Published: December 2013

Wealthy Wall Street organizations allowed to skip reporting requirements

HR 1105 plans to make some of the riskiest entities on Wall Street exempt from the “Small Business Capital Access and Job Preservation Act.” Under the bill private equity fund advisors are allowed to skip basic requirements that protect investors and the public, and its broad definition could be applied to a number of other financial institutions.

In an open letter to Congress, Consumer Action joins advocate groups in denouncing HR 1105 “The Small Business Capital Access and Job Preservation Act.” HR 1105 would exempt almost all private equity fund advisers from reporting requirements to the Securities and Exchange Commission (SEC). Private equity funds already receive significant subsidies through the tax system, as they are major beneficiaries of the favorable treatment for ‘carried interest.' It is totally inappropriate to also grant such funds a blanket exemption from even the limited and basic Dodd-Frank regulatory reporting requirements. Such a blanket exemption would make it more difficult for regulators to monitor systemic risk and risks to investors, solely in order to exempt wealthy managers of large private equity funds from a minor administrative task. HR 1105 should be rejected.

Prior to the Dodd-Frank Act, hedge and private equity funds received almost no regulatory monitoring, despite the fact that combined they manage some $3 trillion in assets and played a significant intermediary role in the financial crisis. Section 404 of the Dodd-Frank Act created more transparency for this previously dark portion of the markets, by requiring advisers to hedge and private equity funds to report basic financial information relevant to systemic risk to the SEC. The experience of the 2008 crisis – where risks emerged from parts of the markets not being monitored by regulators – clearly demonstrates the importance of ensuring that regulators can track financial risks wherever they originate.

An additional source of concern is the danger that the exemption granted in HR 1105 could too easily be exploited to reach beyond private equity firms alone. The distinction between a hedge fund and a private equity fund is not a formal legal distinction, it is simply a differentiation between general investment strategies. While HR 1105 grants the SEC the ability to define more precisely what a private equity fund is, if that definition is at all overbroad then it could be taken advantage of by a wide range of hedge funds in order to avoid oversight.

 

 

Lead Organization

Americans for Financial Reform (AFR)

Other Organizations

| A New Way Forward 
| AFL-CIO
• AFSCME
 | Alliance For Justice
 | American Income Life Insurance
 | American Sustainable Business Council | Americans for Democratic Action, Inc | Americans United for Change | Campaign for America’s Future
 | Campaign Money
 | Center for Digital Democracy
 | Center for Economic and Policy Research | Center for Economic Progress | Center for Media and Democracy | Center for Responsible Lending
 | Center for Justice and Democracy | Center of Concern | Center for Effective Government | Change to Win
 | Clean Yield Asset Management | Coastal Enterprises Inc. | Color of Change
 | Common Cause
 | Communications Workers of America
 | Community Development Transportation Lending Services | Consumer Action
• Consumer Association Council
 | Consumers for Auto Safety and Reliability
 | Consumer Federation of America
 | Consumer Watchdog
 | Consumers Union
 | Corporation for Enterprise Development
 | CREDO Mobile
 | CTW Investment Group
 | Demos
 | Economic Policy Institute
 | Essential Action
 | Greenlining Institute
 | Good Business International
 | HNMA Funding Company
 | Home Actions | Housing Counseling Services
 | Home Defender’s League
 | Information Press
 | Institute for Global Communications
 | Institute for Policy Studies: Global Economy Project | International Brotherhood of Teamsters | Institute of Women’s Policy Research
 | Krull & Company
 | Laborers’ International Union of North America
 | Lawyers' Committee for Civil Rights Under Law
 | Main Street Alliance
 | Move On
 | NAACP
 | NASCAT
 | National Association of Consumer Advocates
 | National Association of Neighborhoods
 | National Community Reinvestment Coalition
 | National Consumer Law Center (on behalf of its low-income clients) | National Consumers League
 | National Council of La Raza
 | National Council of Women’s Organizations
 | National Fair Housing Alliance
 | National Federation of Community Development Credit Unions
 | National Housing Resource Center
 | National Housing Trust
 | National Housing Trust Community Development Fund
 | National Neighbor Works Association
 | National Nurses United | National People’s Action
 | National Urban League
 | Next Step
 | OpenTheGovernment.org
 | Opportunity Finance Network
 | Partners for the Common Good
 | PICO National Network
 | Progress Now Action
 | Progressive States Network
 | Poverty and Race Research Action Council
 | Public Citizen
 | Sargent Shriver Center on Poverty Law
 | SEIU
 | State Voices
 | Taxpayer’s for Common Sense
 | The Association for Housing and Neighborhood Development
 | The Fuel Savers Club
 | The Leadership Conference on Civil and Human Rights
 | The Seminal
 | TICAS | U.S. Public Interest Research Group
 | UNITE HERE | United Food and Commercial Workers
 | United States Student Association
 | USAction
 | Veris Wealth Partners
 | Western States Center
 | We the People Now
 | Woodstock Institute
 | World Privacy Forum
 | UNET
 | Union Plus
 | Unitarian Universalist for a Just Economic Community

More Information

To read the entire letter, please click here.

For more information, please visit the AFR website.

 

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