William Donaldson, the chairman of the US Securities and Exchange Commission, on Wednesday told an audience of private equity market participants that the SEC was too busy with its investigation into hedge funds to seriously pursue greater oversight of the private equity industry.
Donaldson stressed that all his comments were his own and did not reflect official SEC policy.
The comments came at a dinner sponsored by the International Finance Corporation, the investment arm of the World Bank, in Washington DC. The audience was gathered for a dinner that kicked off the IFC’s Annual Global Private Equity Conference.
After reading prepared remarks on the SEC’s recent activities, Donaldson took questions from the audience. A delegate asked whether the SEC’s recent indications that it might require hedge funds to register with the commission as Registered Investment Advisors meant that similar new requirements would also be imposed on the private equity industry.
After discussing the SEC’s work on hedge funds, Donaldson said, “As for us regulating private equity funds – relax. We have enough trouble getting this hedge fund thing going.”
Donaldson noted that the hedge fund industry was approaching $1 trillion in assets under management, and the sheer size of the industry warranted the commission having a closer look. “Everybody and their mother is attempting to jump in,” he said. “There may be potential for trouble down the road. . . All we are looking for is the simple authority to find out who’s in this business.”
He later added: “We want to make sure that this huge aggregation of capital is not preying on” small individual investors.
Many in the private equity industry have worried that the SEC will eventually require all alternative fund managers to register as RIAs. They argue that the added expense and burden of compliance would hit smaller firms especially hard.