Regulatory Compliance Watch Quotes Brian Daly on the SEC’s Form PF Rules

For its article “‘Prudential’ shift seen behind Form PF rules,” PEI’s Regulatory Compliance Watch quoted Akin investment management partner Brian Daly. The article looks at the SEC’s new Form PF rules, how they relate to the Financial Stability Oversight Council (FSOC) and a potential shift in how the private funds industry is regulated.

“You hear people arguing that, under the new Form PF rules, the SEC should move toward being a prudential regulator,” said Brian. “It says all over the adopting release that its purpose is to provide information to the Financial Stability Oversight Council. Many of the statements from SEC commissioners and staffers say that private funds are controlling more assets than the U.S. banking system. So now you’re too big to fail.”

Daly added, “If you read the Form PF release, it really is all about the FSOC. The FSOC sits alongside the SEC, benefitting from the new system the SEC is putting in place; it will police and monitor, but for completely different purposes. You can see how the FSOC might evolve into an actual, legitimate risk monitor.”

“If you are pushing a regulatory agenda that requires far more of an investment in compliance management infrastructure, costs go up,” Daly concluded. “But it also means that you generally wind up with fewer, but larger players. If you want world-class compliance systems, you’re probably not investing with a $15 million fund start-up manager.”