* Gallagher: Dodd-Frank imposed broad registration for
* Gallagher: SEC can use its authority to exempt some of
* Gallagher: Registration creates enormous burdens for
By Suzanne Barlyn
ARLINGTON, Va., March 8 The U.S.
Securities and Exchange Commission can use its authority to
exempt certain investment advisers, such as those to private
funds, from registering with the agency even if the Dodd Frank
Financial reform law directed them to do so, Commissioner Daniel
Gallagher said on Thursday.
Gallagher, the agency's newest commissioner, told a group of
compliance professionals that new regulations required by the
law do not distinguish between the many types of people it is
intended to protect, from traditional retail investors to more
sophisticated investors who sometimes must meet income and net
worth requirements to buy certain products.
That can lead to overly broad and costly regulatory
requirements, he said in prepared remarks.
Many higher-end and institutional investors look to private
equity and hedge funds to maximize their returns. Under the
Dodd-Frank financial reform law, advisers who manage at least
$150 million for such funds must now, for the first time,
register with the SEC.
Many advisers must also file Form PF with the SEC. The
agency will share this disclosure document with the Financial
Stability Oversight Council, which will use the information to
monitor risks to the U.S. financial system.
But despite the Dodd Frank requirements, the SEC still has
authority under other laws to exempt advisers from registration
if the exemption is "necessary or appropriate in the public
interest," among other things, Gallagher said. Mandatory
registration for private fund advisers may be one such
circumstance, Gallagher said.
His concerns about drawing clearer distinctions between
different classes of investors is playing out as private fund
advisers face new compliance responsibilities set in motion by
Dodd Frank. They are "alarmed at the looming costs and
unintended consequences expected to flow" from the registration
requirements, Gallagher said.
The requirements will not protect ordinary retail investors
who cannot afford to invest in private equity and hedge funds,
Gallagher said, but rather sophisticated investors who can take
care of themselves. Keeping up with the mandates will also
impose significant burdens on the commission, Gallagher said.
Using the Commission's authority to exempt certain advisers
from registration "should not become an effort to undercut or
frustrate Congressional intent," Gallagher said. But while the
SEC must pay attention to language from the U.S. Congress, there
will be circumstances in which the agency should grant relief
from registration requirements, he said.
Gallagher was addressing a conference hosted by the
Investment Adviser Association.
(Editing by Lisa Von Ahn)