SEC could grant private equity special exemption over deal fees


The U.S. Securities and Exchange Commission could make private equity firms exempt from needing to register as broker-dealers and therefore allow it to continue charging transaction fees, in a previously disputed area of regulation.

Bloomberg has reported that private equity could receive an exemption, despite the SEC’s chief counsel for the division of trading and markets David Blass previously saying that this practice would fall under the activities of a broker, and need to be registered as such.

The incoming Dodd Frank Act requires private equity firms to register as investment advisers, adding another layer of compliance which could be interpreted as covering associated broker dealer activity.

“Private equity investment advisers perform a fundamentally different service than broker-dealers, and should not be required to register as such,” Steve Judge, president of industry lobbying group Private Equity Growth Capital Council, told Bloomberg. “Layering broker-dealer regulations on private equity will be of no meaningful benefit to investors and would levy significant costs on private equity firms.”

Zurich-based Credit Suisse Group was recently charged for violating the federal securities laws by providing cross-border brokerage and investment advisory services to US clients without first registering with the SEC.

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