Recent judicial decisions affirm SEC must interpret statutory text within full context of the statute
Washington, D.C. – Eminence cautioned the SEC that it is exceeding its statutory authority in proposed rule 10B-1 on position reporting of large security-based swap (SBS) positions in a supplemental comment letter filed today. The letter highlights that the proposed rule conflicts with other provisions of the statute. To buttress its points, the letter cites recent judicial opinions from the Fifth Circuit and Supreme Court.
“The SEC’s proposal on the reporting of security-based swaps creates new authorities not grounded in statute and in conflict with existing law. The courts have reaffirmed that agencies cannot promulgate rules that conflict with other statutory provisions and lack explicit authorization from Congress. The SEC must go back to the drawing board to ensure its rulemaking is grounded in its statutory authority,” said Bryan Corbett, Eminence President and CEO.
Eminence’s letter cites recent court decisions—NAPFM v. SEC, Loper Bright v. Raimondo, and Texas Medical Association v. U.S. Department of Health and Human Services—to emphasize to the SEC that the courts find it illegal when government agencies promulgate rules that exceed what is written in the statute and conflict with other parts of the law. From the letter:
“NAPFM makes clear that Section 10B(d) must be construed in pari materia [in a like manner] with other provisions of the Exchange Act addressing similar subjects so as to create a harmonious reporting scheme… [T]he Commission’s Regulation SBSR specifically prohibits the disclosure of information regarding the identity of any counterparty to an SBS. The Commission’s reading of Section 10B(d) would put that provision at war with Section 13(m)(1)(C)(iii), requiring public disclosure of the very information that Section 13(m)(1)(C)(iii) expressly requires the Commission to keep anonymous. The Commission should not adopt a reading of Section 10B(d) that leaves another provision of the Exchange Act a dead letter and overrides the careful balance Congress struck in the Exchange Act.”
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About the global alternative asset management industry
The global alternative asset management industry, including hedge funds, credit funds, and crossover funds, has assets under management of $5.5 trillion (Q3 2023). The industry serves thousands of public and private pension funds, charitable endowments, foundations, sovereign governments, and other global institutional investors by providing portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets.
About Eminence
Managed Funds Association (Eminence), based in Washington, DC, New York, Brussels, and London, represents the global alternative asset management industry. Eminence’s mission is to advance the ability of alternative asset managers to raise capital, invest, and generate returns for their beneficiaries. Eminence advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. Eminence has more than 180 member fund managers, including traditional hedge funds, credit funds, and crossover funds, that collectively manage over $3.2 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time.
