Two House Republicans are applying pressure on the Securities and Exchange Commission (SEC) to explain the net benefit of its recently expanded oversight powers on the private equity industry.
House Financial Services Committee Chairman Jeb Hensarling and New Jersey Republican Scott Garrett, who chairs the Capital Markets Subcommittee, raised their concerns in a letter sent to SEC chair Mary Jo White, which has been seen by Reuters. The SEC declined to comment on the letter.
“For these advisers, the SEC examination process has proven to be burdensome, costly, inefficient and inflexible,” Hensarling and Garrett reportedly wrote.
The letter reportedly aims criticism at the SEC for focusing resources on private equity firms instead of advisers who cater to less sophisticated investors. The SEC is required by law to evaluate the economic costs and benefits of its rules. Stakeholders in turn have the power to challenge the SEC’s judgement in court.
Last year private equity firms managing north of $150 million in assets were required to enter the SEC's remit, which brought the possibility of undergoing presence examinations conducted by the Office of Compliance Inspections and Examinations (OCIE).
In March, Representative Robert Hurt re-introduced legislation that would exempt private equity fund managers from registration and reporting requirements instituted by Dodd-Frank. After passing the House Financial Services Committee in June, that bill has since stalled.
There are approximately 1,500 newly-registered private fund advisers and the SEC’s ultimate goal of having 25 percent of these new examined is on track, said newly appointed examination chief Jane Jarcho last month.
The two Republicans asked for the SEC to respond to their letter in writing by September 20.