At some point between now and the end of the second quarter, the Securities and Exchange Commission will provide its definition of venture capital firms for the purposes of their classification under and–hopefully for the industry–exemption from the Dodd Frank Act.
When it happens, National Venture Capital Association President Mark Heesen will be prepared.
Heesen told NVCA annual meeting attendees Thursday in Boston he hopes the S.E.C. provides the venture capital industry flexibility and that he feels the agency’s comments period allowed VC pros an opportunity to make themselves heard—and also that they cannot stop now.
“The S.E.C. has moved in our direction,” Heesen told NVCA event attendees during a Thursday morning panel, adding that once the agency formally declares its framework after weighing comments industry professionals and lawmakers have submitted, that VC pros should reach out to Congressional representatives to affect further change.
Funds now being raised—including several billion-dollar-plus investment vehicles—will escape regulation via a grandfather clause and VCs will be allowed to operate without further regulatory burdens. In fact, one source told peHUB, it is likely that other top-tier VCs that have taken advantage of the asset class’ momentum to pursue a new fund will soon seek to close large funds to ensure those vehicles, as well, will remain exempt from registration regardless of the S.E.C.’s determination.
Heesen is far from alone. Small and mid-market private equity firms are also fighting against the prospect of looming registration requirements and complaining of the high due diligence fees that will be imposed upon them in the process.
In his discussion of the current state of the regulatory environment with outgoing NVCA Chairman Kate Mitchell, Heesen decried the “dearth of IPOs” on American equities markets, as did other NVCA event attendees, particularly the persistent lack of smaller offerings. Privately, some conference attendees chalked up the lack of smaller listings to a lack of boutique bank services, a lack of analysts coverage and decimalization of U.S. exchanges.
Heesen and Mitchell also spent a little time bemoaning the current state of U.S. immigration policy—as did, yesterday, panelists at the NVCA joint event with Xconomy at MIT—for failing to provide foreigners graduating from American institutions a green card and an on-ramp to the domestic job market.
Along with pitching change to Congressional representatives, Mitchell said, the NVCA will work toward amending portions of Sarbanes-Oxley legislation to improve smaller companies’ chances of attaining an IPO.