Buyouts Snapshot: Frank advocates changes to Dodd-Frank PE registration

Former U.S. Rep. Barney Frank – the “Frank” in the Dodd-Frank financial reform act – believes Congress should reconsider the $150 million threshold above which private equity firms must register with the SEC.

“In the crisis situation, we erred on the side of maybe being too inclusive,” Frank said in a speech at Private Equity International’s CFO COO Forum in New York City Jan. 21. “I would seriously recommend that they look at raising that amount.”

While Frank hedged his remarks by saying he had not given the matter serious consideration in some time, his comments will likely be welcome news for smaller private equity managers that registered as investment advisers with the SEC. Critics of the registration requirement argue the rule has burdened small firms with unreasonably expensive compliance costs.

“I would be inclined to give more power to the regulators,” Frank said. “Give the SEC the power to adjust (the $150 million amount) upwards after a certain period of years.”

Frank did not endorse removing the registration requirement entirely, however. On Jan. 14, the U.S. House of Representatives passed legislation that would eliminate the registration requirement for certain private funds. After his speech, Frank told Buyouts that he was skeptical of the newly proposed legislation, called the ‘‘Promoting Job Creation and Reducing Small Business Burdens Act.’’

“I would have to hear a better argument,” he said. “I haven’t heard the argument for it, so I would start out being skeptical.”

Frank expanded on the reasoning behind the registration requirement in his keynote speech, saying it was meant to examine the aggregate impact of private equity on the economy, and to determine if that impact represents a systemic risk.

“That is one of the reasons for the reporting that a lot of you think is a big pain in the ass,” he said.

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