Two Important Comment Letters Submitted

Posted on March 27, 2012 by Keith Paul Bishop

Private Fund Advisers

Yesterday marked the end of the comment period with respect to the Commissioner's proposed amendments to Rule 260.204.9.  These rule amendments are critical to advisers of private funds, including venture capital and private equity funds.  Because venture capital and other private funds are crucial financing sources for California businesses and real estate development, the rule amendments could have a substantial impact on the economy here.

I worked with the Committee on State Regulation of Securities of the American Bar Association's Business Law Section on submitting this comment letter.  In addition to various technical comments, the Committee expressed concern about the additional requirements for advisers to funds qualifying on the Section 3(c)(1) exclusion under the Investment Company Act of 1940.  In particular, the Committee requested that these investment advisers not be barred from receiving performance compensation (except as provided in Corporations Code Section 25234(a)(1) and Rule 260.234).

Corporate Political Spending Disclosure

Last August, ten law professors submitted this petition to the Securities and Exchange Commission under the sobriquet "Committee on Disclosure of Corporate Political Spending".  See my post, Political Spending Disclosure – Interest Does Not Equal Majority Support.  I submitted the first comment letter a few days later.  In the ensuing months, the SEC has received tens of thousands of comments (most of them form letters).  Perhaps to even up the academic scales, another group of law professors submitted this counter petition.  These scholars argue that demands for rulemaking in this area are misguided for the following reasons:

  • Genuine political expenditures are currently disclosed.
  • Shareholders are not demanding more disclosure, have already rejected these proposals, and will likely not find this additional information useful
  • Additional requirements will burden political expression without sufficient justification.
  • This rulemaking will jeopardize the SEC’s nonpartisan reputation, and decrease confidence in its regulatory integrity.