This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Venture Capitalists Resist Regulatory Calls

Stocks in this article: BAC C AAPL

WASHINGTON ( TheStreet) -- Since the Obama administration proposed legislation requiring private pools of capital to register with the Securities and Exchange Commission, venture capitalists have been crying foul, saying their businesses don't pose a threat similar to that of Bank of America (BAC) and Citigroup (C).

The Private Fund Investment Advisers Registration Act of 2009, as it was originally drafted last summer, proposed that investment advisers with more than $30 million of assets be required not only to register with the SEC, but also to subject themselves to regulatory reporting requirements, which would mean, among other tasks, establishing "a comprehensive compliance program."

"It's galactically stupid," says Juan Enriquez, a managing director of Excel Medical Ventures in Boston, whose portfolio has included IPC (IPCM) and Molecular Insight Pharmaceuticals (MIPI). "No venture fund is large enough to be a systemic risk to the economy," he says.

The National Venture Capital Association has been lobbying against the proposed legislation. Earlier this month, NVCA Chairman Terry McGuire made his case in front of the U.S. House of Representatives Committee on Financial Services. He argued that while the VC industry is inherently risky -- with a third of venture-backed companies ultimately failing -- venture funds don't undermine the health of the nation's finances.

"While we lose our capital, there are no derivative transactions or leverage that would lead to a ripple effect," McGuire said.

Venture capital firms don't actively trade in public markets, its funds aren't available to the average investor, and the industry is simply too little to pose a big risk, he argued. McGuire said U.S. venture funds held about $197 billion in aggregate assets during the first quarter, compared with $1.33 trillion for the American hedge fund industry. And in 2008, VCs invested $48 billion in start-ups, which was less than 0.2% of U.S. gross domestic product. (Venture-backed companies account for 21% of GDP.)

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs