The US House of Representatives has passed H.R. 1105, the Small Business Capital Access and Job Preservation Act, which will help small private equity funds by removing SEC registration requirements. H.R. 1105 was passed 254 to 159 with 18 members not voting. 36 Democrats joined 218 Republicans in supporting the measure.
“This legislation reduces the burden on private equity and growth capital firms of complicated and unwarranted registration requirements, instituted as part of the Dodd-Frank Act, on an industry responsible for investing $347 billion in U.S.-based businesses last year,” said Steve Judge, President and CEO of the Private Equity Growth Capital Council. “Private equity provides superior returns for its investors, the majority of which include pension funds, charitable foundations, and university endowments. This legislation removes registration requirements that provide no appreciable investor protections, while significantly increasing the cost of compliance for our industry.
H.R. 1105 amends Section 203 of the Investment Advisers Act of 1940 by adding the following: “Except as provided in this subsection, no investment adviser shall be subject to the registration or reporting requirements of this title with respect to the provision of investment advice relating to a private equity fund or funds, provided that each such fund has not borrowed and does not have outstanding a principal amount in excess of twice its invested capital commitments.” A PDF copy of H.R. 1105 can be downloaded for free by clicking HERE.
“The Private Equity Growth Capital Council applauds the bi-partisan passage of the Small Business Capital Access and Job Preservation Act by the U.S. House of Representatives,” said Mr. Judge. “The PEGCC is thankful for the vision and leadership of Speaker John Boehner, Majority Leader Eric Cantor, Chairman Jeb Hensarling, Congressmen Robert Hurt, Jim Himes, Scott Garrett, and Jim Cooper for their work ushering this necessary legislation through Congress.”
The Small Business Investor Alliance (www.sbia.org) which supports lower middle market private equity funds championed this legislation since its introduction and participated as the only witness during the committee hearing. SBIA member Marc Reich with Ironwood Capital testified in front of the House Financial Services Capital Markets Subcommittee on May 24, 2013. Mr. Reich’s testimony pointed to the high initial and annual cost of SEC registration and that many SEC rules are one-size-fits-all and inapplicable to the private equity industry.
H.R. 1105 now moves on to the Senate where it is expected to receive a chilly reception. “The SBIA was pleased the House focused its attention on small business investors, and we call on the Senate to follow the House and take action on this bipartisan legislation,” said Brett Palmer, the President of the SBIA. “Small businesses depend on investors for the capital they need to grow and hire. If this bill becomes law then the reduction of costly regulatory burdens facing small private equity funds will free up capital and time that will help growing businesses expand and add jobs to our economy.”
© 2013 PEPD • Private Equity’s Leading News Magazine • 12-5-13
