Private Funds Accuse SEC of ‘Wildly Inconsistent’ Rules Approach

Private funds took their opening swing in a legal fight with the Securities and Exchange Commission, telling an appeals court that rules forcing investors to reveal more about short selling and stock lending are arbitrary and capricious.

Trade groups including the National Association of Private Fund Managers and MFA—formerly known as the Managed Funds Association—said the SEC adopted two rules last year that are interconnected yet “wildly inconsistent,” violating the Administrative Procedure Act.

“The Commission’s conduct is about as arbitrary and capricious as agency action gets,” the trade groups said in Tuesday’s filing with the US Court of Appeals for ...