Small private equity firms may get registration extension: SEC

April 11, 2011

The Securities and Exchange Commission appears ready to extend a transition period for some private equity firms and other investment advisers required to register with the agency under provisions in the Dodd-Frank financial reform law.

The changes have been the cause of much worry and harried preparation among advisers, particularly smaller and mid-sized private-equity firms subject to new requirements under the legislation.

SEC Associate Director Robert Plaze told Reuters the transition period would likely be extended, but stressed the agency had not yet acted.

He was reiterating comments contained in an April 8 letter made public on the agency’s website. The letter was addressed to David Massey, the deputy securities administrator for the state of North Carolina and president of the North American Securities Administrators Association.

“We anticipate that the Commission will complete its implementing rulemaking by July 21, 2011 in accordance with the Dodd-Frank Act, but expect in connection therewith that the Commission will consider providing additional time for investment advisers affected by these provisions to come into compliance,” Plaze wrote.

Among advisers mentioned were some private equity firms, hedge funds and others with assets totaling $150 or more under management in the United States, which includes many firms required to register for the first time. They will likely to be required to register and come into compliance by the first quarter of 2012.

The other group includes some smaller firms with assets of $25 million to $100 million under management, which will have to withdraw their existing registration with the SEC and reapply at the state level. Plaze’s letter said he expects those firms will be required to report their eligibility for registration with the SEC by the 2012 deadline. Those no longer eligible would be given a grace period to register with appropriate regulators, he said.

Douglas MacLean, a Boston-based securities lawyer who has been holding seminars on compliance under the new Dodd-Frank rules, said the requirements have created a steep learning curve for firms.

“Some of these PE funds are run like a lemonade stand, in some sense,” he said. “If they’re self-administered, they’re not really subject to outside review. This is a huge awakening.”

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