CONGRESSWOMAN ELISE STEFANIK
On Wednesday, December 4, 2013, the House will consider H.R. 1105, the Small Business Capital Access and Job Preservation Act, under a rule. H.R. 1105 was introduced by Representative Robert Hurt (R-VA) on March 13, 2013 and has twelve cosponsors. H.R. 1105 was marked up by the House Committee on Financial Services on June 19, 2013 and was favorably reported by a vote of 38-18. Similar legislation was favorably reported out of the Committee by voice vote in 2011.
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According to the Financial Services Committee report, “[t]itle IV [of the Dodd-Frank Act] imposes new registration and reporting requirement[s] on hedge funds and private equity firms. Specifically, Title IV requires investment advisers to private investment funds to register with the SEC under the Investment Advisers Act of 1940.” Advisers to the private funds are required to maintain records and file reports with the SEC. These reports are also made available to other regulators, including the Financial Stability Oversight Council (FSOC). The information required to be reported includes: the amount of assets under management and use of leverage; counterparty credit exposure, trading and investment positions, valuation policies and practices, types of assets held, side arrangements, trading practices, as well as other information deemed necessary by the SEC in consultation with the FSOC for the public interest or to assess systemic risk. The cost of complying with the registration requirements is expected to be $500,000 per fund and approximately several hundred thousand dollars annually per adviser for ongoing SEC compliance.
Certain limited exemptions to the registration requirement already exist under the Dodd-Frank Act. “Private fund advisers with assets less than $150 million qualify for a limited exemption from registration if they comply with recordkeeping and reporting requirements to be established by the SEC. The Dodd- Frank Act also exempts ‘family offices’ from registration, as those [family offices] are defined by the SEC rule. Lastly, advisers registered with the Commodity Futures Trading Commission (CFTC) as commodity trading advisers are exempt from registration, unless the business of the adviser becomes predominantly securities related after the Dodd-Frank Act takes effect.” It is important to note that the bill does not change the existing requirement under the Dodd-Frank Act that “all private fund advisers maintain records and make them available to the SEC for the protection of investors or for the assessment of systemic risk by the Financial Stability Oversight Council.”
Witnesses testified before the Committee that enactment of “H.R. 1105 would strengthen the ecosystem of the private equity marketplace by reducing overregulation that threatens capital access for small businesses. This bill will help private equity funds by removing unnecessary regulatory burdens that are tying up precious resources and wasting investor capital which would otherwise be directed towards growing small businesses.”
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H.R. 1105 exempts advisers to certain private equity funds from the new registration requirements set forth in Title IV of the Dodd-Frank Act. Specifically, H.R. 1105 exempts advisers to private equity funds that have not borrowed and that do not have outstanding a principal amount in excess of twice their funded capital commitments.
CBO reports that “implementing the bill would not have a significant effect on the agency’s [SEC] workload. Therefore, we estimate that implementing the bill would not have a significant effect on spending that is subject to appropriation. Further, the SEC is authorized to collect fees sufficient to offset its annual appropriation; therefore, CBO estimates that the net budgetary effect of implementing H.R. 1105 would be negligible. Enacting H.R. 1105 would not affect direct spending or revenues; therefore pay-as-you-go procedures do not apply.”
 See CBO Cost Estimate.
1) Rep. Maloney (D-NY) Amendment #2 – Amendment requires private equity fund advisers to register with the SEC, but directs the SEC to create a simplified registration and disclosure regime for small private equity fund advisers.
For questions or further information contact the GOP Conference at 5-5107.