US Congress set to debate Dodd-Frank rules on PE

This week Republican congressman Robert Hurt will introduce legislation that would exempt private investment firms from registration with the SEC.

Robert Hurt, a Republican member of the US House of Representatives’ Financial Services Committee, is taking the lead against new rules thatwould further regulate the private equity industry. 

Under the landmark Dodd-Frank financial reform bill passed last summer, private investment firms with $150 million or more in assets will need to register with the Securities and Exchange Commission and designate or hire a compliance officer. Private equity firms are wary of registration mainly because of compliance costs, as well as the future regulatory scrutiny it is likely to bring in the form of audits and other compliance issues. Concerns also have been raised about the SEC’s ability to regulate the vast number of private equity firms that would need to register.

Robert Hurt

During a hearing in Washington DC on Wednesday, Hurt will introduce “The Small Business Capital Access and Job Preservation Act,” which “exempts advisors to private equity funds from the registration requirements”, according to a congressional statement.  

The Riverside Company’s chief operating officer Pam Hendrickson will be among those testifying at Wednesday’s congressional hearing, which will broadly examine Dodd-Frank’s potential stifling of job creation.

“The registration of private equity firms as proposed by Dodd-Frank will not accomplish the Act’s stated purpose of helping identify and reduce systemic risk in the US financial system”, said Hendrickson in written testimony submitted ahead of the hearing.

“But it will impose an undue burden on private equity firms – especially small and mid-sized firms – in terms of both money and time. And that will divert scarce resources from buying and building small and mid-sized companies – the engines that drive job growth in the United States,” the testimony says.

If passed by the Republican-controlled House, the bill would then move on to approval by the Senate, where Democrats retain a slim majority. President Obama ultimately would hold veto power over any potential legislation, which if used, means the bill would need a two-thirds majority in Congress to pass. 

The legislative hearing will be streamed live beginning 2pm (EST).