, maybe pivoting a bit in our last couple of minutes.
938
00:55:07.519 --> 00:55:09.800
Assuming the SEC is just.
939
00:55:09.800 --> 00:55:13.760
Going to go back to, you know, their offices in
940
00:55:13.960 --> 00:55:17.159
Washington and lick their wounds here, where do they go
941
00:55:17.199 --> 00:55:19.079
from here? Do they go back to the drawing board?
942
00:55:19.159 --> 00:55:23.000
Will there be another rulemaking down the line? Will there
943
00:55:23.039 --> 00:55:27.599
be more enforcement actions? How do you sort of handicap that, David.
944
00:55:29.440 --> 00:55:32.559
Well of you? Maybe I'll turn.
945
00:55:32.400 --> 00:55:36.400
Out I had the question box off front of your
946
00:55:36.840 --> 00:55:37.320
side there.
947
00:55:37.360 --> 00:55:42.199
Yeah, it's going to affect the enforcement environment much. I mean,
948
00:55:43.440 --> 00:55:47.039
most of the cases they brought against private fund managers
949
00:55:47.079 --> 00:55:51.280
I think have involved sort of traditional allegations of fraud
950
00:55:51.320 --> 00:55:52.639
and things like that.
951
00:55:52.719 --> 00:55:54.440
I don't think the.
952
00:55:54.360 --> 00:55:58.000
New rules were you know, I don't think enforcement was
953
00:55:58.079 --> 00:56:02.320
chopping at the bit to enforce the new rules. I mean,
954
00:56:02.320 --> 00:56:06.119
they would have been violations, but I think they primarily
955
00:56:06.159 --> 00:56:09.760
focused on fraud cases, so in that respect, I don't
956
00:56:09.920 --> 00:56:14.039
I don't expect it to have much impact on enforcement and.
957
00:56:14.079 --> 00:56:17.800
All that day would talk to the regulatory side, well.
958
00:56:17.800 --> 00:56:20.559
I agree with Russ, I wouldn't expect. I mean, enforcement
959
00:56:20.639 --> 00:56:22.880
is not slowing down, and they're they're they're doing plenty
960
00:56:22.880 --> 00:56:25.599
fast already, so it's hard to imagine them going any
961
00:56:25.639 --> 00:56:27.840
faster after this, and the exam programs the same.
962
00:56:28.840 --> 00:56:29.519
I don't think that.
963
00:56:29.480 --> 00:56:34.039
They really would their role will really change as a
964
00:56:34.039 --> 00:56:36.199
result of this decision, other than just not having another
965
00:56:36.239 --> 00:56:41.119
set of rules to examine compliance for. On the rulemaking side,
966
00:56:41.119 --> 00:56:43.559
I mean, like, I don't know what's happening within the SEC,
967
00:56:44.079 --> 00:56:48.239
but I was around when one of the decisions out
968
00:56:48.239 --> 00:56:51.840
of the DC Certing Court of Appeals overturned one of
969
00:56:51.840 --> 00:56:55.199
the investment company actuals that I mentioned earlier. And this
970
00:56:55.320 --> 00:56:57.880
is not inside baseball at all, it's all public. One
971
00:56:57.880 --> 00:57:00.199
of the one of the grounds for overturning that rule
972
00:57:00.360 --> 00:57:04.840
was a lack of adequate economic analysis. The SEC is
973
00:57:04.880 --> 00:57:07.599
one of the few agencies that, by statute, is required
974
00:57:08.079 --> 00:57:11.960
to conduct economic analyzes for its rules, which is great
975
00:57:12.000 --> 00:57:14.480
I think because it forces you really to think through
976
00:57:14.519 --> 00:57:15.840
the consequences the rules.
977
00:57:16.519 --> 00:57:20.199
And when the court struck down that rule on an
978
00:57:20.199 --> 00:57:24.840
adequate e phonomic analysis grounds, we read the course's decision,
979
00:57:24.920 --> 00:57:28.079
we're like, how we ever complied with the standard that
980
00:57:28.119 --> 00:57:30.639
the Court is set. But the SEC.
981
00:57:30.719 --> 00:57:34.880
Prepared and published guidelines for how it does economic analyzes.
