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Middle-Market Public Policy Roundup

The House this week held hearings to explore challenges in manufacturing and address topics related to the SEC’s Division of Investment Management.

Maria Wolvin and Ben Marsico
Middle-Market Public Policy Roundup

In this week’s roundup, we recap two hearings held by the U.S. House of Representatives to address manufacturing challenges and the SEC’s Division of Investment Management. In the latter hearing, representatives commented on the impact of the SEC’s fees and expenses rule on business development companies, and the Volcker Rule.


House Hearing Spotlights Manufacturing Challenges

The House Committee on Energy and Commerce held a hearing on Sept. 26 titled “Built in America: Jobs and Growth in the Manufacturing Sector” to examine the current state of the manufacturing sector, the so-called skills gap and other workforce issues in the industry.

Three of the hearing’s four witnesses are directly responsible for operations at manufacturing firms. In their remarks, they repeatedly emphasized the challenge of finding qualified workers, both trained and untrained. According to the Manufacturing Institute, the average age of manufacturing workers has increased steadily in recent years, creating a pressing need for younger talent in the industry. All witnesses attributed the decline in U.S. manufacturing to a lack of vocational and technical education, and the negative perception of manufacturing careers within society.

Changes to the Volcker Rule, including to the definition of a “covered fund,” are currently being considered in a joint notice of proposed rulemaking by the five federal agencies charged with implementing the rule.

Middle-market firms represent an outsized portion of the manufacturing field—17 percent of middle-market companies are manufacturers, while the industry accounts for 12 percent of the economy overall. The National Center for the Middle Market’s recent study on manufacturing highlights the trends impacting manufacturing and how the industry is adapting to challenges. ACG plans to engage on behalf of the middle market as discussions surrounding this issue continue.

Lawmakers Weigh in On Fees and Expenses, Volcker Rule During Hearing

The House Committee on Financial Services held a hearing on Sept. 26 focused on the Securities and Exchange Commission’s Division of Investment Management. The director of the division, Dalia Blass, provided testimony about the department’s current direction and outlook.

The hearing addressed a variety of topics, including the SEC’s acquired fund fees and expenses rule, which requires registered funds that invest in other funds to include the fees and expenses of the funds in which they invest in their own fee and expense calculations. The rule prompted business development companies to be removed from the S&P and Russell indexes due to investor concerns related to overall expense ratios, which in turn reduces the number of investors in BDCs.

Rep. Steve Stivers, R-Ohio, objected to the rule. “I think it’s having a negative impact on an investment that allows a lot of Main Street folks to be able to participate in middle-market companies, and investments that they haven’t had access to,” he said. He requested that BDCs be exempted from the rule in the same way real estate investment trusts were excluded—due to the fact that they are active, not passive, investment funds.

Regarding proposed changes to the Volcker Rule addressed during the hearing, Rep. Randy Hultgren, R-Ill., and Rep. Ted Budd, R-N.C., expressed concerns that the current rule is too broad. Hultgren reiterated a previous request that venture capital funds be exempted from the rule, citing testimony from Federal Reserve Chairman Jerome Powell, who said VC funds do not pose systemic risk. Budd suggested the Volcker Rule was not intended for long-term investments.

Changes to the Volcker Rule, including to the definition of a “covered fund,” are currently being considered in a joint notice of proposed rulemaking by the five federal agencies charged with implementing the rule. ACG intends to take advantage of this important opportunity to advocate on behalf of the middle market.

Check back each Friday for the weekly Public Policy Roundup. Is there a policy issue you’d like us to cover? Send your suggestions to MMG Editor Kathryn Mulligan at kmulligan@acg.org.


Maria Wolvin is ACG Global’s vice president and senior counsel, public policy.

Ben Marsico

Ben Marsico is ACG Global’s manager of legislative and regulatory affairs.