Daily News: August 12, 2013

ACG Applauds SEC Decision to Provide Custody Rule Relief

The Association for Corporate Growth said in a news release it applauds the decision of the Division of Investment Management of the SEC for providing much-needed relief from the requirement of the Custody Rule (206(4)-2). The resulting “Privately-Offered Securities Exemption” alleviates the burdensome and costly regulatory requirements under the custody rule as originally proposed by the SEC.

ACG and its members expressed concerns with staff of the SEC on the impact of the custody rule on the middle-market. The requirements bestowed burdensome and costly constraints for middle market private funds that typically hold a small number of non-tradable securities from private companies at any given time. Cost estimates under the original proposed custody rule were as much as $100,000 per firm, per year.

The SEC’s ‘Privately-Offered Securities Exemption” will no longer require private equity managers to hold private securities with a qualified custodian, provided that the certain factors are met.

“Today, we celebrate the wisdom of the SEC in creating an exemption that lifts unnecessary obligations for middle-market private equity investors,” said Pamela Hendrickson, COO for The Riverside Co. and vice chairman of ACG global board of directors. “We are grateful to the SEC for the time taken to fully understand the impact on the middle-market. This will save ACG members collectively millions of dollars every year in operating costs. The time and money that has been diverted to needless administrative procedures can now be used to make investments, drive corporate growth and create jobs.”