SEC Commissioner Uyeda Criticizes Regulatory Overreach on Private Funds

SEC Commissioner Mark T. Uyeda warned against the dangers of excessive regulation and government overreach in the private fund sector.  

In an address before the 2024 AIMA APAC Annual Forum in Hong Kong, Mr. Uyeda told regional regulators, hedge fund managers and institutional investors that he supports a more restrained regulatory approach to alternative investments. He argued that the growth of non-bank financial institutions, including private equity and private credit, was a natural response to the restrictions imposed on banks after the 2008 financial crisis. He warned that categorizing these firms as "shadow bank[s]" risks stifling innovation and reducing access to the risk capital needed to drive growth in critical sectors like technology and healthcare. He added that private funds have been crucial in providing the capital necessary for venture-stage businesses and innovative industries that banks are often unable to support.

Mr. Uyeda reiterated his opposition to the SEC's 2023 rulemaking on private funds, which imposed new requirements, including mandatory audits, quarterly statements, and restrictions on fees and expense allocation. He criticized the rule for exceeding the SEC's statutory authority and undermining the established notion that sophisticated institutional investors, such as pension funds and university endowments, do not need the same level of protection as retail investors. Mr. Uyeda pointed to a 2024 US court ruling that vacated the SEC's private fund rules and urged the SEC to learn from this judicial rebuke. (See related coverage.)

In addition, Mr. Uyeda called for the US to catch up on crypto regulation. He compared the US unfavorably to jurisdictions like Hong Kong, Singapore, Japan and Australia, which he praised for leading the way in regulating digital assets and fostering financial technology innovation. He highlighted Hong Kong's stablecoin licensing regime and Singapore's FinTech investment initiatives as examples of how the Indo-Pacific region is setting the pace in FinTech regulation. He called on the SEC to adopt a more transparent and flexible regulatory framework for crypto; one that recognizes the unique characteristics of digital assets and fosters innovation while protecting investors. He also emphasized the need for greater international engagement and a balanced approach that recognizes the differences between banking systems and market-based financial activities.