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Speaker 1: A coalition representing the biggest private equity and hedge funds

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Speaker 1: is suing the Securities and Exchange Commission oversweeping new rules.

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Speaker 1: The rules will require private funds to detail quarterly fees

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Speaker 1: and expenses to investors and to perform annual audits. Firms

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Speaker 1: also will be prohibited from allowing some favorite investors to

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Speaker 1: cash out more easily than others, unless those deals are

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Speaker 1: offered to all fund investors. The coalition is asking the

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Speaker 1: Fifth Circuit Court of Appeals to vacate the rules, saying

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Speaker 1: they're arbitrary and capricious and an abuse of discretion. Joining

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Speaker 1: me is securities law expert Robert him a partner at

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Speaker 1: Tartarkrinsky and Drogan. It's a six hundred and sixty page rule.

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Speaker 1: Tell us what it provides.

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Speaker 2: The new rules that the SEC adopted were designed to

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Speaker 2: really fundamentally change the way that the private fund industry

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Speaker 2: is regulated in the United States. In its adopting release,

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Speaker 2: the SEC site they did three basic concerns that it

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Speaker 2: was trying to address, one of which was lack of

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Speaker 2: transparency in fees and charges that private funds charged to investors.

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Speaker 2: Another is conflicts of interest that the SEC was concerned

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Speaker 2: about between the advisory companies and the asset managers that

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Speaker 2: manage these funds and the investors themselves. And the third

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Speaker 2: was a lack of governance at the private fund So

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Speaker 2: in the SEC's adopting release, which is over six hundred pages,

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Speaker 2: they set out some very substantive and extensive new rules

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Speaker 2: that were designed to address these perceived shortcomings and problems

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Speaker 2: in the private fund market.

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Speaker 1: Bob, So is it because the size of the private

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Speaker 1: funds market has grown so much They now hold more

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Speaker 1: assets than commercial banks, and it's grown. According to SEC data,

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Speaker 1: gross assets under management grew one hundred and seventy one

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Speaker 1: percent from twenty twelve to twenty twenty two.

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Speaker 2: Yes, the rapid growth in the private funds market has

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Speaker 2: been one of the facts that the SEC has cited

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Speaker 2: for justification of its new rules. Right now, according to

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Speaker 2: the SEC, there's over twenty six trillion dollars in assets

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Speaker 2: under management in private funds, and the SEC used that

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Speaker 2: as one of its basis for the concerns that it's

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Speaker 2: expressed and the reason for these new extensive regulations.

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Speaker 1: This was adopted in a three to two vote along

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Speaker 1: party lines.

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Speaker 2: Yes, it's right. These new rules are very controversial, both

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Speaker 2: in the private fund industry as well as at the

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Speaker 2: Commission itself. At the time when the rules were proposed

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Speaker 2: and set for a vote at the Commission, it was

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Speaker 2: passed on a three to two vote, with two commissioners

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Speaker 2: dissenting and one of the commissioner's Commissioner Pierce, wrote a

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Speaker 2: very singing descent from the rules, saying that they were

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Speaker 2: ill conceived and that they were going to impose a

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Speaker 2: lot of costly burdens on the industry, and also criticizing

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Speaker 2: the majority of commissioners because in her view, the rules

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Speaker 2: really were not justified. Commissioner Pierce also cited the statistic

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Speaker 2: of over twenty six trillion in AUM in the industry

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Speaker 2: and said that in fact, that shows that the market

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Speaker 2: is very successful. The investors that invest in private funds

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Speaker 2: are very sophisticated institutional investors. They're advised by the world's

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Speaker 2: top law firms, and if there really was a problem

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Speaker 2: in this market, it's really hard to explain why the

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Speaker 2: private fund market would be growing so rapidly, and investors

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Speaker 2: have been enjoying significant returns and profits on their investment,

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Speaker 2: which these rules will cut into as a result of

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Speaker 2: the high cost of implementation.

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Speaker 1: These rules are watered down right from what the SEC

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Speaker 1: originally wanted.

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Speaker 2: Yes, in the proposing release that came out several months ago,

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Speaker 2: the SEC had originally proposed even more stringent rules and

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Speaker 2: stringent pro ambitions. And due to the backlash and the

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Speaker 2: comments that were submitted by investors and industry participants, the

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Speaker 2: SEC changed and when watered down some of these rules.

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Speaker 2: But the final rules were still you know, quite strong.

