SEC considers new registration deadline

The deadline for most private equity firms to register with the SEC has been set for 21 July, but this may be extended to Q1 2012.

The US Securities and Exchange Commission is considering extending the deadline by which most private equity firms must register into the first quarter of 2012.

The commission has not yet made a final determination on extending the deadline, but is expected to provide firms more time, according to Robert Plaze, associate director with the SEC. It’s not clear when the commission will make a final decision on whether to extend the deadline.

“Given the time needed for advisors to register and come fully into compliance with the obligations applicable to them once they are registered, we expect that the commission will consider extending the date by which these advisors must register … until the first quarter of 2012,” Plaze wrote in a letter posted on the SEC’s web site Friday.

The US financial reform bill “Dodd-Frank” passed last year mandated that private equity firms with $150 million or more of assets under management in the US register with the SEC. Registration will give the US government more oversight over managers, including the right to run inspections and forces firms to hire or designate a compliance officer.

“I think this will be a relief to all unregistered private equity firms,” said Jason Brown, a partner at law firm Ropes & Gray, who has worked with firms on registration.

The SEC’s rationale behind extending the deadline probably has to do with the uncertainty over which firms have to register, Brown said. The SEC has not yet finalised registration rules, which it is required to do on 21 July, the same day firms must have registered by.

For example, firms that straddle the line between venture capital and private equity still don’t know if they must register. Similarly, there is uncertainty around the $150 million AUM threshold in the US, including whether or not that amount will include uncalled commitments and how it will apply to non-US private equity firms, Brown said. The registration proposal calls for uncalled commitments to be included in AUM, and many non-US advisors to be excluded from registration, but that has yet to be finalised, he said.

“It’s fair to say the SEC has been keenly aware of the fact that until they adopt these rules, there are a number of firms who won’t know whether they need to register or not,” Brown said.

The revelation that the SEC is considering extending the deadline comes a few weeks after a Republican member of the House of Representatives, Robert Hurt, introduced legislation that would exempt private equity firms from registering.

Many firms have been preparing to meet the 21 July deadline, while some firms like Bain Capital, Kohlberg Kravis Roberts, The Carlyle Group and TPG Capital have already registered with the SEC. Private equity managers have been wary of registering mainly because of compliance costs as well as future regulatory scrutiny in the form of audits and other compliance issues.

The Riverside Company’s chief operating officer Pam Hendrickson testified in front of Congress in March that the registration requirements would “impose an undue burden on private equity firms – especially small and mid-sized firms – in terms of both money and time”, according to a transcript of her prepared testimony.