NEW YORK (The Deal) -- A mostly Republican group of House lawmakers on Thursday evening voted to approve a package of bills including a measure that would exempt most private equity firms from registering with the Securities and Exchange Commission.
The package of bills, which faces a White House veto threat, was approved by a 253 to 163 vote, with 32 Democrats backing it. The private equity measure included in the package, which is opposed by SEC Chairman Mary Jo White, passed the House in December with a vote of 254-159, with 36 Democrats backing it.
If approved, the buyout shop legislation would roll back a provision in the Dodd-Frank financial reform law that requires private equity firms to register with the SEC and open up their books to periodic surprise examinations. Since 2012, these firms have been required to register with the SEC and also produce reports to the agency, which include disclosures about fund governance and conflicts.
The measure would instruct the SEC to produce a more comprehensive definition of the term "private equity firm," and require many private equity funds to only maintain records that the agency could access periodically. However, without much Democratic support it is unlikely it will have much of a chance of passage in the near future.
Rep. Robert Hurt, R-Va., a key sponsor of the buyout shop measure, told The Deal outside of the House of Representatives in the Capitol that registration of private equity funds is an unnecessary burden, especially on the smaller funds. He argued that many other fund managers, such as venture capital advisers, are not required to register.
"We know that other advisors of similar funds are not required to be registered and we feel that they [private equity] shouldn't be treated any differently," said Hurt. "Sometimes people say this won't have a direct effect on investments but I would beg to differ: When you have paperwork costs anywhere within the structure that is time and money that it is tied up when they could be doing an analysis of potential acquisitions." Hurt noted that he represents a rural Virginia district where many people are employed at companies backed by private equity sponsors.