Bull Bear Report Sep 29 2010

PE Firms Hiring Compliance Officers for Finreg

By julie steinberg

The private equity industry has been getting prepared for regulatory changes since at least last January.

Now that PE is definitely included in Dodd-Frank, firms are going to start scrambling to scoop up compliance talent, said panelists at the Dow Jones Private Equity Analyst Conference yesterday. (Disclosure: Dow Jones is the publisher of FINS.com.)

The main growth will come at firms that previously slipped under the compliance radar and will now have to hire whole new compliance teams.

The Private Equity Growth Capital Council, an industry group, supported the regulations. "This is an appropriately nuanced way for regulators to have a window into PE without being overly intrusive," said Doug Lowenstein, the group's founder.

Dodd-Frank introduces a host of changes.

Firms that were previously exempt from registering with the SEC may now be forced to: Shops with $100 to $150 million AUM must register, unless they manage private funds and aren't advisors to separately managed accounts. All PE firms with more than $150 million AUM will be required to register.

Once a fund registers, it will be required to maintain records for each private fund it manages, including information such as amount of AUM, use of leverage, counterparty credit risk exposure and types of assets held.

All firms that haven't registered yet must register by July 21, 2011 and also must ensure their compliance infrastructure is in place to deal with all the new paperwork.

Larger firms are better positioned to deal with the changes than smaller firms, said Kevin Bardon, global head of compliance at State Street Alternative Investment Solutions. If they're registered, they're likely to have positions in place and probably won't require much added talent.

The smaller firms, however, that weren't previously registered need to start from scratch.

"The burdens are going to be quite significant on firms with less than $1 billion AUM," Lowenstein said. "They'll have to staff up very quickly as the effective date is coming up soon."

What that means is that those firms will be on the prowl over the next several months to snap qualified talent.

Write to Julie Steinberg



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