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Question of the Week: Should Small PE Firms Have to Register with SEC?

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A section of the Dodd-Frank Act has gotten PE firms in a tizzy.

Signed into law last summer, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that private equity firms with $150 million or more in capital register with the SEC no later than July 2011. Buyout shops are complaining that the new law will make it very expensive for small PE shops to comply. For example, Welsh Carson expects to spend $600,000 this year to comply with the rule.

The law also just makes life more complicated. Firms will have to file annual paperwork, develop compliance policies, keep tighter records and undergo examinations, among other obligations. PE firms will also likely have to hire personnel to deal with the new requirements.

Before the law, most PE firms didn’t have to register with the SEC. (Many of the mega buyout shops already register with the SEC, I’m told.) With the legislation, most firms, large and small, would have to comply. There is now a movement afoot to stop the changes. There was a hearing in the House on Wednesday to draft legislation to exempt buyout shops from having to comply.

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