Gensler weighs private fund reforms

'The SEC must grow and evolve with the industry,' chairman says.

SEC Chairman Gary Gensler has asked his staff for recommendations on overhauling private fund disclosure rules and “other reforms,” he tells Congress.

There are now more than 18,000 private equity funds, Gensler told the House Appropriation’s Subcommittee on Financial Services May 26. Over the same period, the number of venture capital funds rose 110 percent, to more than 1,700, Gensler said.

“This trend creates new risks for markets and investors,” Gensler said, reading from his prepared testimony. “The SEC must grow and evolve with the industry. Given the growth and changes in private funds, I’ve asked staff for recommendations for consideration of enhanced reporting and disclosure through Form ADV, Form PF, or possible other reforms.”

Into the light

Private fund reform had languished in the cellar for decades. Years of lobbying by reform advocates – from state regulators to consumer rights activists – have finally dragged it into the light. Both of Gensler’s Democratic colleagues on the Commission have already endorsed reforms, especially in the Reg D market, as reported by affiliate title Regulatory Compliance Watch.

It is not a cleanly partisan issue. At Gensler’s confirmation hearing, for instance, Republican Louisiana Senator John Kennedy asked Gensler why no one had gone to jail behind the mortgage crisis.

Read Gensler’s full testimony here.