Managers of large private pools of capital including hedge funds, private equity funds and venture capital funds would be required to register with the SEC under an Obama administration proposal outlined today by Treasury Secretary Timothy Geithner.
Mr. Geithner urged federal lawmakers to approve such legislation during testimony before a House Financial Services Committee hearing.
Registration is needed to permit the SEC to assess whether such funds individually or collectively pose a threat to financial stability, said Mr. Geithner, according to the text of his testimony.
In his testimony, which lays out Treasurys priorities for regulatory reform, Mr. Geithner said only larger firms should be required to register. His testimony recommends the use of an assets-under-management test to establish the threshold but does not endorse a specific amount.
Firms required to register would be subject to reporting and disclosure requirements for regulators, investors and counterparties, according to the prepared testimony.
The regulatory requirements for such funds should require reporting, on a confidential basis, information necessary to assess whether the fund or fund family is so large or highly leveraged that it poses a threat to financial stability, Mr. Geithner said in his testimony. Firms that pose a systemic threat would be subject to prudential standards set by regulators, including capital, liquidity, counterparty and credit-risk management requirements.
The law does not now require managers of private pools of capital to register with the SEC, although many managers of hedge funds have registered voluntarily. It is unclear how many managers of private equity and venture capital funds also have registered.
As of Dec. 31, at least 1,804 managers of hedge funds were registered with the SEC, according to spokesman John Heine. But Mr. Heine said the SEC hasnt tried to calculate how many managers of other sorts of private pools of capital, including private equity and venture capital funds, are also registered at the SEC.
Richard H. Baker, president and CEO of the hedge fund industrys Managed Funds Association, Washington, said it is important to note that more than half of all hedge funds, representing 70% of total assets under management, are already voluntarily registered with the SEC. We look forward to working constructively with Treasury Secretary Geithner, other congressional leaders, and the Obama administration in the broader dialogue on financial regulatory reform, Mr. Baker said in a statement.
Robert Stewart, a spokesman for the Private Equity Council, Washington, declined to comment.
Emily Mendell, a spokeswoman for the National Venture Capital Association, Arlington, Va., said her association opposed a registration requirement for venture capital firms.
We really feel this would be a regulation aimed at mitigating risks in which the venture capital industry largely does not play a part, Ms. Mendell said. This is a time the country should be supporting venture capital firms because were in the business of creating new companies and new jobs, which is what the country needs right now.