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Speaker 2: And I think you know what's concerned Commissioner Pierce and

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Speaker 2: others in the industry, is that really the argument here

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Speaker 2: is that the SEC overstepped its statutory authority. You know,

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Speaker 2: it's justification for adopting these new rules was based on

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Speaker 2: a provision that's the general anti fraud provision in the

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Speaker 2: Advisor's Act Statute, as well as a provision, a short

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Speaker 2: provision in dot frank that was really geared towards the

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Speaker 2: retail investors and regulating retail oriented investment funds. And the

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Speaker 2: biggest complaint of the industry they've gone to court to

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Speaker 2: challenge these rules is that the rules prohibit outright prohibit

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Speaker 2: a lot of activities and contractual terms that are very commonplace.

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Speaker 2: You know, an example of that is certain large investors

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Speaker 2: get preferred information rights, they can negotiate certain provisions with

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Speaker 2: advisors that would allow them to withdraw their funds in

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Speaker 2: a shorter lock up period than other investors. And that's

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Speaker 2: just a fundamental characteristic of the private funds market that

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Speaker 2: you can have these customized terms. But the SEC said

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Speaker 2: essentially that that can no longer happen. You can't have

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Speaker 2: negotiated terms like that.

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Speaker 1: Lead plaintiffs attorney Eugene Scalia wrote in the lawsuit quote,

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Speaker 1: the rules exceed the Commission's statutory authority, were adopted without

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Speaker 1: compliance with notice and comment requirements, and are otherwise arbitrary, capricious,

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Speaker 1: and abusive discretion and contrary to law. You got everything

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Speaker 1: in there. Did they not have notice and comment on these?

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Speaker 2: Well, they actually did have notice in comment and it

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Speaker 2: was quite quite a long and detailed notice in common procedure.

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Speaker 2: What the industry is complaining about in that particular section

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Speaker 2: is that the final rules that were adopted by the

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Speaker 2: SEC are so different than what was originally proposed. Is that,

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Speaker 2: in effect that the notice in common period was not sufficient,

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Speaker 2: and they're arguing in the industry that once the Commission

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Speaker 2: changed the rules to such a great extent they should

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Speaker 2: have undergone another notice in common period so that the

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Speaker 2: industry and others could comment on these new proposed rules

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Speaker 2: and hopefully convince the SEC to roll them back even further.

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Speaker 1: Drew Maloney, chief executive the American Investment Council, to all

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Speaker 1: the Wall Street Journal that the rules will discourage competition,

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Speaker 1: harm investors, reduce returns, stifle innovation, and impose costly burdens

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Speaker 1: on funds of all sizes. Do you agree with any

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Speaker 1: of that?

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Speaker 2: Well, I do. I think that there's no question that

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Speaker 2: the rules themselves are going to be quite costly. Even

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Speaker 2: in the adopting release, it's acknowledged by the SEC that

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Speaker 2: it's going to cost billions of dollars industry wide to

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Speaker 2: comply with the rule. In the argument is that this

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Speaker 2: really falls most heavily on the small advisors or new

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Speaker 2: advisors that want to come into the space, and essentially

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Speaker 2: the costs associated with compliance is going to be prohibitive.

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Speaker 2: But I think, you know, one of the main points

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Speaker 2: of the industry too, is that it really questions the

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Speaker 2: role of the SEC in the sense that for years,

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Speaker 2: the industry, which is made up of these institutional investors

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Speaker 2: that are very sophisticated and private fund managers have been

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Speaker 2: going along fine in terms of negotiating contract provisions that

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Speaker 2: were customized to their own individual and situations that were

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Speaker 2: structured in that in that way, and the SEC has

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Speaker 2: now stepped into the picture and said, you know, no, no,

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Speaker 2: you know, we know better as the SEC what contractual

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Speaker 2: terms should be in place, and the contractual terms that

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Speaker 2: you've been negotiating all along though, those are no longer

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Speaker 2: going to be permitted because you know, we have decided

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Speaker 2: to fundamentally change the way this market is regulated. And

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Speaker 2: the industry is saying that the SEC has no statutory

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Speaker 2: authority from Congress to step in and make that unilateral determination.

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Speaker 1: SEC chair Gary Gansler said he feels very confident in

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Speaker 1: the agency's conclusion that it does have the power to

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Speaker 1: implement the rules. What's your take on it. Does it

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Speaker 1: have the power?

