PEGCC files comment letter urging SEC to reconsider aspects of Form PF requirement

Letter: “The PEGCC respectfully requests that the Commission not require private equity sponsors to file Form PF… Private equity funds do not present systemic risk.”

WASHINGTON, DC, April 15, 2011 – This week, the PEGCC filed extensive comments on the proposed rule calling on the Securities and Exchange Commission (SEC) to reconsider aspects of the Form PF requirement. Among other things, the proposed form would require various investment advisers to file information that the SEC believes is relevant to assessing systemic risk. The full 21-page letter has been attached in its entirety.

Read the letter here.

Specifically, the PEGCC has requested that the SEC consider the following:

  • Private equity sponsors and their portfolio companies do not pose systemic risk.
  • The SEC should not require private equity sponsors to file Form PF.  Much of the information sought in Form PF relates to portfolio company financing.  Such information is not pertinent to systemic risk and has little to do with the SEC’s regulatory mission of protecting investors and ensuring fair markets.
  • In relation to concerns about lending to private equity portfolio companies, PEGCC notes that most businesses depend on debt financing for capital because they cannot access equity markets. The intent of the Dodd-Frank Act is not to regulate how non-financial PE-backed operating businesses use leverage in their capital structures.  PEGCC understands the SEC’s objectives underlying these reports, but believes that other institutional regulators should capture information on bank lending practices from the lending institutions themselves. PE firms should not be singled out among all shareholders of businesses in the United States to be subject to report on their borrowing decisions.
  • Should the SEC still decide to require private equity sponsors to file Form PF, then at a minimum the information required to be reported by private equity sponsors should be more narrowly tailored given the structures, operations, and lower relative risks of private equity funds and sponsors.  In addition, any private equity sponsor reporting on Form PF should not occur more than once a year.

The Private Equity Growth Capital Council (PEGCC) is an advocacy, communications and research organization and resource center established to develop, analyze and distribute information about the private equity and growth capital investment industry and its contributions to the national and global economy. Established in 2007 and formerly known as the Private Equity Council, the PEGCC is based in Washington, D.C. The members of the PEGCC are 33 of the world‘s leading private equity and growth capital firms united by their commitment to growing and strengthening the businesses in which they invest.

Read the letter here.