The Great Escape: Could Private Equity Avoid Most New Regulation?
This summer was supposed to represent a regulatory tipping point for private equity, as U.S. and European legislators pledged to close tax loopholes and reduce perceived systemic risk. Private equity firms would have to register their funds, and provide additional disclosures. Carried interest would be taxed as ordinary income. U.S. banks would be required to divest private equity holdings, while European institutions would effectively be banned from serving as limited partners in North American or Asian funds. It was almost as if regulators had discovered a speck of residual shine on private equity's Golden Age, and were determined to dull it down. But a funny thing happened on the way to the reckoning: Many of the proposed changes -- including some that many PE pros have accepted as fait accompli -- are being watered down, postponed or abandoned.
