The Dodd-Frank Bill, signed into law last week, requires that private equity firms with $150 million or more in capital register with the SEC no later than July 2011.
VC firms are exempt from the new provision, although the law still does not specify how to distinguish between VC and PE firms. “The SEC rulemaking [in the future] will define what the difference is between VC and PE firms,” says Frederick Callori, a partner with Choate Hall & Stewart.
Stewart Kohl and Béla Szigethy, Riverside’s co-CEOs, say the new rule could cause barriers to entry for smaller firms. Kohl and Szigethy estimate that Riverside will spend roughly $300,000 a year, plus additional expenses, complying with the rule. PE Firms are also subject to enhanced record-keeping requirements as well as an SEC audit, and must designate a “chief compliance officer.” Riverside may have to hire someone to help them comply with the regs, say Kohl and Szigethy, who were visiting pour Times Square office.
“This is one more burden, or barrier, for firms,” says Kohl. “But we accept the premise that in the wake of the global financial crisis, there is a need for more global financial regulation.”
Riverside, which manages more than $3 billion in assets, will have no problem adhering to the rule. But Kohl and Szigethy made clear that private equity was not responsible for the recent broad market meltdown. “PE had nothing to do with the global financial crisis,” Szigethy says.
The Riverside co-CEOs are concerned that governments globally, particularly in Europe, may institute more financial reforms. “Countries around the world are instituting more regulations,” says Kohl. “Europe, in some ways, was more impacted by crisis than the U.S.”