Lawsuit Challenges Regulatory Overreach, Defends Innovation and Growth

September 1, 2023

Contact: Robin Ceppos

WASHINGTON, DC – Today, the National Venture Capital Association (NVCA) united with a coalition of asset management associations, including the National Association of Private Fund Managers (NAPFM), in filing a lawsuit in the United States Court of Appeals for the Fifth Circuit against the United States Securities and Exchange Commission (SEC) to prevent the adoption of the recently approved Private Fund Adviser rule, contesting the legality of the rule. The coalition also includes the Alternative Investment Management Association Ltd. (AIMA), American Investment Council (AIC), Managed Funds Association (MFA), and the Loan Syndications and Trading Association (LSTA).

As was noted by the dissenting Commissioners, the petitioners believe the rule exceeds: the SEC’s authority under the Investment Advisers Act of 1940 and other applicable law; runs counter to the SEC’s stated mission to protect investors, maintain fair, orderly, and efficient markets, facilitate capital formation, and promote competition; fails to take account of the costs and benefits of this new regulation; violates notice and comment requirements; and is arbitrary and capricious.

“The SEC has indicated its intention to operate akin to a self-appointed legislative body, aiming to impose far-reaching regulations on the realm of private funds without proper authorization from Congress,” said NVCA President and CEO Bobby Franklin. “The Commission should refrain from overly intrusive involvement in the operations of individual businesses, and enable capital to flow to innovative early-stage firms.”

Despite venture capital’s significant contributions to our economy, with more than $240 billion invested in 15,000+ companies across the country in 2022, and venture-backed companies creating jobs at eight times the rate of other businesses, these regulatory measures threaten to stifle innovation, hinder investment, and curtail the growth of the entrepreneurial ecosystem. The petitioners are concerned that this rule will result in increased fees and decreased choice for investors crippling the very engine of economic growth and job creation that venture-backed companies have come to represent.

“The SEC is pursuing an ideological agenda that goes well beyond its legal authority with far-reaching implications for American innovation and economic growth,” Franklin added. “The Commission claims that the new rule increases transparency and oversight, while ignoring the vital role that venture capitalists play in providing the funding, mentorship, and support that early-stage companies need to innovate and succeed.”

The lawsuit highlights the following fundamental flaws with, and significant adverse consequences of, the Private Fund Adviser rule to protect smaller, newer firms susceptible to regulatory changes and foster a flourishing entrepreneurial environment.

The petition for review can be found here.


The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the U.S. venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade association, NVCA arms the venture community for success, serving as the leading resource for venture capital data, practical education, peer-led initiatives, and networking. For more information about NVCA, please visit