The WSJ reports:
The Securities and Exchange Commission voted 3-1 to issue a proposal that would increase the amount and timeliness of confidential information that private-equity and hedge funds report to the agency on a document known as Form PF.
The main goal, Chairman Gary Gensler said, is to allow regulators to better spot risks building up in private markets, stepping up an effort that began after the 2008 financial crisis.
Meanwhile, over on the editorial page, two of the Journal's readers proved they ought to be running the Commission:
While it is premature to judge the merits or validity of the proposal outlined in “SEC Eyes Stronger Oversight of Private Firms” (Page One, Jan. 11), some of the apparent motives are troubling. The Securities and Exchange Commission was established to administer securities laws for investor protection, orderly markets and capital access. Labor and environmental issues are important, and may be legitimate for regulation, but not by the SEC.
Using the SEC as a universal regulator draws resources away from the critical functions and core areas of responsibility entrusted to it by Congress. It also invites abuse if constituencies across the political spectrum come to see securities law as a legitimate tool for achieving their desired ends. Such an outcome would politicize securities law to the detriment of investors, the SEC and the country.
Brian Knight
There is no statutory authority for the SEC to provide such “oversight” to nonfinancial private firms. This unjustified power grab must be resisted.
As the head of a private firm that has underwritten IPOs since the late 1960s, I believe the more pertinent question is this: Why are so few firms availing themselves of the public markets when they need capital? The answer is obvious. Increased reporting requirements and costs discourage them, despite the better valuation metrics and liquidity in public markets versus private markets.
For Walmart’s 1970 IPO, the entire S-1 registration statement (the most detailed filing required by the SEC) was 26 pages. Everything one might need to assess this company was in the prospectus. The total offering raised less than $5 million.
This would be impossible today. The grinding increase in disclosure and costs over the decades and administrations of both parties is to blame. For example, the January 2022 IPO of TPG Inc. raised $1 billion, an impressive valuation. But the prospectus was 424 pages. No one has time to read that.
The SEC doesn’t need to expand its power. As Rep. Patrick McHenry of North Carolina says ..., the regulator would serve public markets better by revisiting its current, highly burdensome disclosure rules.
Warren A. Stephens
I couldn't have said it better myself.
