PE, VC industries to be regulated

The venture capital community last week was up in arms over President Obama’s proposed changes in financial regulation.

Obama laid out his vision for reshaping U.S. financial regulation on Wednesday, aiming to tighten oversight of large firms whose excessive risk-taking triggered a global economic slump.

Among other stipulations in his proposal to overhaul the country’s financial system, Obama wants advisers to hedge funds, private equity funds and venture capital funds, whose assets under management exceed a not-yet-determined level, to register with the Securities and Exchange Commission.

VCs say that they want to be expempt from such rules, arguing they were not part of the problem.

In response to Obama’s proposal, the National Venture Capital Association said that their industry is “relatively inconsequential” compared to other parts of the financial industry.

“We believe that the entrepreneurial risk associated with the venture capital industry is not relevant to the systemic risks which the Administration is hoping to mitigate with this reform,” said Jennifer Connell Dowling, NVCA’s vice president for federal policy, in a written statement.

The NVCA represents about 460 venture firms in the United States.

However, an advocacy and research group for the private equity industry said last week that it supported Obama’s overhaul of regulation of the country’s financial system, even though it believes it would result in new regulatory oversight for many private equity firms.

The Private Equity Council said in a statement that while private equity firms “do not create systemic risk” it supported the concept of collecting data from firms.

“The plan calls for private equity firms to register as investment advisers with the SEC,” said Douglas Lowenstein, PEC president, in a statement. “We support this proposal, even though it will result in new regulatory oversight for many private equity firms.”

Washington, D.C.-based PEC’s members include many of the biggest firms in the industry, including Bain Capital, The Blackstone Group, The Carlyle Group and Kohlberg Kravis Roberts & Co. —Reuters