These are my live notes from PEI’s Private Fund Compliance Forum.
They are likely to be incoherent and full of typos.
Panel Member:
Jason Mulvihill, General Counsel, Private Equity Growth Capital Council
Joel Wattenbarger, Partner, Ropes and Gray
A bill has passed the House that would exempt private equity fund advisers from registration. It’s unlikely to pass the Senate and unlikely to pass a presidential veto.
The CFTC is working on various rules related to private funds. One is a rule on position limits. The rule proposes to aggregate positions in subsidiaries. The CFTC is still providing some temporary relief for fund of fund managers having to register as a CPO/CTA based on investments by the underlying funds.
The SEC has a private funds working group at OCIE. In the long run that should be a benefit because it should eventually get examiners more educated on the private funds industry. But in the short-term there may be some difficult gyrations as the SEC finds practices it does not understand and also fails to grasp industry practices. (A little knowledge can be a dangerous thing.) As a new group, they may want to make a name for themselves and could be out looking to make the news.
The SEC indicated that it understood that the Investment Advisers Act may not been a great fit for private funds given the current regulatory framework. However, there has been little movement to better adapt the regulatory framework.
There is concern about the statistics cited in Bowden’s speech. The SEC is not distinguishing between a $1000 accounting error in a multi-billion dollar fund and serious cases of theft and abuse of funds.
The audience is overwhelmingly not using general solicitation as part of their private placements. The proposed rules are scaring people away. The rules are a mistake. The House Committee on Financial Services is even working on a bill that would repeal the proposed rule. But the SEC publicly stated that it did not like the JOBS Act.
Broker-Dealer issues seem to have waned. That grenade was thrown last year. The question is still being asked in some exams. The issue is not dead. Expect a rule to come out and the issue to come roaring back. The SEC may be providing some relief for private funds and their fundraising platform.
Carried interest will stay on the plate. But, it’s unlikely for anything to happen during this election year. The debate will continue.