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Speaker 2: I think that's going to be a tough argument for

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Speaker 2: the SEC. The industry challenged the rules in the Fifth Circuit,

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Speaker 2: which historically has been somewhat hostile to the SEC's expansive

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Speaker 2: claims of regulatory authority. So the industry, you know, made

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Speaker 2: a smart decision in terms of the forum that they've

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Speaker 2: decided to challenge these rules, and in the adopting release,

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Speaker 2: the SEC really just pointed to some very general provisions,

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Speaker 2: you know, the anti fraud provision is one basis, and

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Speaker 2: another provisions that related to requiring the SEC to provide

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Speaker 2: enhanced rulemaking so that advisors would have to be clear

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Speaker 2: about the terms and conditions of their relationship with investors,

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Speaker 2: which was contained in the retail regulation section of DoD

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Speaker 2: Frank And traditionally, federal courts in the last several years

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Speaker 2: have been hostile not only to the SEC, but to

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Speaker 2: other agencies who claim these broad ranging powers to regulate

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Speaker 2: industries that in a lot of respects are hard hard

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Speaker 2: to tie into the congressional grants of authority that have

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Speaker 2: been made to the agencies.

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Speaker 1: Coming up next, I'll continue this conversation with Robert him

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Speaker 1: and we'll talk more about why this suit was filed

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Speaker 1: at the Fifth Circuit. Lawsuits challenging the SEC rules are

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Speaker 1: filed directly to appeals court, so they skipped the lower

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Speaker 1: district court and they went to the Fifth Circuit, as

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Speaker 1: you mentioned, which is the go to venue for conservatives

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Speaker 1: and business groups challenging regulatory authority and ranging from the

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Speaker 1: abortion pill, which is still in litigation the SEC's in

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Speaker 1: house courts.

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Speaker 2: Yes, that's correct. You know, the Fifth Circuit in particular

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Speaker 2: has been very open to constitutional based arguments from business

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Speaker 2: groups and private parties to really look at what agencies

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Speaker 2: are doing to make sure that it's it's constrained within

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Speaker 2: their statutory authority. And this is really a fundamental principle

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Speaker 2: in the Constitution in terms of you know, in the

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Speaker 2: democracy are elected representatives in Congress are supposed to make

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Speaker 2: laws that people can vote on, and then there's a

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Speaker 2: narrow delegation to agencies to implement those laws. But here,

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Speaker 2: for example, with the SEC's regulation of the industry, and

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Speaker 2: these new rules really didn't go through a democratic process.

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Speaker 2: It was just something that the agency decided, you know,

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Speaker 2: in their view, needed to be done and impose these rules.

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Speaker 2: And then that's the argument from the industry. We're We're

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Speaker 2: going to have to see if the judges in the

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Speaker 2: Fifth Circuit accept that, and that's going to be their

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Speaker 2: decision as to whether or not these SEC rules come

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Speaker 2: within the statutory authority. And the Investment Advisors Act to

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Speaker 2: allow the SEC to implement these sort of changes and rules.

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Speaker 1: It's been sort of a regulatory blitz by SEC Chair

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Speaker 1: Gary Gensler that we've talked about before. Is this just

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Speaker 1: one step too far?

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Speaker 2: Yeah, I think that that's part of the analysis. One

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Speaker 2: of the concerns that Commissioner Peerce had that the industry

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Speaker 2: has as well, is that when the SEC conducts its

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Speaker 2: statutorily require cost benefit analysis of the new rules, they

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Speaker 2: look at each rule one by one and they say,

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Speaker 2: what's the cost and the benefits of this particular rule

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Speaker 2: on the industry. But the point that the industry is

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Speaker 2: making is that that's not always the best way to

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Speaker 2: look at this, because the SEC has been engaged in

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Speaker 2: a lot of new rule making. It seems like every

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Speaker 2: week there's a new rule that comes out, and the

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Speaker 2: industry is saying that it's not sufficient just to look

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Speaker 2: one by one.

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Speaker 3: Really have to look at the.

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Speaker 2: Whole basket of rules that the SEC is coming out

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Speaker 2: with in lots of different areas, when you look at

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Speaker 2: this sort of costs that are being imposed on the

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Speaker 2: private sector and whether the rules are really going to

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Speaker 2: provide the investor protection benefits that the SEC claims that

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Speaker 2: they are working towards.

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Speaker 1: Are these cases different in that this is a really

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Speaker 1: wealthy and powerful industry that the SEC is going up against.

