WASHINGTON Dec 4 The U.S. House of Representatives passed a bill on Wednesday that would largely spare private equity fund advisers from federal regulations enacted after the 2007-2009 financial crisis.
The bill would exempt many private equity fund advisers from a provision in the 2010 Dodd-Frank Wall Street Reform law which required advisers with more than $150 million in assets under management to register with the U.S. Securities and Exchange Commission.
Any firm that registers with the SEC is also subject to reporting rules and is required to open its books to agency examiners for routine compliance inspections.
Dodd-Frank also imposed more extensive confidential reporting requirements on larger private equity and hedge fund advisers in an effort to help U.S. regulators monitor possible broader systemic market risks.
In a 254-159 vote Wednesday, the Republican-controlled House passed the bill with more than 30 Democrats also voting in favor. It does not stand a strong chance of becoming law, however, because there is no likely action in the Democratic-controlled U.S. Senate after President Barack Obama threatened to veto the bill.
The administration said it "represents a step backwards from the progress made to date, given that private equity fund advisers have been filing reports with the SEC for over a year."
Republicans who voted to support the bill on Wednesday argued that the SEC's new rules of the road for private equity funds are unwarranted and overly burdensome.
They said that because only sophisticated investors can buy into private equity deals, the SEC should focus on examining and regulating advisers that deal with small investors.
"The Dodd-Frank Act has imposed enormous burdens on private equity firms, forcing most fund advisers to spend millions of dollars complying with new SEC registration and reporting requirements," said New Jersey Republican Scott Garrett, who chairs a Financial Services Committee panel with oversight of the SEC.
SEC Chair Mary Jo White also previously recommended against passing the bill, saying the markets would "not be well-served by narrowing the scope of the commission's jurisdiction" in the private equity area.