S.E.C. Delays PE’s Registration Due Date

The Securities and Exchange Commission made the most of Friday, as the federal government faced–but ultimately did not go through with–its first shutdown in nearly two decades. And while some venture capitalists were no doubt ruffled by news the agency is considering doing away with its 500 shareholder rule, private equity firms are rejoicing in what looks to be a delay in their looming S.E.C. registration requirement.

The agency released a statement late Friday saying it will delay implementing the investment advisors registration portion of the Dodd Frank Act that was set to take effect in late July, much to the consternation of small- and middle-market private equity firms. LBO shops have been campaigning for exemption from Dodd Frank’s registration requirement for investment firms with as little as $150 million in assets.

In a story first reported by The Wall Street Journal, an S.E.C. associate director stated in a letter “we expect the commission will consider extending the date…until the first quarter of 2012” and that the agency will make a public declaration “in advance of July 21,” the date the rule was to take effect.

The pending registration requirement—which, now, seems headed for debate and reconsideration—earned the scorn of smaller firms that decried the high cost of compliance.

In the meantime, expect PE to deploy an arsenal of lobbyists to Capitol Hill to try and earn clients exemption, said Joel Wattenbarger, a partner in Ropes & Gray’s hedge funds, private equity and investment management practice. The longer the matter awaits final determination, the longer legislators have to make changes, though it is unlikely Democrats will permit widespread amendments to Dodd Frank. Because—at some point—PE firms will have to register as investment advisers, already, they have been preparing for the legislation to take effect.

“Most of our clients are pretty far down the road” on registration paperwork and compliance matters, Wattenbarger said.