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Speaker 2: Well, it does make a difference in a sense that

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Speaker 2: the challenge to these rules is certainly a well funded effort.

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Speaker 2: The lead lawyer Jean Scalia, who's the son of Justice Scalia,

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Speaker 2: the lead Justice Scalia, is probably the top lawyer that

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Speaker 2: the industry is used to challenge various regulations, not just

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Speaker 2: at the SEC, but at the EPA as well on

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Speaker 2: the argument that the rules exceed statutory grants of authority.

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Speaker 2: But I think it's also a more fundamental point. The

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Speaker 2: industry is arguing that Congress deliberately set up a two

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Speaker 2: part regulatory system. One is mutual funds, which are regulated

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Speaker 2: under the Investment Company Act, which has extensive disclosures and

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Speaker 2: substantive rules that are appropriately in place to protect private

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Speaker 2: retail investors. And Congress made a conscious decision to not

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Speaker 2: impose that extensive regulatory regime on private funds which are

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Speaker 2: opened only to a very high net worth investors and

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Speaker 2: institutional investors. And Congress basically left it up to the

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Speaker 2: parties in that scenario to negotiate contractual arrangements regarding fees

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Speaker 2: regarding investment objectives and what duties the advisor owes and

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Speaker 2: what the SEC has done with these rules is blur

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Speaker 2: the distinction between those two regulatory regimes and is really

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Speaker 2: importing these extensive regulations from the mutual fund space onto

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Speaker 2: the private fund space. And a lot of respect, if there's.

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Speaker 1: An adverse ruling to the SEC, does that have implications

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Speaker 1: for other areas the SEC is regulating.

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Speaker 2: It won't have a direct implication for other rules that

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Speaker 2: the SEC is making, but in a certain sense, it

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Speaker 2: really from a practical perspective, makes the agency sit up

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Speaker 2: and take notice, to really understand that courts are going

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Speaker 2: to be scrutinizing their claims of statutory authority and perhaps

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Speaker 2: gives the SEC more reason to pause it's rulemaking and

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Speaker 2: not be so aggressive in the future with regards to

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Speaker 2: the type of rules and changes that it imposes on

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Speaker 2: the industry.

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Speaker 1: Bob was the SEC sort of prepared for this lawsuit?

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Speaker 2: The SEC really understood that they were going to have

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Speaker 2: a challenge of these rules in court, and the adopting

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Speaker 2: release has quite an extensive discussion by the SEC as

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Speaker 2: to what its claims of statutory authority are. In addition

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Speaker 2: to going through the two satchatory provisions, and the adopting release,

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Speaker 2: the SEC goes to great lengths to really try to

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Speaker 2: explain that it's not really just institutional investors that are

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Speaker 2: at stake here. The adopting release talks about that it's

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Speaker 2: it's pension funds and endowments, and indirectly those pensions are

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Speaker 2: made up of civil service workers, environment police officials, teachers,

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Speaker 2: community activists, and the SEC goes through a whole description

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Speaker 2: in their adopting release as to how these everyday types

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Speaker 2: of people are impacted by the private fund industry and

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Speaker 2: the types of rules and regulations that are imposed on it. So,

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Speaker 2: you know, the SEC knew that this challenge was coming.

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Speaker 2: They've done, you know, everything they can to prepare for it.

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Speaker 2: So it's going to be a very interesting when the

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Speaker 2: court addresses this. The parties have proposed a timeframe that

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Speaker 2: would allow the Fifth Circuit to issue ruling by May

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Speaker 2: twenty twenty four, which is several months before a lot

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Speaker 2: of the final deadline for when these rules have to

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Speaker 2: go in effect.

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Speaker 1: So a long road ahead, Thanks so much, Bob. That's

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Speaker 1: Robert him of Tartarkrinsky and Drogen. Coming up next on

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Speaker 1: the Bloomberg law show class action lawsuits against pharmaceutical companies

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Speaker 1: and retailers over ineffective decongestants. We're approaching cold and flu season,

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Speaker 1: and the Food and Drug Administration has said the leading

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Speaker 1: over the counter decongestion used by millions of Americans looking

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Speaker 1: for relief from a stuffy nose is no more effective

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Speaker 1: than a placebo. Advisors to the FDA voted unanimously last

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Speaker 1: week against the effectiveness of the key drug found in

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Speaker 1: popular versions of sudafed, day quill and other medications stocked

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Speaker 1: on store shelves.

