The CAS team provides its insights on the Fifth Circuit Court of Appeal’s decision striking down the SEC’s Private Fund Adviser Rule {PFAR). Our insights include both perspective from GPs and LPs, as well as views as what to expect next in the marketplace.

CAS Client Update Memo

Published: June 21, 2024

The CAS team was extensively quoted in a June 12 article by Brian Croce at Pensions & Investments regrding the Fifth Circuit Court of Appeals striking down the SEC’s Private Fund Adviser Rules. Jason Mulvihill, Founder & President of CAS, highlighted the perspective of private fund advisers, while Chris Hayes, Managing Partner at CAS, shared the perspective of institutional LPs.

The CAS Team had the following quotes:

“Jason Mulvihill, founder and president of policy advisory firm Capitol Asset Strategies and former chief operating officer and general counsel at the American Investment Council, said the rule was extreme, unnecessary and ultimately would’ve cost limited partners and general partners a lot of time and money.

‘I’m glad that the court recognized the SEC lacked statutory authority to pursue this rule,’ Mulvihill said.”

“While the option for an appeal is still on the table, Mulvihill doesn’t expect the SEC to challenge the June 5 decision.

‘Both the full 5th Circuit and the Supreme Court would be as skeptical as the three-judge panel was of the tenuous authority that the SEC claimed it had to write this rule,’ he said. ‘If the SEC appeals and loses again it would simply raise the profile of the case and put another exclamation point on what the SEC already cannot do.’”

“‘In the current environment with a conservative Supreme Court and given that the 5th Circuit is always very skeptical of federal agency authority, I think you were sort of expecting that outcome, which is why the litigation was designed to be delivered there,’ said Chris Hayes, managing partner at Capitol Asset Strategies and former senior policy counsel with ILPA.

Another court could look at the same rule and legislative text and reach a different conclusion, Hayes added.

Now, it’s unlikely there will be government action anytime soon addressing limited partner challenges in fund agreements, according to Hayes, unless there’s a financial crisis in the coming years that leads to another major legislative package like Dodd-Frank.”

Press Article: Pensions & Investments

Published: June 12, 2024

Chris Hayes, Managing Partner at CAS, was quoted extensively in a June 5 article by Bill Myers in Private Funds CFO regarding the Fifth Circuit Court of Appeals striking down the SEC’s Private Fund Adviser Rule. Chris shared the perspective of institutional LPs in regard to the decision:

“‘Part of Gensler’s problem may be that he didn’t appreciate the diversity of LPs’, says Chris Hayes, who led ILPA’s initial lobbying on the private funds rules and is now a managing partner at the consulting firm Capitol Asset Strategies.

‘Ultimately, LPs are competitors with one another for allocation,’ he says of LPs. ‘You have divergent views in the community on the need for regulation in the space. If you’re among the largest LPs, you’re already getting many of the rules’ protections in side letters ahead of smaller county and municipal pension plans or union pension plans. Small LPs are paying a full load of fees and are lucky to get allocations to high performing managers, whereas if you’re a large LP with co-investment, you’re focused on achieving those rights in negotiations to lower your overall fee load.’

‘The side letter provisions of the rules were polarizing among many of these large LPs mostly because they’re afraid of what might change regarding these investment rights, and how they’re going to meet their fiduciary obligations,’ Hayes says.

There is even division among union pension plans – between organized labor’s policy teams and their investment teams, Hayes says. ‘Labor and the groups they support in DC have always had a divergent view of private equity when they deal with it in DC policy versus when they sit on boards where their pension plans are in the asset class,’ he says. ‘Many of the labor policy folks in DC are generally hostile to private equity. Their view is there’s too much risk. They think the private equity industry is negative for workers. Now, the investment folks who work in those plans saw things differently, at least before interest rates grew, where you just can’t get those returns from mutual funds to ensure the pension is sustainable. Relying on private equity for returns, but opposing it from a policy perspective, has always been a challenge for them.’

‘At the same time, public pension fund managers in Republican-led states must tread carefully in policy battles, Hayes says. ‘A red state pension fund has to be more careful because there’s a lot more risk to their involvement in policy on investment issues. Many of these plans have political appointees from the governors’ offices on their boards. What you don’t want is folks in DC calling the governor and saying, ‘You’re causing trouble for us.’

For nearly a decade, LPs have had three core asks of private funds, Hayes says. The first was fee transparency, ‘so they can verify that what they were charged is what they contractually agreed to.’

The second was to make sure that GPs didn’t use their contract leverage to contract away their fiduciary duty. The third was ‘making sure that LPs aren’t picking up the tab for wrong-doing and indemnifying managers when they have regulatory problems.’ The SEC’s rules went well beyond that, and stirred up the divisions among large and small LPs, Hayes says.’

