Congress exempted private funds from the Investment Company Act so they wouldn’t be subject to the same level of regulation as public funds that are available to less sophisticated retail investors. But Mr. Gensler claims the SEC can regulate private fund advisers under the Investment Advisers Act, which makes it “unlawful for any investment adviser . . . to engage in any act, practice, or course of business which is fraudulent, deceptive, or manipulative” as defined by the commission.
Yet the SEC doesn’t demonstrate fraud or harm to private fund investors. Under Mr. Gensler’s argument, there’s no limit to the SEC’s power. The Supreme Court this autumn will revisit its Chevron doctrine that defers to regulatory discretion. Mr. Gensler is giving Justices another reason that judges shouldn’t defer to regulatory interpretations that ignore the law.
Source: The SEC Strikes Out Again on Crypto With Grayscale – WSJ
