Who regulates private equity firms in the US?
The private equity industry in the United States is regulated by the Securities and Exchange Commission's implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Under the Dodd-Frank Act, private funds, generally, must register with the SEC if they manage $150 million or more in regulatory assets. (There are some exceptions, including for venture capital or foreign fund managers.)
All private equity and venture capital firms in the UK are regulated by the Financial Conduct Authority (FCA).
Key Takeaways. Venture capitalists and their private equity firms are regulated by the U.S. Securities and Exchange Commission (SEC).
Private equity was viewed as a “lightly regulated” industry for a long time. Only wealthy individuals and institutions could invest, so governments cared less about PE firms than commercial banks and brokerages.
The U.S. Securities and Exchange Commission, or SEC, regulates the offer and sale of all securities, including those offered and sold by private companies.
Although a private equity fund may be advised by an adviser that is registered with the SEC, private equity funds themselves are not registered with the SEC. As a result, private equity funds are not subject to regular public disclosure requirements.
The Financial Conduct Authority (FCA) regulates the financial services industry in the UK. Its role includes protecting consumers, keeping the industry stable, and promoting healthy competition between financial service providers.
Private funds are not required to be registered or regulated as investment companies under the federal securities laws. A private fund cannot publicly offer its securities.
Rank | Private equity firm | Money Raised Over Five Years |
---|---|---|
1 | Blackstone Inc. (ticker: BX) | $125.6 billion |
2 | KKR & Co. Inc. (KKR) | $103.7 billion |
3 | EQT AB (OTC: EQBBF) | $101.7 billion |
4 | Thoma Bravo LLC | $74.1 billion |
Who runs private equity funds?
Private equity funds are generally backed by investments from large institutional investors: pension funds, sovereign wealth funds, endowments and very wealthy individuals. Private equity firms manage these funds, using both investors' contributions and borrowed money.
Unlike mutual funds, hedge funds are not subject to some of the regulations that are designed to protect investors. Depending on the amount of assets in the hedge funds advised by a manager, some hedge fund managers may not be required to register or to file reports with the SEC.
Hedge funds must file Form PF if they have investment advisors that are registered or are required to register with the Securities and Exchange Commission (SEC), manage one or more private funds, and have at least $150 million in private fund assets under management.
"Two" means 2% of assets under management (AUM), and refers to the annual management fee charged by the hedge fund for managing assets. "Twenty" refers to the standard performance or incentive fee of 20% of profits made by the fund above a certain predefined benchmark.
Private equity is a core pillar of BlackRock's alternatives platform. BlackRock's Private Equity teams manage USD$41.9 billion in capital commitments across direct, primary, secondary and co-investments.
Job Losses and Cost-Cutting:One common criticism is that private equity firms may focus on cost-cutting measures to boost short-term profitability, which can lead to layoffs and job losses.
Private companies are required to file reports with the Securities and Exchange Commission (SEC) if they meet these criteria: Companies with more than $10 million in assets whose stock is held by more than 500 owners. Companies that have made a public debt offering.
Cargill kept its number one spot for the third consecutive year. Koch Industries, Publix Supermarket and Mars take the 2nd, 3rd and 4th spots respectively, the same ranks as last year. Texas-based supermarket chain H-E-B moved back into the top five after dropping to No. 6 in 2022.
The SEC said it has exercised its discretion to stay the final rules pending a review in the Eighth Circuit U.S. Court of Appeals. Republican-led states, energy industry companies and business groups say the rules amount to environmental regulation and therefore overstep the SEC's legal mandate.
Both firms and individuals must be registered with FINRA to conduct securities transactions and business with the investing public.
Do private equity firms register with finra?
FINRA Rule 5123 (Private Placements of Securities) requires firms to file with FINRA's Corporate Financing Department within 15 calendar days of the date of first sale of a private placement, a private placement memorandum, term sheet or other offering document, or indicate that no such offerings documents were used.
In the U.S. and Europe, most private equity funds are established as Limited Partnerships or Limited Liability Firms, and you'll need competent attorneys to complete all the necessary paperwork and registration documents.
- withdraw a firm's authorisation.
- prohibit specific individuals from conducting regulated activities.
- suspend firms and individuals from regulated activities.
- issue fines where there has been a breach of their rules or if they commit market abuse.
You can check our Financial Services Register (FS Register) to make sure a firm or individual is authorised. It will also tell you the activities the firm has permission for. Search for the firm by name, or by using its firm reference number (FRN).
There are numerous agencies assigned to regulate and oversee financial institutions and financial markets in the United States, including the Federal Reserve Board (FRB), the Federal Deposit Insurance Corp. (FDIC), and the Securities and Exchange Commission (SEC).
References
- https://www.finra.org/rules-guidance/key-topics/private-placements
- https://www.sec.gov/education/capitalraising/building-blocks/sec-have-do-my-private-company
- https://www.quora.com/Why-do-some-people-view-private-equity-as-bad-for-business-and-society-in-general
- https://www.propublica.org/article/what-is-private-equity
- https://www.federalreserve.gov/releases/efa/efa-hedge-funds.htm
- https://www.reeds.co.uk/insight/the-powers-of-the-financial-conduct-authority-fca/
- https://www.reuters.com/legal/us-sec-stays-climate-disclosure-rule-amid-legal-challenges-2024-04-04/
- https://mergersandinquisitions.com/how-to-start-a-private-equity-firm/
- https://www.gov.uk/government/organisations/financial-conduct-authority
- https://www.sec.gov/education/capitalraising/building-blocks/private-fund
- https://www.investopedia.com/ask/answers/063015/what-are-some-major-regulatory-agencies-responsible-overseeing-financial-institutions-us.asp
- https://www.bvca.co.uk/Our-Industry/Private-Equity
- https://guides.newman.baruch.cuny.edu/c.php?g=188282&p=1244105
- https://www.blackrock.com/institutions/en-us/strategies/alternatives/private-equity
- https://money.usnews.com/investing/articles/largest-private-equity-firms
- https://www.investor.gov/introduction-investing/investing-basics/glossary/hedge-funds
- https://www.privatefundscfo.com/the-paradoxes-of-sec-registration/
- https://www.investor.gov/introduction-investing/investing-basics/investment-products/private-investment-funds/private-equity
- https://www.investopedia.com/terms/t/two_and_twenty.asp
- https://mergersandinquisitions.com/private-equity-regulation/
- https://www.investopedia.com/ask/answers/013015/how-venture-capital-regulated-government.asp
- https://www.finra.org/registration-exams-ce/registration
- https://www.forbes.com/lists/largest-private-companies/
- https://www.fca.org.uk/consumers/using-financial-services-register