Specialty firms await surge in SEC registrants

EisnerAmper and TerraNua are preparing for a barrage of new private equity clients seeking help with the Securities and Exchange Commission’s registration process.

In July, President Barack Obama signed off on finance reform that will require private equity firms with $150 million or more in assets to register with the SEC. Managers have one year to comply with the new rules.

Consultants and accounting firms are waiting for new clients to pour in.

SEC registration will keep the firms busy for some time, said Michael Laveman, a partner in the financial service division of EisnerAmper, one of the largest auditors of SEC registrants.

“There has been a lot of activity on the [private equity] compliance side,” said Laveman, adding that the firm expects a significant uptick in new business once the summer ends.

Under the new registration requirements, private equity firms will need to establish formal compliance policies to outline how they would deal with potential conflicts of interest. Registration also means firms will face regular inspections by the SEC.

“The actual registration process is relatively smooth,” said Laveman, noting managers have been anticipating the new regulations for “quite some time”.

Private equity managers are seeking guidance for the rapidly changing regulatory landscape, new taxation initiatives, and a volatile and competitive business environment, said Laveman.

Brian Fahey, CEO of TerraNua, agrees.

TerraNua, which offers governance, risk and compliance services, estimates that only 5 percent of private equity firms are registered.

“One common misconception is when people think you do whatever the legislation says. What you really have to do is comply with a set of established SEC rules and expected practices. The good news is it’s very well understood,” said Fahey.

New reporting requirements are the cause of most concern among managers, said Fahey.

“During the initial setup, a lot of firms out there need help with what needs to be done to comply. One of the good things is these are established rules and practices. There really isn’t anything new there,” said Fahey. “It’s a matter of getting organized and aligning with firms that will make the process seamless.”