By Douglas Gillison
(Reuters) – A federal judge in Texas on Thursday rejected the U.S. Securities and Exchange Commission’s review of government bond rules adopted earlier this year by the U.S. Securities and Exchange Commission, ruling that the agency in issuing the rules had exceeded her legal authority, according to court documents.
The decision marked at least the third time in a year that a court had struck down prominent SEC rules and was the latest blow by a conservative-leaning judiciary against policy goals under President Joe Biden, who is set to step down in January.
The changed legal environment has hampered the SEC’s ability to pursue its regulatory agenda this year.
“The Court finds that the rule exceeds the Commission’s authority based on the text, history and structure” of the SEC’s founding statutes, U.S. District Judge Reed O’Connor of the Northern District of Texas said in a statement. advice.
The rule, adopted in February over objections from Republican officials, required proprietary traders and others who routinely trade government bonds and other securities to register as broker-dealers.
The rule was intended to address liquidity problems in the $26 trillion Treasury market, which market players said was part of the biggest overhaul of market structure in decades.
An SEC spokesperson said the agency was reviewing the decision before deciding on next steps.
The case was brought by the Managed Funds Association and other trade groups representing the investment industry. O’Connor also reached the same outcome Thursday in a separate case brought by the Blockchain Association and the Crypto Freedom Alliance of Texas, two cryptocurrency organizations.
The Alternative Investment Management Association, which filed a lawsuit with MFA, welcomed the news, saying the decisions saved hedge fund managers from “serious and adverse consequences” of what it said would have been sweeping and unprecedented changes.
Courts in December and June also struck down the SEC’s rules on stock buybacks and disclosures by private fund advisers. At least three other rules remain subject to legal challenges.
However, observers say they expect President-elect Donald Trump’s administration to simply rule in the industry’s favor after taking office next year.
(This story has been refiled to add a missing word in paragraph 2)
(Reporting by Douglas Gillison; Editing by Alistair Bell)
