NVCA Today

The Senate Banking Committee under Chairman Chris Dodd (D-CT) unveiled its version of financial regulatory reform on November 10. Title IV of the discussion draft deals with “Regulation of Advisers to Hedge Funds and Others;” most significantly that Title explicitly exempts venture capital fund advisers from both registration requirements as well as from any additional reporting requirements. As was done in the House legislation, the draft leaves the definition of a venture fund to the SEC. In a difference with the House measure, the Senate language also exempts private equity funds from registration with the SEC, but does require additional reporting obligations from those funds. Essentially, the measure leaves hedge funds as the only “private advisers” that must fully register with the SEC as investment advisers.

The Committee began hearings on the discussion draft on November 19^th, but will postpone most of the substantive debate until the Senate returns after the Thanksgiving break. In the House, Chairman Barney Frank has continued to shepherd portions of his reform package through his committee and seems on track to meet his goal of having a complete bill on the floor of the House by the middle of December.

Although leaving the definition of venture funds to the SEC could produce further battles down the road, having explicit exemptions in both the House and Senate measures will put pressure on the SEC to effectively carry out Congressional intent to leave the industry unharmed.