The United States House of Representatives passed a bill on December 4, 2013, that would restore an exemption from registration to advisers of certain private equity funds that limit leverage, an attempt to undo another Dodd-Frank Act provision that some claim hurts the economy.
H.R. 1105, the Small Business Capital Access and Job Preservation Act, introduced on March 13, 2013, would restore the exemption that the Dodd-Frank Act eliminated in 2010. The bill would exempt advisers to “a private equity fund or funds” from the registration and reporting requirements of the Investment Advisers Act of 1940. Advisers can rely on this exemption provided that each fund they advise “has not borrowed and does not have outstanding a principal amount in excess of twice its invested capital commitments.”
The bill would require the Securities and Exchange Commission to adopt rules:
- that define the term “private equity fund” for purposes of this section; and
- requiring advisers relying on this exemption to maintain records and file reports with the SEC as the SEC determines are “necessary and appropriate in the public interest and for the protection of investors.”
In writing these rules, the SEC can take into account the fund size, governance, investment strategy, risk and other relevant factors.
The bill, introduced by Rep. Robert Hurt, a Virginia Republican, on March 13, 2013, passed by a vote of 254 to 159. It now goes to the Senate for consideration.
H.R. 1105 represents the latest attempt to roll back portions of the Dodd-Frank Act that critics claim inhibit capital raising for growing companies. Its prospects for passing in the Senate appear to be slim, in view of reluctance by the Democratic majority to loosen regulation of the securities industry.