Federal Judge Vacates SEC’s Dealer Rule Amendments and Gensler Announces Imminent Departure

On Thursday, in two separate decisions, a federal district court in Texas struck down the U.S. Securities and Exchange Commission (SEC) rule that expanded the definition of “dealer” to include proprietary traders and some hedge funds (the “Dealer Rule”),[1] finding that the SEC had exceeded its authority based on the text, history, and structure of the Securities Exchange Act of 1934, according to court records. This decision marks yet another instance this year that a federal court has vacated prominent SEC regulations.[2]

The first case was brought by the Managed Funds Association and other trade groups representing the investment industry. U.S. District Judge Reed O’Connor also reached the same outcome in a separate case brought by the Blockchain Association and the Crypto Freedom Alliance of Texas, two cryptocurrency organizations.

Further, the SEC announced today that Gary Gensler will step down as chair of the SEC effective at 12 p.m. (EST) on January 20, 2025.

More detailed analysis will follow discussing the regulatory implications of these decisions and the unwinding of SEC rulemaking that will likely continue.

[1] SEC Expands Dealer Rule To Proprietary Traders, Private Funds

[2] Fifth Circuit Vacates SEC Private Fund Adviser Rules