‘The SEC’s goal was to level the negotiating playing field in fund agreements for large and small LPs through the preferential treatment rules,” he adds. “If you’re a small LP, you would benefit significantly from the rules – accessing rights you can’t negotiate yourself. But if you’re a large LP, you might have been more concerned about your competitiveadvantage and whether you’re still going to be able to negotiate co-investment rights, thereby reducing your fee load on behalf of your beneficiaries.’”

Press Article: Private Funds CFO

Published: June 5, 2024

Jason Mulvihill, Founder & President of CAS, was quoted in a May 8 article by Brian Croce at Pensions & Investments regarding the recent Request for Information (RFI) on the involvement of private equity in the healthcare industry issued by the FTC, DOJ Antitrust, and HHS:

“I spoke on Monday with Jason Mulvihill, founder and president of policy advisory firm Capitol Asset Strategies and former chief operating officer and general counsel at the American Investment Council, a private equity trade group, and he said from his point of view, the agencies aren’t conducting a serious inquiry.

‘Unfortunately, when you look into the RFI and the related public statements made by agency participants at the March 5 virtual workshop on the topic, it seems like the regulators have already decided the answers they want and that they are really just hunting for bad anecdotes that could be used to support what they want to do anyway, which is make it harder for private equity to invest in healthcare businesses.’”

Press Article: Pensions & Investments

Published: May 8, 2024

The CAS Team prepared an article on the growing US-China tensions and the implications for private fund managers and investors in the Hong Kong Venture Capital & Private Equity Association (HKVCA)’s Spring 2024 Journal to their members.

Report: HKVCA Journal, Spring 2024

Published: Spring 2024

The CAS team provides an executive summary of the growing legislative and regulatory threats to private equity funds operating in the healthcare sector at both the federal and state level. For the full memo, please contact us directly at info@capitolassetstrategies.com.

CAS Client Update Memo

Published: April 23, 2024

The CAS team provides an executive summary of the proposed rule from the Financial Crimes Enforcement Network (FinCEN), which would impose new anti-money laundering (AML) compliance requirements on investment advisers. For the full memo, please contact us directly at info@capitolassetstrategies.com.

CAS Client Update Memo

Published: February 23, 2024

The CAS team reviews the current slate of policy challenges to the crypto/blockchain industry in the U.S., including legislation, regulatory action and litigation as of the beginning of 2024.

CAS Client Update Memo

Published: January 16, 2024

The CAS team reviews the SEC’s fall regulatory agenda, as we move towards a finalization of a variety of rulemakings in spring 2024 that will impact private equity and private credit advisers.

CAS Client Update Memo

Published: December 14, 2023

Washington, D.C.--(Newsfile Corp. - November 30, 2023) - Capitol Asset Strategies is offering a new outsourced policy "operating partner" model that will assist private fund advisers and their portfolio companies in efficiently addressing Washington challenges.

Press Article: Yahoo! Finance

Published: November 30, 2023

The CAS team covers the growing regulatory risk for private capital firms, with IOSCO and FSB, as well as national regulators in the US, UK and EU focusing on the risks of non-bank financial firms in the context of systemic risk and investor protection.

CAS Client Update Memo

Published: October 2023

The CAS Team has prepared a note on the SEC proposed rule on Conflicts of interest Associated with the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers. We focus on the impact to investment funds and distribution channels.

CAS Client Update Memo

Published: August 3, 2023; Updated September 5, 2023

The CAS team brings their extensive involvement on this proposed rule to bear to analyze the various provisions in the new SEC Private Fund Adviser rule (PFA), and subsequent litigation.

CAS Client Update Memo

Published: August 25, 2023

The CAS team has put together a helpful overview of the Biden Administration’s proposed Executive Order and ANPRM targeting outbound investments in China and other countries.

CAS Client Update Memo

Published: August 16, 2023

The CAS team put together a helpful analysis of the proposed rule changes to Hart Scott Rodino (HSR) by the Federal Trade Commission (FTC),

CAS Client Update Memo

Published July 11, 2023

The CAS team reviews the SEC’s spring regulatory agenda, with a significant number of potential rulemakings ont he horizon impacting advisers to private equity and private credit funds.

CAS Client Update Memo

Published: June 30, 2023

The CAS team brings their past expertise to bear in analyzing the final amendments to Form PF at the SEC.

CAS Client Update Memo

Published: May 4, 2023

Crypto, rather than "blowing up" traditional finance, is making the existing system more efficient.

Opinion: CoinDesk

By: Chris Hayes (CAS) and Chris Ostrowski (SODA)

Published: January 27, 2023

Industry leading layer 1 blockchains must collaborate on policy engagement, delivering a uniform message that regulatory clarity is needed beyond Bitcoin and Ethereum.

Opinion: CoinDesk

By: Chris Hayes (CAS)

Published: December 27, 2022