Friday Letter: SEC takes aim at VC

New chairman Gary Gensler this week asked SEC staff for recommendations on overhauling private fund disclosure rules and other reforms to keep step with a growing venture market that has expanded to more than 1,700 firms.

More than a month after the US Senate approved President Biden’s pick of Gary Gensler to lead the Securities and Exchange Commission, the new chairman is looking to shake things up.

Gensler this week asked staff for recommendations on overhauling private fund disclosure rules and “other reforms,” referring to the proliferation of venture, as well as private equity funds, as “new risks for markets and investors”.

In testimony on Wednesday before the subcommittee on financial services, Gensler discussed with Congress such hot topics as IPOs, SPACs, private fund growth, crypto assets, fintech and the pandemic, among other issues.

When discussing private funds, he noted how the general PE industry has ballooned in recent years, noting that over the last five years the number of venture funds has increased by 110 percent to more than 1,700. He also noted that SEC staff are seeing new strategies, structures and business practices within those funds.

That figure of 1,700 sounds like a conservative estimate to me. But however many venture funds there are in the US, each one should pay attention to what Gensler had to say.

“The SEC must grow and evolve with the industry,” he said. “Given the growth and changes in private funds, I’ve asked staff for recommendations for consideration of enhanced reporting and disclosure through Form ADV, Form PF or possible other reforms.”

Form ADV provides regulators with a sense of a firm’s key characteristics, strategy and personnel, while Form PF collects various data points, such as borrowings, that could be useful reference points for prospective LPs.

As Bill Myers at our affiliate publication Regulatory Compliance Watch pointed out, the two other Democratic colleagues on the five-person commission have already endorsed reforms, especially for Reg D filings.

With reform looking likely – and with a separate push by the Biden administration and others in Congress, who unveiled a bill to change the tax on carried interest to a higher rate – I sense that there are at least 1,700 venture firms nationwide that are getting quickly acquainted with Gensler’s name and what the SEC is up to.

You can read Gensler’s full testimony here.

Let me know what you think about Gensler and possible reforms. You can drop me a line at, and I’m happy to chat.