New Private Equity Registration Exemption??

The U.S. House of Representatives is expected to vote on legislation that would  exempt certain private equity fund advisers from U.S. Securities and Exchange Commission (“SEC”) registration and reporting rules.

The Dodd-Frank Act significantly changed the adviser registration requirements. As a result, many advisers to private investment funds, including private equity funds, must register with the SEC. The Dodd-Frank Act exempts a limited group of advisers from this registration requirement, including advisers to private funds with assets under management of less than $150 million (subject to recordkeeping and reporting requirements); “family offices,” as defined by the SEC; and advisers to certain venture capital funds.

The proposed bill would exempt advisers to private equity funds that have not borrowed and that do not have outstanding a principal amount in excess of twice their funded capital commitments.

The bill further requires the SEC, within six months of enactment, to issue rules defining the term “private equity fund” and requiring exempted advisers to maintain records and provide reports that the SEC determines are “necessary and appropriate in the public interest and for the protection of investors.” In establishing the latter rule, the SEC is to take into account “fund size, governance, investment strategy, risk and other factors.”