SEC faces questions of power

The US Securities and Exchange Commission has come under fire on two fronts as it attempts to reform the regulatory oversight of the US mutual and hedge funds industries.

On September 2 the US Chamber of Commerce filed a lawsuit to try to derail an SEC rule that would require mutual funds to have independent chairmen – a case the regulator will vigorously contest. Just days later, the SEC received a letter from a Washington DC law firm questioning its rulemaking authority over proposed hedge fund reforms.

Wilmer Cutler Pickering Hale and Dorr argued that the SEC would be going beyond its authority if it forced hedge fund advisers to register with the regulator. Wilmer Cutler cited Ernst & Ernst v Hochfelder (1976) as saying: “The rulemaking power granted to an administrative agency charged with the administration of a federal statute is not the power to make law. Rather,...