Audit Integrity and Job Protection Act

Mr. Speaker, I yield myself such time as I may consume.

I rise today in opposition to H.R. 1105, which will create a gaping loophole for private equity fund advisers and deprive investors and regulators of important information about the risk these funds pose.

The Dodd-Frank Act wisely required that advisers to all hedge funds, private equity funds, and other private funds register and file regular reports with the SEC. It did this for two reasons: one, to help regulators better understand the systemic risks that these funds pose to the overall financial system, and to provide investors in these funds with meaningful information about the funds' governance.

This bill would exempt nearly every private equity fund adviser from these important disclosure requirements. Some of my colleagues who support this bill will argue that because private equity funds were not the cause of the last crisis, we should not subject them to these modest transparency and accountability requirements.

But one of the most important lessons we did learn during the financial crisis is that systemic threats seem to always bubble up from the opaque and unregulated sectors of the market. Giving this exemption will allow threats to once again grow in the dark corners of our financial system, only showing themselves when it is too late to prevent serious harm to the American taxpayer.

Supporters of this bill, while well-intended, will point to the provision that ensures advisers to private equity funds with leverage ratios over 2:1 will still have to register. This may sound attractive on its surface until you realize that every private equity fund is basically within that parameter. Private equity funds invest in companies, and it is these portfolio companies that

load up on leverage and that have the potential to take on outside risk, piling on the leverage while the private equity fund itself appears on its surface to be modestly leveraged. A private equity fund could have a leverage ratio well below 2:1, while its portfolio companies are leveraged in excess of 30:1 masking the actual risk that these funds pose. Nearly every private equity fund in existence today would come in below the 2:1 leverage cap. This is a hollow limitation that provides no protection to the funds' investors or to the American taxpayer.

Mr. Speaker, we learned the hard way after the recent financial crisis that systemic risks grow in the dark corners of our financial markets and that the more information we can gather about how the markets work, the safer we will be. The registration and reporting requirements for private equity advisers are modest and narrowly tailored, but they provide investors and regulators with important information. Rolling back these reforms now moves us in the wrong direction. I urge my colleagues to oppose H.R. 1105.

I reserve the balance of my time.

Mr. Speaker, I yield myself 1 minute.

I do want to respond to the gentleman's invoking of the SEC chair, Mary Jo White. Judging from the gentleman's remarks, you would think she might be in favor of this bill. Well, let me talk about what she says about this bill in particular:

Our markets would not be well served by narrowing the scope

of the commission's jurisdiction in oversight of these

advisers.

That is with respect to this bill. She also said:

Private equity investors are in need of the same

protections as other private fund investors.

Lastly, she has also said that the commission has brought enforcement actions, talking about the advisability of having oversight over advisers and having these disclosures made:

The commission has brought enforcement actions against

private equity funds and their advisory personnel involving

unlawful pay-to-play schemes, insider trading, conflicts of

interest, valuation, and misappropriation of assets.

I yield myself another 30 seconds.

Now, when you think about the protections that are necessary for pension funds, especially where these workers have invested their whole lives in these pension funds, you understand the need for this disclosure.

At this time I yield 3 minutes to the gentleman from Minnesota (Mr. Ellison).

I yield the gentleman an additional 1 minute.

I yield the gentleman an additional 20 seconds.

Mr. Speaker, I yield myself 1 minute to respond to some of these allegations.

In respect to sophisticated investors, the Council of Institutional Investors, which is an association representing corporate, union, and public pensions, foundations and endowments, largely very sophisticated investors with combined assets of $3 trillion, opposes this bill. They oppose this bill because of the record of enforcement actions of the SEC to go after risks that do actually exist.

I now yield 3 minutes to the gentleman from Connecticut (Mr. Himes), a cosponsor of the bill.

Mr. Speaker, I yield the gentleman an additional 1 minute.

Mr. Speaker, may I ask how much time is remaining for each side.

Mr. Speaker, at this time I yield 3 minutes to the gentleman from Tennessee (Mr. Cooper).

Mr. Speaker, I yield myself such time as I may consume.

I do want to point out, in response to the gentleman from Tennessee's remarks about this bill going on voice vote in committee, I just want to remind the Members and the public that during that debate there was a need for further work on this bill.

I think, in a moment of bipartisanship, we agreed, both Democrat and Republican, to allow the bill to go by voice vote with the promise to work on some of those issues going forward. So it was an agreement to try to continue to agree and to work on the bill. It was

not a vote in favor of any particular provisions within this bill.

