Senator challenges SEC registration bill

The new bill, introduced by Senate Banking Committee chairman and representative for Connecticut Chris Dodd, is broadly similar to the existing act, but would only require hedge fund managers to register. Private equity firms would still be subject to some SEC reporting regulations under the act, however.

The discussion draft says, “Except as provided in this subsection, no investment adviser shall be subject to the registration or reporting requirements of this title with respect to the provision of investment advice relating to a private equity fund.”

Douglas Lowenstein, president of advocacy group the Private Equity Council, has argued that measures like those approved by the House Financial Services Committee are unnecessary for private equity firms, saying that they do not present the kind of risk that resulted in the US financial crash.

Speaking before the House Financial Services Committee last month, Lowenstein said, “PE firms are not deeply interconnected with other financial market participants through derivatives positions, counterparty exposures or prime brokerage relationships. When applying the administration’s systemic risk factors to private equity, it is hard to see how any particular PE fund could be considered to present a systemic risk.

“PE funds invest in long-term illiquid assets that are typically the equity of operating companies. Private equity funds do not normally invest in short-term instruments such as derivatives, options, swaps or listed equities,” he added.

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