The Fifth Circuit ruled today, June 5, 2024, in National Association of Private Funds Managers, et al. v. Securities and Exchange Commission, that the SEC exceeded its statutory authority under Sections 211(h) and 206(4) of the Advisers Act in adopting a 2023 final rule to enhance the regulation of private fund advisers (the “Private Funds Rule”), which imposed substantial new disclosure requirements and restricted a broad range of activities within the private funds industry. In a unanimous opinion of a three-judge panel, the Fifth Circuit vacated the Private Funds Rule in full. Importantly, in reaching its decision the Fifth Circuit held that the SEC’s authority under Section 211(h) is limited to “retail investors” and that to promulgate rules under Section 206(4) the SEC is required to articulate a “rational connection” to fraud and explain how such rules are designed to prevent fraud.