Barney Frank, a driving force behind the Dodd-Frank bill, told a captivated audience at the forum that the current Congress should “look at” the $150 million threshold for determining what size a private fund adviser can reach before becoming subject to Securities and Exchange Commission oversight.
Dodd-Frank requires GPs managing north of $150 million of assets under management to register with the commission. Frank, answering a question from the audience, said whatever threshold used should also be “indexed” for inflation. The comment took many by surprise, delegates told pfm reporters on the sidelines, considering Frank’s reputation as an advocate for more supervision, not less, of unfamiliar investment strategies and asset classes.
Frank left Congress in 2013 but is still an influential consultant on the landmark financial reform bill as Republicans wage a campaign to repeal some of its key elements. He also addressed the SEC’s Financial Stability Oversight Committee, which may designate certain large insurers and asset managers “systematically important financial institutions” or SIFIs. The label would make them subject to greater scrutiny and restrictions, potentially similar to those that already apply to banks.
The SEC has already slapped this label on some insurers, including MetLife which has publicly fought back. It is also considering assigning it to some asset managers, though Frank said that this is unlikely, even for the very largest firms.
Responding to a question from the audience on whether managers engaged in private lending could be labeled SIFIs, Frank said it’s unlikely but “that’s one of the reasons for the [regulatory] reporting [requirements] that you think [are] a pain in the ass,” he said, referring to mandatory SEC filings.
He explained that the watchdogs need clarity on what these firms actually do. One firm “probably can’t become a behemoth like Citi, but they [the regulators] still want to make sure that everyone doesn’t rush to the same side of the boat at the same time and tip it over,” said Frank.