US Court Overturns SEC Dealer Rule On Treasury Markets
The decision is the third in a year to be struck down
By: : Daniel
Update: 2024-11-22 02:30 GMT
US Court Overturns SEC Dealer Rule On Treasury Markets
The decision is the third in a year to be struck down
The US District Court, Northern District of Texas has overturned a Securities and Exchange Commission (SEC) rule, adopted early this year, that required traders in the Treasury market to register as broker-dealers. The court observed that the agency overstepped its legal authority in issuing the regulation.
The decision was the third time in a year that a court vacated prominent SEC regulation and the blow from a conservative-leaning judiciary to policy goals under President Joe Biden, due to step down in January.
The changed legal environment has hampered the SEC's ability to pursue its regulatory agenda.
Judge Reed O'Connor remarked that based on the text, history, and structure, the rule was beyond the Commission's authority.
Implemented in February over Republican officials' objections, the rule required proprietary traders and those routinely dealing in government bonds and securities to register as broker-dealers. It addressed liquidity problems in the $26 trillion Treasury market, which the players said was part of the biggest structure overhaul in decades.
Meanwhile, an SEC spokesperson said the agency would review the decision before deciding.
The case was brought by the Managed Funds Association (MFA) and other trade groups representing the investment industry.
Judge O'Connor reached the same decision in a separate case brought by the Blockchain Association and the Crypto Freedom Alliance of Texas.
The Alternative Investment Management Association, which filed the suit with MFA said the decisions spared hedge fund managers from "severe and adverse consequences" from sweeping and unprecedented changes.
Earlier, the courts struck down the SEC rules on share buybacks and disclosures by private fund advisers. Three more rules are subject to legal challenges.
However, observers expect President-elect Donald Trump to favor the industry on assuming charge.