Date: 2013-12-04
Speaker: CAROLYN B. MALONEY (democrat)
Chamber: H
State: New York

Mr. Speaker. I first want to commend the chairman and the ranking member for their hard and dedicated work on the Financial Services Committee. I would also like to commend the vicechairman. Congressman HURT. for his work on this bill. I agree with him that private equity funds did not cause the financial crisis. I also agree that many private equity fundsand especially the small private equity funds that invest in middlemarket businessessupport jobs across our country. I also agree that for many small equity funds. the cost of complying with every single requirement in the Investment Advisers Act can be burdensome and costly. However. while I share the goal of reducing unnecessary regulatory burdens on small private equity funds with under $1 billion in assets. I believe that there are better ways to accomplish this goal to reduce the burden. to reduce costs without eliminating important investor protections. I would say that we should have equality in this countryand equality of treatment for everyone. including investors. If you are a small investor. a large investor. a teacher. an unemployed worker. and you have invested. whoever you are. you should have protections. Arent we a country of laws and equality of treatment? So my amendment would direct the SEC to create a simplified disclosure form for fund advisers between $150 million and $1 billion. while also retaining important investor protections. We would reduce the burden. reduce the reporting. reduce the disclosure. simplify the forms. make it easier. but protect the fiduciary duty to act in a clients best interest. Isnt that the moral. right thing to do? There is the obligation to disclose conflicts of interest and the obligation to disclose fees. I thought we all supported transparency. Well. lets have transparency in these investment funds. too. I would ask my colleagues on the other side of the aisle who are objecting to this amendment how much of a burden is it to disclose whether or not you have a conflict of interest. You just have to check yes or no. I have a conflict of interest. Then maybe you have to disclose what that conflict is. But that is the fair and right thing to do. How burdensome is it to disclose fees? Tell people what you are charging them. And how burdensome is it to have the necessary fiduciary duty to act in the clients best interest? Most people think that you are acting in their best interest. I think they would be horrified to know that some Members of this body want to roll back that protection for them. I would also like to note that in August the SEC did provide relief for smaller private equity funds from what the industry tells me is one of the most burdensome aspects of registrationthe socalled custody rulewhich requires that the funds use independent custodians for stocks that dont even trade. So private equity funds have already gotten relief. and I applaud the SEC for this commonsense decision. The reforms in my amendment would build on this relief and would direct the SEC to act quickly on simplified formswithin 6 monthsand save these small businesses money so that money can go out into the community. The underlying bill grants a complete exemption to private equity fund advisers with under 2 to 1 leverage. which is pretty much the entire industry. because the funds themselves are not leveraged. It is the companies the funds invest in that are leveraged. The underlying bill is opposed by the Securities and Exchange Commission. whose prime mission is to protect investors. and by President Obamas administration. He has even threatened a veto. If the problem is the high cost of registry at the SEC and preparing the required disclosures. then the solution is to simplify the registration and disclosures for small equity funds. That is what my bill does. But it also protects investors. It does not exempt the entire industry from investor protection. which is what the underlying bill does. and I do not believe that that is the intent of my colleagues on either side of the aisle. So my amendment accomplishes the express goal of saving money and simplifying. but protects the integrity of our financial system and investors. I urge everyone to support my amendment. and I yield back the balance of my time.