NEW YORK ( TheStreet) -- Venture capital funds were among the big winners in the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama last week, possibly giving a boost to a pocket of the deal industry that has struggled even more than most. Though big banks like Citigroup ( C), Bank of America ( BAC), Wells Fargo ( WFC) and Goldman Sachs ( GS) got off easier than many expected would be the case as recently as a few weeks ago, they will still be subject to a host of new restrictions on activities such as derivatives trading, private equity investing, and charges they assess to merchants for credit card transactions. Many of those restrictions emanate from the fact that these financial giants enjoy government support in the form of cheap loans from the Federal Reserve. Large non-bank financial institutions, such as General Electric ( GE)'s GE Capital unit, or private equity giant The Blackstone Group ( BX), whose failure might threaten the U.S. economy, will also be subject to new oversight. While hedge funds and private equity firms (as well as venture capital funds), wriggled off the hook after facing a threat of a higher tax rate they may still face other new restrictions, such as having to disclose short positions in stocks. But venture capital funds are feeling good about the bill. Though versions of proposed legislation would have required venture capital funds to register with the Securities and Exchange Commission, VC funds, through their main lobbying group, the National Venture Capital Association, successfully argued that because they are not large enough to be systemically important, they should not be subject to costly registration and compliance requirements. "We dodged a bullet," admits NVCA spokeswoman Emily Mendell. Venture capital funds -- along with other private investment funds -- were already required to register with the SEC if they had more than 15 institutions as clients. That requirement has not changed. It will be up to the SEC to define what constitutes a venture capital fund, something the Commission will have to do within the next year. Venture capital needs all the help it can get these days. The IPO market is still relatively slow, and companies and buyout firms' reluctance to spend on, or succeed in getting financing for, acquisitions has made it tough for VC funds to exit their investments and return investors their money.
"It's no secret that it's been challenging times for the venture industry," says Howard Beber, a partner in the private investment funds group at the law firm Proskauer Rose LLP. Beber doesn't expect to see a stampede of financial firms seeking to define themselves as venture capital funds in order to avoid regulation. "I'm not sure regulation drives what type of funds people form," Beber says. -- Written by Dan Freed in New York.