In April 2013, we issued a PE Alert addressing a speech by David Blass, Chief Counsel of the SEC’s Division of Trading and Markets, regarding the potential need for broker-dealer registration of private fund advisers. In his April speech, Mr. Blass focused his remarks on (i) whether the sale of fund interests by a private fund adviser’s internal personnel requires broker-dealer registration and (ii) whether the receipt of transaction-based fees in connection with portfolio company transactions requires broker-dealer registration. On September 26, Mr. Blass participated in a Practising Law Institute webinar on broker-dealer issues in the private fund industry where he provided an update on the SEC’s views.
Mr. Blass started by noting that his April speech was not intended to target the private equity industry but rather to raise awareness of the broker-dealer registration requirements. Mr. Blass stated that his speech was intended to start a dialogue with the private fund industry and to understand what issues the SEC needs to address, and that the SEC intends only to apply a rule of reason to the analysis of the broker-dealer registration requirements.
In his April speech, Mr. Blass sought comments as to whether a private fund broker-dealer exemption would be useful. In his update, Mr. Blass stated that it is more likely that the SEC will provide informal guidance on this topic rather than modifying the broker-dealer registration regime.