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Early versions of Dodd-Frank
had an exemption from registration for private equity fund managers, just as
there is one for venture capital fund managers. Perhaps there is some hope that
the private equity exemption will once again surface?
Don't count on it.
Although I appreciate the efforts of Congressmen Hurt,
Cooper, Garrett, Himes, and others. They wrote a January
30 letter to the Securities and Exchange Commission urging the SEC to "delay
the March 30, 2012 registration deadline and to exempt advisers to private
equity funds that are not highly leveraged at the fund level from the new
registration requirements." They point out that The Small
Business Capital Access and Job Preservation Act has a new registration
exemption for private equity. Unfortunately, it's been sitting
dead since it was passed by the House Financial Services Committee in June 2011.
The congressmen's argument:
In addition, [the Congressmen] believe that requiring
registration by private equity fund advisers not only misdirects resources at
private equity firms but also at the Commission. As a result of private equity
fund adviser registration, the Commission will have hundreds of new firms to
oversee and inspect. The Commission's resources will thus be diverted away its
core responsibilities of protecting retail investors and other new oversight
priorities that can contribute in a meaningful way to financial stability.
It's a nice argument, but too late. The registration
deadline is March 30, but the filing deadline is February 14. Private equity
firms already have their resources allocated or are very far along in gathering
I've heard some whispers from limited partners indicating
they are concerned that private equity is fighting against SEC registration
under the Investment Advisers Act. Although it's a good regulatory scheme for
hedge funds, there are many items in the scheme that is a poor fit for private
equity. The insider trading requirements and custody rule are at the top of my
additional commentary on developments in compliance and ethics, visit Compliance Building,
a blog hosted by Doug Cornelius.
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