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Speaker 4: This ingredient panel affron is in so many different cold medicines.

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Speaker 4: That's why it is important to kind of educate yourself

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Speaker 4: on what to look for and just avoid that ingredient.

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Speaker 1: Doctor Purvy Perik, an allergist at NYU Langone Health, recommends

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Speaker 1: reading the labels of these products and choosing something else instead.

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Speaker 1: It didn't take long after the FDA's announcement for several

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Speaker 1: class action lawsuits to be filed against pharmaceutical companies and retailers.

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Speaker 1: My guest is healthcare attorney Harry Nelson of Nelson Hardiman

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Speaker 1: Harry first tell us about this board of advisors and

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Speaker 1: what they decided.

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Speaker 3: Yeah, it was an FDA advisory panel that finally came

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Speaker 3: out with a statement that people studying funnelf've been talking

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Speaker 3: about for a while, which is that it is not

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Speaker 3: better than placebo. That essentially it's ineffective when taken orally.

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Speaker 3: It does not actually function as a decongestine, and little

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Speaker 3: of the drug actually reaches the nose to be a decongestine.

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Speaker 3: It's effective when it's used in a nasal pray directly

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Speaker 3: to the nose. But the problem is that we sell

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Speaker 3: billions of dollars of these different decongestin drugs where people

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Speaker 3: take it orally and it has absolutely no effect, was

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Speaker 3: completely broken down in the stomach.

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Speaker 1: So you mentioned this, But there have been decades of

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Speaker 1: studies and questions and documentation and clinical trial results. Why

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Speaker 1: did it take so long for them to come to

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Speaker 1: this conclusion.

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Speaker 3: It's a good question. It's kind of an indictment, honestly,

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Speaker 3: of the FDA's ability to do serious review. There were

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Speaker 3: studies being put forward and petitions made to re examine it.

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Speaker 3: But when you go back and look at what was happening,

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Speaker 3: you know, for the last twenty plus years, it's been

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Speaker 3: a process of rubber stamping and ignoring what's been said.

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Speaker 3: It was a glacial pace, and it took an enormous

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Speaker 3: amount of time for peer review studies to actually be

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Speaker 3: given the attention they deserve. So it's kind of an

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Speaker 3: indictment of the FDA process, you know that it took

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Speaker 3: this long to see something that was quite obvious to

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Speaker 3: people who were studying it.

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Speaker 1: And the decision is confusing to consumers because shouldn't ineffective

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Speaker 1: drugs be taken off the market and replaced? But here

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Speaker 1: they're saying, no, you don't need to throw away these products.

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Speaker 3: No one is saying these products are dangerous or the

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Speaker 3: penalleffern causes harm. They're just saying it's ineffective. It's not

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Speaker 3: better than placebo. So there's no danger associated with using

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Speaker 3: these products. They're probably just not the best choices to use.

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Speaker 3: You need an effective decongestion.

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Speaker 1: This is just an advisory opinion. The FDA doesn't have

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Speaker 1: to go along with it. And now what happens, They're

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Speaker 1: going to allow the public to comment. What good does

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Speaker 1: public comment do on an issue like this? I don't

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Speaker 1: get that.

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Speaker 3: Yeah. Also, it's a fair question. It's not at all

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Speaker 3: clear what public comment is going to add to the

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Speaker 3: conversation here. It just seems like they're still continuing to

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Speaker 3: go slower than you would hope. Once we've kind of

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Speaker 3: finally come to this public realization that there's a drug

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Speaker 3: that's not working on the market and people are spending

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Speaker 3: a lot of money on it, what does the.

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Speaker 1: FDA have to do now in addition to you know,

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Speaker 1: we mentioned the public comments, but what has to happen next.

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Speaker 3: The next step is actually formal. This was just an

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Speaker 3: advisory chanel, but the FDA has to formally review the

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Speaker 3: status of the drug and presumably revoke its approoved status

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Speaker 3: or narrow its approved status, because again, the drug is

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Speaker 3: useful when applied directly, for example, like through a nasal spray,

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Speaker 3: but at least orally to revoke the approval of the drugs.

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Speaker 1: How unusual is it that class action lawsuits were filed

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Speaker 1: within days of the FDA's announcement.

