(Bloomberg News) Private-fund advisors serving the most sophisticated clients should be exempt from the full force of registration requirements under the Dodd-Frank Act, the U.S. Securities and Exchange Commission's Daniel Gallagher said.
As private-equity and hedge funds prepare to meet a March 30 registration deadline, the SEC should consider letting some avoid parts of the requirement, Gallagher said today in remarks prepared for a conference in Arlington, Virginia. Gallagher, one of two Republicans among the SEC's five commissioners, used the example of advisors who don't use leverage and market their services "only to sophisticated and institutional investors."
"There will be cases, moving forward, when an individual advisor or a particular class of advisors ought to be granted some measure of relief," he said in a speech to the Investment Adviser Association. "In many instances, all investors in a given private fund are sophisticated enough and possess enough bargaining power to ensure adequate disclosure."
Dodd-Frank, the regulatory overhaul enacted in response to the 2008 credit crisis, requires the SEC to register private fund advisors. The agency's registration rule, adopted before Gallagher joined the SEC in November, requires reporting of data on employees, investors and assets they manage. Fund advisors are also preparing to report private data on a new Form PF that will be used by the Financial Stability Oversight Council to weigh potential risk in the funds.