While VCs were away on summer vacation, the Securities & Exchange Commission was hard at work drafting rules to regulate hedge funds-and mulling the possibility of doing the same for private equity funds. (See story, page 13.) VCs had better get up to speed fast. The comment period for the proposed regs ends on Sept. 15.
Paul Atkins, an SEC commissioner, has all but threatened to pursue PE funds next. At a July 14 SEC meeting, Atkins said, “I would recommend that advisers to venture capital and private equity funds ask themselves: Why are you so special? Why are you not inevitably next?”
I have yet to hear a good answer to Atkins’ question from someone in the industry. I doubt that there is one. For that reason it behooves everyone to take another look at the recommendations from the Private Equity Industry Guidelines Group. PEIGG’s proposals were largely ignored when they were issued back in December 2003.
If the private equity industry doesn’t show a good faith effort to adopt at least some level of reporting standards, the feds will have a much easier time implementing their own standards.
Given the political environment, it’s just a matter of time before action is taken. The only question is whether VCs will do it themselves or have it forced upon them.