982
00:57:35.000 --> 00:57:38.599
It enhanced its practices. I'm not saying they're perfect today
983
00:57:38.639 --> 00:57:41.320
by any stretch, but they're much better today than they
984
00:57:41.360 --> 00:57:44.360
were ten years ago or fifteen years ago. And that's
985
00:57:44.400 --> 00:57:48.039
how fifteen years ago, twenty years ago, that's how it reacted,
986
00:57:48.079 --> 00:57:50.480
and I would expect it to do something similar here,
987
00:57:51.679 --> 00:57:55.000
maybe draw in more the voice of litigators into their
988
00:57:55.079 --> 00:58:00.679
rulemaking packages to be sure they understand the litigate risk.
989
00:58:00.599 --> 00:58:01.880
Profile around a rule.
990
00:58:03.239 --> 00:58:05.519
That maybe one reaction they have similar to how they
991
00:58:05.599 --> 00:58:08.840
drew in do you ra the division of economic risk
992
00:58:08.880 --> 00:58:12.559
analysis for economic analysis grounds? I wouldn't be surprised if
993
00:58:12.599 --> 00:58:15.960
they react that way for future rulemakings. I can't imagine
994
00:58:16.000 --> 00:58:19.400
a situation, though, lindsay to your question that they try
995
00:58:19.440 --> 00:58:22.159
to adopt this set of rules again, like that would
996
00:58:22.199 --> 00:58:24.519
be kind of shocking to me if they come back
997
00:58:24.519 --> 00:58:27.800
to this set of rules without a congressional mandate, at.
998
00:58:27.800 --> 00:58:32.519
Least not soon, Jen, assuming that they don't, what do
999
00:58:32.559 --> 00:58:34.679
you think the LP's reaction is going to be, and
1000
00:58:34.719 --> 00:58:36.760
what is what is happening in the marketplace right now?
1001
00:58:36.760 --> 00:58:41.280
It's a great place for us to wrap up. Oh
1002
00:58:41.480 --> 00:58:41.760
thank you.
1003
00:58:41.800 --> 00:58:44.719
So so the industry, I think, and we've kind of
1004
00:58:44.719 --> 00:58:47.920
painted this picture. The industry was already moving to develop
1005
00:58:48.440 --> 00:58:53.159
a differentiated, evolved, more comprehensive reporting standard, and anticipation of
1006
00:58:53.199 --> 00:58:57.840
the rules standing and being coming into a fact, you know,
1007
00:58:57.960 --> 00:59:00.360
which would have been September of this year and next
1008
00:59:00.480 --> 00:59:03.800
quarter in March of twenty twenty five for the smaller funds.
1009
00:59:03.960 --> 00:59:06.639
So the industry was already mobilizing. We were already leading
1010
00:59:06.639 --> 00:59:09.400
an effort around the fee and expense disclosure requirements and
1011
00:59:09.440 --> 00:59:13.480
the performance requirements. And I would say, to what David
1012
00:59:13.519 --> 00:59:17.880
reflected on earlier, even if rulemakings fall, even if they
1013
00:59:17.920 --> 00:59:21.880
are successfully challenged in court, it does bring certain matters forward.
1014
00:59:22.000 --> 00:59:24.760
It does force the industry to focus in a helpful way,
1015
00:59:24.800 --> 00:59:29.159
I think, on certain questions and to come to a
1016
00:59:29.159 --> 00:59:32.079
more mature answer perhaps on some things. And so that's
1017
00:59:32.119 --> 00:59:36.280
exactly what we've experienced. We had been mobilizing a coalition
1018
00:59:36.360 --> 00:59:41.719
of LPs, GPS, software providers, fund administrators, lawyers on these
1019
00:59:41.760 --> 00:59:46.480
disclosure requirements before the Fifth Circus decision. When that decision
1020
00:59:46.519 --> 00:59:49.000
came out, we paused the work, went back to what
1021
00:59:49.000 --> 00:59:52.280
we had already done and said, okay, without the forced
1022
00:59:52.320 --> 00:59:56.639
compliance with the rule, what do LPs require? How does
1023
00:59:56.639 --> 00:59:59.719
this make sense practically and operationally for GPS? How do
1024
00:59:59.719 --> 01:00:03.440
we get to an answer that's better for everyone? And
1025
01:00:03.519 --> 01:00:05.800
we are getting there. We have these templates out in
1026
01:00:05.840 --> 01:00:08.239
the market for comment right now. The comment period goes
1027
01:00:08.280 --> 01:00:11.960
through October. We'll be releasing the templates in December, and
1028
01:00:12.000 --> 01:00:14.559
I can tell you the response from industry has been
1029
01:00:14.639 --> 01:00:18.800
very positive. This was something a long time coming LPs.
