Kelley Howes spoke to Buyouts about the U.S. Securities and Exchange Commission's (SEC) new private fund rules, which have been described as the most sweeping new regulations for private funds since the passage of the Dodd-Frank Act – even after the SEC significantly mitigated much of its original proposals.
According to Kelley, fund managers will need to devote much more money and time for the new compliance requirements.
"These things cost money," Kelley said. "It's going to increase the number of staff members involved in compliance. It's going to need more integration of custodial and administrative systems. A lot of smaller shops don't have these systems, and that increases risks since you're relying on humans using an Excel spreadsheet."
Ultimately, the increased compliance costs will be paid for by LPs [limited partners], the constituency the SEC looks to protect through its new rules, Kelley added. "It all comes back to the questions if this is worth it, because everyone's expenses just went up."
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