Today, the House Committee on Financial Services heard testimony on Enhancing Oversight of Private Pools of Capital. This seems to be is response to the draft Private Fund Investment Advisers Registration Act. Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, released a discussion draft of the bill.
This was likely to be a battle over who gets regulated. Congressman Kanjorski opened that door by including a registration exemption for “Venture Capital” funds, with no definition of what that means.
Panel Two—Enhancing Oversight of Private Pools of Capital
- Testimony of the Honorable Richard H. Baker,
President, Managed Funds Association - Testimony of Mr. Douglas Lowenstein, President, Private Equity Council
- Testimony of Mr. James S. Chanos, Chairman, Coalition of Private Investment Companies
- Testimony of Mr. Terry McGuire, Co-Founder and General Partner, Polaris Venture Partners, and Chairman, National Venture Capital Association
Rep. Paul E. Kanjorski emphasized that the committee wanted to works with the industry to impose regulations that would not burden the industry with lots of compliance costs. His audience of fellow Congressmen was limited. There were more empty seats than Congressmen.
The panelists emphasized that the full burden of the Investment Advisers Act would inhibit the private fund industry. They also pointed out that many of the types of private pools of capital (other than hedge funds) do not have systemic risk and were not part of the cause of the financial industry issues.
The hearing did include a battle over whether there should be registration and who should be registered. “We only deal with sophisticated investors, we think we should be treated differently than retail investments.”