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Speaker 3: So, I mean it's almost reflective, right, There are plaint

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Speaker 3: of law firms around the countries that are basically built

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Speaker 3: to take on harm related to different drugs, and so

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Speaker 3: soon as the FDA said the drug was ineffective, it's

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Speaker 3: not a surprise that we saw the first class action

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Speaker 3: filed down in Florida. I'm sure we're going to see more.

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Speaker 3: The real question is, other than the harm to people's

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Speaker 3: wallets from spending one point seventy five billion on the drug,

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Speaker 3: what actual harm? You know, whether there were any side

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Speaker 3: effects that actually hurt anybody from Fenel effronts. There are

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Speaker 3: a lot of reports of like minor problems like swelling

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Speaker 3: or interration and itching, but I'm not aware of any

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Speaker 3: severe harm, and it's not clear what kind of damages

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Speaker 3: they are going to be beyond just the fact that

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Speaker 3: these companies were selling an ineffector drug.

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Speaker 1: Some of the complaints charged that the defendants violated consumer

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Speaker 1: protection statutes and alleged a breach of implied warranty of

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Speaker 1: merchant ability and they committed fraud, stating the defendants intentionally

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Speaker 1: and knowingly falsely concealed, suppressed, and or admitted material facts,

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Speaker 1: including us to the standard, quality or grade of the

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Speaker 1: products they marketed and sold. But if the FDA approved this,

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Speaker 1: what were the manufacturers supposed to do? Say no, the

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Speaker 1: FDA is wrong.

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Speaker 3: You know, there's been a lot of industry studies going on,

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Speaker 3: so we know that, for example, competitors of some of

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Speaker 3: the fenleft and products, like the folks that sharing plout

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Speaker 3: who were making Clereson were doing a lot of research

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Speaker 3: to show that and arguing that these drugs were ineffective.

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Speaker 3: It's an interesting question whether internally whether the manu were

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Speaker 3: doing their own research and had reason to know that

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Speaker 3: these drugs were not effective, and whether they turned a

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Speaker 3: blind eye to it. I think it's an interesting question,

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Speaker 3: and hopefully we'll learn about some of the internal process

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Speaker 3: within the pharmaceuticals and how much they were aware of

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Speaker 3: this and taking it seriously and concerned about it. But

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Speaker 3: you know, I think that still remains ahead of us.

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Speaker 1: You know, you mentioned harm to consumers and that there's

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Speaker 1: probably very little of that, so it would be limited

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Speaker 1: to economic damages, right, I mean, how would they determine

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Speaker 1: economic damages to consumers from this?

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Speaker 3: I think what's likely to happen. I mean, I don't

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Speaker 3: mean to sound cynical, but when this case gets prosecuted,

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Speaker 3: what's likely to happen is that the lawyers who brought

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Speaker 3: these cases will have a multimillion dollar pay day and

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Speaker 3: attorneys fees, and they'll be coupons, you know, for people

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Speaker 3: who can prove that they bought the drugs, but those

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Speaker 3: coupons will be for insignificant amounts. The big winners in

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Speaker 3: this class accent are likely to be the lawyers who

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Speaker 3: get tens of millions of dollars for filing it.

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Speaker 1: As an example, Johnson and Johnson's consumer unit settle claims

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Speaker 1: alleging aerosol products contained benzene for one point seventy five

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Speaker 1: million dollars plus two point five million in attorneys fees,

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Speaker 1: So more an attorney's fees than in the settlement for consumers.

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Speaker 4: Yeah.

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Speaker 3: So a lot of people, and including me, think it

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Speaker 3: is a defect in our class action systems that, you know,

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Speaker 3: the plane of class action lawyers are motivated to bring

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Speaker 3: cases that really don't do much to advance the public interest,

401
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Speaker 3: but to produce profitable work for them. Kind of a

402
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Speaker 3: sort of bug in our class action system that anytime

403
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Speaker 3: there's a drug, even if the harm to the public

404
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Speaker 3: is really miniscule, the plane of class action lawyers have

405
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Speaker 3: a big opportunity.

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Speaker 1: Are those kinds of suits mostly settled? Do any of

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Speaker 1: them ever go to trial?

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Speaker 3: This is certainly not a case that's going to trial.

