I have written here, and in my recent article (Fall 2021 issue in Massachusetts InHouse) about the activist agenda of the Democratic-controlled SEC under Chair Gary Gensler.  Yesterday, Gensler furthered that agenda by announcing that the SEC will address transparency in fees paid to sponsors of PE and hedge funds.

The SEC cannot attack substance, in the sense that the amount of fees taken by the sponsor-operators of these funds is a matter of freedom of contract.  But every dollar going to these folks is indeed a dollar less going to the investors.  The SEC is of the view that funds are not making sufficiently clear what the sponsors are in fact taking off the table– a matter of disclosure.

The stated SEC drivers are to increase competition which will lower fees, and thus assist the investor cadre, which is appealingly described  as consisting of pension funds, school endowments, retiring people and those paying for college.  I  suppose that wealthy, non-retired, childless trading professionals also will be allowed to benefit from whatever investor benefits will be derived from this effort…..  🙂

Nor do I suggest that the bottom line goals of the SEC are misguided and, in this context, it is a bit difficult to understand Republican member resistance, which is actually framed in what seems a thin disguise of complaining that comment periods on new regulations are being expedited to shrink public comment periods from customary 60 days to 45 days or less; readers of public comments on pending SEC regulations, accessible to the public at SEC.gov., know that people with a real interest are prompt to post support or objections.  Surely lawyers for fund sponsors and managers are not going to miss an earlier comment deadline.