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case # 3 - Fight Against Regulation Intensifies By Deborah...

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“Fight Against Regulation Intensifies” By Deborah Gage November 1, 2009 Venture Capital News Copyright Thomson Reuters 1992-2009. All rights reserved. Venture capital and private equity trade groups faced off in a day-long hearing last month in front of the House Financial Services Committee to argue whether VCs should be exempt from registering with the Securities and Exchange Commission under the Private Fund Investment Adviser Act. The National Venture Capital Association (NVCA) said, “Yes,” that VC firms nationwide should be exempt. But several private equity groups, including the Private Equity Council, said, “No.” And, they added, their smallest members shouldn’t have to register with the SEC either. The concern is what risk these various groups pose to the worldwide economy, which has been severely strained in the last year by the collapse of AIG and several large banks that relied on leveraged, unregulated and in some cases toxic pools of capital. Investment advisers registered with the SEC are required to provide clients with information about their business, fees, risks customers can expect and conflicts of interest. The Private Equity Council, in addition to the Managed Funds Association and the Coalition of Private Investment Cos. (CPIC), said that investment firms of a certain size should have to register with the SEC and disclose information about their activities to investors, as long as the information was kept confidential, regardless of what they say they do. If Congress lets venture capitalists off the hook, “bubbles and fraud” will grow, warned James Chanos, chairman of the CPIC.
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