In just three short months, on July 24, private equity and hedge fund firms will have to start filing reports with the Securities and Exchange Commission.
A survey by law firm Willkie Farr & Gallagher LLP found that while most of the largest U.S. hedge funds already have legal and compliance infrastructure to deal with the new requirement, most unregistered private equity firms have only one internal legal or compliance person, usually the general counsel. According to the survey, only 35% of the top 100 private equity managers already have registered.
“There is a race right now for the thousands of private equity funds that will have to report to the SEC in July,” said Ben Mazza, managing director with Investment Cafe, a firm that sells compliance and reporting software to private equity firms. “You can't find a cheap compliance officer.”
“The good news for private equity firms is that their core business, which is raising funds and doing portfolio company transactions, is largely unaffected,” said Jason Brown, partner in the Boston office of law firm, Ropes & Gray. Registering with the SEC won't affect firms' ability to buy and sell businesses. However, he added: “To be clear, there will be some changes.”
Not all firms are taking the registration in stride. A small group of middle-market private equity firms, including Stamford, Conn.-based Olympus Partners and Boca Raton, Fla.-based Brockway Moran & Partners Inc., are asking for a one-year extension and eventual exemption from filing, according to letters sent by firm executives to the SEC.
Also, a bill introduced in the House three weeks ago by Reps. Robert Hurt, R-Va., and Jim Cooper, D-Tenn., seeks to exempt all private equity firms from registration and reporting requirements.