A federal judge in Texas on Thursday struck down the U.S. Securities and Exchange Commission's overhaul of Treasury dealer rules adopted earlier this year, finding that the agency had overstepped its legal authority in issuing the regulations, according to court records.
The decision marked at least the third time in a year that a court had vacated prominent SEC regulations and the latest blow from a conservative-leaning judiciary to policy goals under President Joe Biden, who is due to step down in January.
The changed legal environment has hampered the SEC's ability to pursue its regulatory agenda this year.
"The Court holds that the Rule is in excess of 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 an opinion.
Adopted in February over Republican officials' objections, the rule required proprietary traders and others who routinely deal in government bonds and other securities to register as broker-dealers.
The rule aimed to address liquidity problems in the $26 trillion Treasury market, something market players said was part of the biggest market structure overhaul 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 on 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 had brought suit with MFA, hailed the news, saying the decisions spared hedge fund managers from "severe and adverse consequences" from what it said would have been sweeping and unprecedented changes.
Courts in December and June also struck down SEC rules on share 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 may simply settle them in favor of industry after taking office next year.
(This story has been refiled to add a missing word in paragraph 2)
