Donohue Says that Venture and Private Equity Fund Managers Should Register
In a recent speech, Andrew Donohue, Director of the SEC’s Division of Management, argued that any regulatory reform for private funds should not distinguish among hedge funds, private equity funds, and venture funds. He argued that managers of all such funds should be subject to Advisers Act registration. He said, “The same adviser often manages funds pursuing different strategies and even individual private funds often defy precise categorization.” Moreover, he continued, “I am concerned that in order to escape Commission oversight, advisers may alter fund investment strategies or investment terms in ways that will create market inefficiencies.” He also stated that any reform legislation should not exclude fund advisers that manage less than $150 Million because the Advisers Act and its enforcement have always included smaller managers. He explained that one of the key protections of the Advisers Act is the requirement to implement a compliance program under the supervision of a designated compliance officer.
OUR TAKE: Mr. Donohue appears at odds with most of the legislative proposals, most of which have exemptions for managers of venture funds and smaller funds.