Private Equity Industry Floats Trial Balloon For “Get Out of Decades of Flagrant SEC Abuses for Free

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from Naked Capitalism:


Private Equity Industry Floats Trial Balloon For “Get Out of Decades of Flagrant SEC Abuses for Free” Card
Posted on March 3, 2014 by Yves Smith


In late February, Bloomberg stated that the SEC is “considering” forgiving decades of private equity firms acting as unregistered broker-dealers and possibly legalizing the practice going forward. In case you think this is not a big deal, as we explain later in the post, the SEC is in fact vigilant about enforcing these regulations, so this would be an unprecedented waiver of liability. And remember, private equity firms engage top securities law firms, yet as we’ve discussed in past posts, they’ve been remarkably open, one might even say brazen, about their misconduct. In other words, these violations aren’t in a grey area. The firms and their legal advisors knew exactly what they were up to, but apparently figured they’d see how long they could get away with it, and indeed, it has proven to be for quite a long time.

But notice the formulation of the Bloomberg story:

The U.S. Securities and Exchange Commission is considering granting private-equity firms a reprieve after they collected billions of dollars in deal fees without being registered to do so, according to a person with knowledge of the matter.

This article is based on a single source. And it’s very easy to guess who that single source is: one of the people pushing the SEC to treat decades of running roughshod over well-established, well-known securities laws as not even worthy of notice, much the less action. A group of excessively wealthy individuals is pressing for a “get out of our costly arrogance for free” card, when they of all parties can well afford to pay.

This is a classic Washington D.C. trial balloon, where a controversial or indefensible course of action is floated out to the press by an anonymous “knowledgeable insider.” The public relations plant’s purpose is to test whether opponents can muster the strength to make a big fuss, in which case the SEC bureaucrats can climb down from their position in favor of PE without ever having stuck their necks out. .........................(more)

The complete piece is at: http://www.nakedcapitalism.com/2014/03/private-equity-industry-floats-trial-balloon-get-decades-flagrant-sec-abuses-free-card.html