1030
01:00:18.800 --> 01:00:22.000
We're asking for more information. The questions were getting harder,
1031
01:00:22.719 --> 01:00:27.119
and GPS needed a rallying cry, a center of gravity
1032
01:00:27.519 --> 01:00:30.880
and a real catalyst and momentum to do something to
1033
01:00:31.199 --> 01:00:35.159
again force these questions into the limelight and really focus
1034
01:00:35.159 --> 01:00:36.119
our attention on them.
1035
01:00:36.760 --> 01:00:39.079
And that's been a positive outcome in all of this.
1036
01:00:39.719 --> 01:00:41.000
Adoption is another matter.
1037
01:00:41.679 --> 01:00:47.239
Without without the sec requiring adoption, this will be a
1038
01:00:47.239 --> 01:00:49.639
bit of hand to hand combat. I think between LPs
1039
01:00:49.679 --> 01:00:52.079
and GPS it will continue to be but we're getting
1040
01:00:52.079 --> 01:00:55.239
to a good answer. So it's a good development. Maybe
1041
01:00:55.280 --> 01:00:59.800
not without the regulatory requirement behind it, maybe not quite
1042
01:00:59.800 --> 01:01:02.480
what LPs had hoped for, but it is a good development.
1043
01:01:03.800 --> 01:01:04.400
Thank you, Jen.
1044
01:01:04.639 --> 01:01:07.599
I think that's wonderful and a great way for us
1045
01:01:07.599 --> 01:01:10.119
to wrap up here. If folks have additional questions, feel
1046
01:01:10.159 --> 01:01:11.000
free to reach out.
1047
01:01:10.880 --> 01:01:11.639
To any of us.
1048
01:01:12.039 --> 01:01:15.320
Hopefully you have our content information or it's readily available.
1049
01:01:15.880 --> 01:01:17.920
And thank you to all of the panelists today. We
1050
01:01:17.960 --> 01:01:19.440
definitely appreciated the time.
1051
01:01:20.199 --> 01:01:22.480
Thank you, thanksving Federal Society.
1052
01:01:23.480 --> 01:01:25.920
Yeah on behalf of the Federalist Society. Thank you so
1053
01:01:26.000 --> 01:01:28.880
much to David, Jennifer and Russ for speaking and Lindsay
1054
01:01:28.880 --> 01:01:32.119
for moderating. We're so grateful for your time and expertise today,
1055
01:01:32.599 --> 01:01:34.800
and thank you also to our audience for joining us.
1056
01:01:34.840 --> 01:01:38.119
We really appreciate your participation. You can stay up to
1057
01:01:38.199 --> 01:01:41.440
date with announcements and upcoming webinars on our website fedsdock
1058
01:01:41.480 --> 01:01:45.199
dot org or on all major social media platforms. Thank
1059
01:01:45.199 --> 01:01:47.599
you once more for tuning in, and we are adjourned.
1060
01:01:47.960 --> 01:01:49.559
Thanks Edith, thank you.
1061
01:01:51.079 --> 01:01:53.719
Thank you for listening to this episode of fedsock Forms,
1062
01:01:53.800 --> 01:01:56.960
a podcast of the Federal Societies practice groups. For more
1063
01:01:56.960 --> 01:02:00.239
information about the Federal Society, the practice groups, and to
1064
01:02:00.239 --> 01:02:03.119
become a Federal Society member, please visit our website at
1065
01:02:03.159 --> 01:02:04.440
fedsoc dot org.