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Speaker 3: This is clearly you know, if there were big damages

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Speaker 3: and significant amounts that would be at risk, Like if

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Speaker 3: the harm caused by a final effort was so significant,

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Speaker 3: then there would be something to fight over and a

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Speaker 3: lot at stakes. But you know, the money that the

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Speaker 3: drug companies are likely to pay for this is going

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Speaker 3: to be something like a rounding error for them. This

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Speaker 3: is not going to be one of those multi billion

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Speaker 3: dollar settlements. You know, it's likely that the plans class

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Speaker 3: ection layers will kind of have a get in quick,

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Speaker 3: you know, reach the settlements, and the drug companies will

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Speaker 3: be offered numbers that will motivate them to do so.

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Speaker 3: I think it's a pretty safe bet that we're never

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Speaker 3: going to see a trial on the marketing of fenel efern.

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Speaker 3: Does the FDA.

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Speaker 1: Give the drug manufacturers time to put new products on

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Speaker 1: the shelves or don't they take that into consideration.

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Speaker 3: The first decision is whether to actually revoke the marketing

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Speaker 3: approval for it. But if the FDA imposes a recall,

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Speaker 3: the recall is focused on exclusively on the public health

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Speaker 3: issues and not on whether these drug companies have time

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Speaker 3: to find alternatives. That's really the drug companies problems. I'm

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Speaker 3: sure that the folks at all the companies that we're

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Speaker 3: selling sele An Efferns are you know, already working hard

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Speaker 3: on that. But the really interesting question here is whether

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Speaker 3: the fact that the drug is ineffective, though not seemingly dangerous,

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00:25:07,760 --> 00:25:11,840
Speaker 3: is going to provoke an actual recall or alternatively, whether

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00:25:12,240 --> 00:25:15,600
Speaker 3: presumably its sales will decline. The drug companies will obviously

437
00:25:15,640 --> 00:25:18,200
Speaker 3: stop marketing it because you know, now that the FDA

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Speaker 3: has come out with this, it's a much higher risk

439
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Speaker 3: for them to engage in any marketing suggesting that it

440
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Speaker 3: has positive benefit, and whether we'll just fade away from

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Speaker 3: the shelves of our drug stores sort of more naturally.

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Speaker 1: I sort of assume that the FGA, in light of this,

443
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Speaker 1: would take these off the shelves at some point, since

444
00:25:34,359 --> 00:25:36,360
Speaker 1: the best you can say is they're ineffective.

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00:25:36,720 --> 00:25:40,159
Speaker 3: Honestly, I think the reason that tenneleffernd became popular in

446
00:25:40,160 --> 00:25:43,679
Speaker 3: the first place was because of problems associated with a

447
00:25:43,680 --> 00:25:47,720
Speaker 3: different decontestant that is effective, which is a related drug

448
00:25:47,760 --> 00:25:50,760
Speaker 3: category called pseudofhedriant. You know, more than fifteen years ago

449
00:25:50,760 --> 00:25:55,240
Speaker 3: we started seeing that metam fetamine dealers or manufacturers were

450
00:25:55,680 --> 00:25:59,760
Speaker 3: using due to Fedrian to make illegal drugs and so

451
00:26:00,000 --> 00:26:04,439
Speaker 3: so that led to the popularity of penalleffern as an alternative.

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00:26:04,480 --> 00:26:06,199
Speaker 3: So I think now it's kind of back to the

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00:26:06,280 --> 00:26:09,359
Speaker 3: drawing board of actually figuring out what are going to

454
00:26:09,400 --> 00:26:12,680
Speaker 3: be you know, effective decongestion, And it's going to be

455
00:26:12,760 --> 00:26:17,000
Speaker 3: interesting to see what the impact on pseudofedrian access is,

456
00:26:17,520 --> 00:26:20,639
Speaker 3: given that it is a ineffective the congestion, but also

457
00:26:21,119 --> 00:26:23,359
Speaker 3: a drug that is at risk of a view. That's

458
00:26:23,359 --> 00:26:24,760
Speaker 3: a part of the story that we haven't really been

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00:26:24,800 --> 00:26:27,000
Speaker 3: talking about yet. But I think it is clear that

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00:26:27,200 --> 00:26:30,680
Speaker 3: part of the rise of seneffrine was about the problems

461
00:26:30,720 --> 00:26:33,760
Speaker 3: associated with pseudophedrin. So it's going to be interesting to

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00:26:33,800 --> 00:26:37,200
Speaker 3: see what medications are the winners after senal eleftferm phades

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00:26:37,200 --> 00:26:37,720
Speaker 3: from the market.

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Speaker 1: Thanks so much, Harry. That's healthcare attorney Harry Nelson of

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Speaker 1: Nelson Hardiman