Bill to Modernize PE Compliance Gets Strong Bipartisan Vote

A bipartisan bill to modernize longstanding reporting requirements for private equity firms received strong support in the U.S. House Financial Services Committee on Thursday, following its introduction into Congress last week.

Led by Reps. Robert Hurt, R-Va.; Juan Vargas, D-Calif.; Steve Stivers, R-Ohio; and Bill Foster, D-Ill., the Investment Advisers Modernization Act (H.R. 5424) would tailor requirements of the Investment Advisers Act of 1940 to reflect the private equity investor model, while also maintaining SEC oversight and investor protections.

H.R. 5424 received a vote of 47 to 12 and is now expected to move for consideration on the House floor.

The legislative action follows efforts by ACG Global and its Private Equity Regulatory Task Force, known as PERT, to support the bill.

As a result of Dodd-Frank, advisers of private funds with $150 million or more in assets under management must register with the Securities and Exchange Commission and comply with the reporting and compliance standards of the IAA. The new bill updates antiquated rules enacted prior to the development of private equity funds.

Among other changes, H.R. 5424 adjusts books and records requirements to provide advisers with a set of guidelines that can be easily interpreted, exempts them from some advertising restrictions and removes duplicate reporting requirements.

The Association for Corporate Growth on Thursday applauded the introduction of the bill. Earlier, it joined several other business organizations in a public letter of support.

“Middle-market investment is vital to growth in the U.S. economy,” said Gary A. LaBranche, ACG Global’s president and CEO. “By passing this bipartisan product, Congress will help advisers to small and midsize funds better comply with reporting requirements under the IAA and enable them to focus on growing Main Street companies and the jobs that follow.”

“By passing this bipartisan product, Congress will help advisers to small and midsize funds better comply with reporting requirements under the IAA and enable them to focus on growing Main Street companies and the jobs that follow.”
(Gary LaBranche, president and CEO, ACG Global)

Middle-market businesses employ 47 million Americans and produce one-third of U.S. GDP, LaBranche noted. The legislation helps the advisers to small and midsize funds better comply with reporting requirements under the IAA and allows them to focus more attention on Main Street companies, ultimately resulting in more jobs. The existing one-size-fits-all compliance requirements cost small and midsize advisers critical time and hundreds of thousands of dollars, he added.

In mid-May, ACG PERT member Joshua Cherry-Seto, CFO of Blue Wolf Capital, testified before the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises in support of the bill.