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Need To Know

SEC Accepting Comments On Compensation Rule

The SEC is accepting comments on a controversial rule it proposed for incentive-based compensation until May 31. The proposed a rule would require registered advisers with $1 billion or more of assets to disclose how they pay professionals who help make investment decisions.

Eight people had commented as of April 18, though none of them appear to be involved in the private equity industry. Karl T. Muth, of the London School of Economics, and Senators Robert Menendez, Frank Lautenberg and Jeff Merkley are among those who had submitted comments.

The SEC could effectively prohibit firms from maintaining incentive-based compensation agreements if the agency believes they encourage inappropriate risks under the rule, which the SEC rolled out as part of its enforcement role on the Dodd-Frank financial reform bill. The proposal, which could result in the disclosure of sensitive payment agreements with certain executives, also includes tighter restrictions for financial institutions with $50 billion or more in assets (which would capture several mega-firms)

To submit a comment online, visit here: http://www.sec.gov/rules/proposed.shtml.

More Firms Going Out of Biz: Study

Private equity firms went out of business in 2010 at the fastest rate in a decade, according to a Financial News report citing Preqin data. There are 183 firms winding down their portfolio, which is more than double the 90 firms in the so-called “run-off” in 2009, according to Preqin. This comprises about 4.5 percent of the approximately 4,196 private equity firms in operation, peHUB, a blog affiliate of Buyouts noted. Preqin’s figures are based on firms that have not raised a fund in the last 10 years and spent previous funds. The data provider estimates that about 150 firms will go out of business in 2011 based on firms that last raised funds in 2001. Preqin did not release the names of the firms it believes are going on of business. “Between Dodd Frank costs, turnover and bad performance it makes sense,” a source told peHUB. “In fairness, some are firms that have been in runoff for a decade already.”

PE Exec Sentenced To Prison

A federal court in Manhattan recently sentenced Steven Byers, the former had of Chicago-based private equity firm WexTrust Capital, to more than 13 years in prison. Prosecutors said that between 2003 and 2008, Byers and others took $9.2 million from investors to buy seven commercial properties but never bought them, according to The New York Times. The court also ordered Byers to pay $7.7 million in restitution and to forfeit $9.2 million in proceeds from the crimes.