US representatives present draft law to ease PE rules

Draft legislation introduced to ease regulatory requirements on private equity funds will be presented today at a hearing alongside two other draft bills.

The bill, which has been drawn up by Virginia congressman Robert Hurt and California congressman Juan Vargas, intends to “amend the Investment Advisers Act of 1940 and to direct the Securities and Exchange Commission to amend its rules to modernise certain requirements relating to investment advisers, and for other purposes,” according to the discussion draft on the legislation.

During the hearing, the House of Representatives Capital Markets Subcommittee and Government Sponsored Enterprises will “examine the current competitiveness of US capital markets and regulatory burdens impacting capital formation, job creation, and economic growth,” according to a memorandum. Alongside committee members, the hearing will also consist of five witnesses, including Joshua Cherry-Seto, chief financial officer at New York-based private equity firm Blue Wolf Capital Partners.

Under the draft bill, the Securities and Exchange Commission (SEC) would have to exempt funds from certain onerous reporting requirements, including the disclosure of financial details about their underlying portfolio companies.

In recent years, there have been a number of bills that have been introduced to end SEC registration for private equity funds, but have been held up in the Senate. In 2013, Representative Robert Hurt re-introduced legislation that would exempt private equity fund managers from registration and reporting requirements instituted by Dodd-Frank. However, after passing the House Financial Services Committee in June, the bill was stalled.

House Financial Services Committee Chairman Jeb Hensarling and New Jersey Republican Scott Garrett, who chairs the Capital Markets Subcommittee, are not in favour of the SEC’s expanded oversight powers on the private equity industry and raised concerns about the benefits in a letter sent to SEC chair Mary Jo White a few years ago,.

The meeting is being held a few days after the SEC enforcement director Andrew Ceresney told delegates at the Securities Enforcement Forum that the regulator would continue to “aggressively” monitor private equity firms for breaches of fiduciary duty.