There has been a lot of talk here about the risks that don't exist, and I do want to just point out some of those. As a result of this bill, funds investing more than $300 billion a year, much of which is the retirement savings of workers like teachers, firefighters, police officers, they would no longer be required to provide basic investor protections.

Specifically, H.R. 1105 would deprive investors of basic disclosures about an employee of a fund adviser who, for instance, violated securities law, or the adviser's businesses practices, its fees, any conflict of interest on the part of that adviser.

It would also eliminate a compliance program and code of ethics within the bill, within Dodd-Frank, and would eliminate the need for a chief compliance officer for each fund manager.

H.R. 1105, the bill under consideration here, would also prevent the SEC from conducting compliance exams of private equity fund adviser, even though SEC Chairman Mary Jo White notes that the Commission has already uncovered issues such as unlawful pay-to-play schemes, insider trading that we have all read about recently, conflicts of interest, valuation issues, and misappropriation of assets.

I want to talk about some of these since there has been a complete dismissal of any risk here. I think the record speaks to the risk.

The SEC has brought several enforcement actions against private equity firms. While the defendants do not necessarily represent all private equity firms, they do highlight the need for a strong police officer with the authority to examine all private equity advisers.

Capital formation relies on investor confidence in the underlying assets; and without registration with the SEC, investors will no longer have a cop on the beat that can enforce the rule of law, reducing investor demand.

In Knelman, for example here, there have been broad violations related to fraud, custody, compliance, and reporting. In Knelman Asset Management Group, the SEC found that registered private equity fund-of- funds adviser Knelman Asset Management Group, LLC, and Irving P. Knelman, KAMG's managing director, chief executive officer, and former CCO, violated the Advisers Act's custody, antifraud, compliance, reporting, and books-and-records provisions.

In insider trading enforcement, the Gowrish insider trading case involved an individual who allegedly stole confidential acquisition information, TPG Capital, and sold that information to two friends who made $500,000 in illicit trading profits.

Valuation related enforcement actions, the Oppenheimer/Brian Williamson matters concern an investment adviser and portfolio manager who misrepresented material details about his valuation methodology to his investors.

Recently, the Commission filed a case against Yorkville Advisors, where Yorkville allegedly inflated the values of certain liquid assets. While Yorkville managed hedge funds, the valuation issues are very similar to ones we see in private equity.

Finally, the KCAP valuation case involved alleged overstatements of the value of certain debt securities and CLOs held in the investment portfolio, highlighting the division and AMU's emphasis on pursuing valuation cases.

And in the Ranieri Partners case, the SEC also found that an investment manager knowingly used a sanctioned, unregistered broker- dealer to solicit capital for a pooled investment vehicle.

So all of these illegal activities would be made unavailable to private equity investors under this bill. That is what the risk is. That is not fiction. Those are actual cases that the SEC has introduced enforcement actions on. So there is real risk here for investors and for the markets themselves.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself 2 minutes.

We need not worry about small firms in this. They are already exempt under this bill. They are already exempt. So the concerns about small firms being covered by this, they are already exempt, number one.

Number two, the other scenario that has been posited here is that somehow, by allowing private equity firms the right to keep secret--or to refuse to disclose that their employees have been prosecuted for violating securities laws, by allowing that to remain undisclosed, that somehow that is going to help some single mom go to work, I don't think that is a rational assumption.

Mr. Speaker, I will now enter into the Record letters from the following organizations who are all opposed to this bill: Americans for Financial Reform, the Council of Institutional Investors, the North American Securities Administrators Association, and a Statement of Administration Policy from the Obama administration.

I reserve the balance of my time.

Americans for

Financial Reform,

Washington, DC.

Dear Representative: On behalf of Americans for Financial

Reform, we are writing to express our opposition to HR 1105.

Contrary to its title, this bill is not designed to benefit

small business. Instead, it would exempt private equity fund

advisers--who include some of the wealthiest and most

significant entities on Wall Street--from basic reporting

requirements designed to help regulators

monitor systemic risk in the financial system and protect

investors and the public.

Prior to the Dodd-Frank Act, hedge and private equity funds

received almost no regulatory monitoring, despite the fact

that combined they manage some $3 trillion in assets and

played a significant intermediary role in the financial

crisis. Section 404 of the Dodd-Frank Act created more

transparency for this previously dark portion of the markets,

by requiring advisers to hedge and private equity funds to

report basic financial information relevant to systemic risk

to the Securities and Exchange Commission (SEC). The

experience of the 2008 crisis--where risks emerged from parts

of the markets not being monitored by regulators--clearly

demonstrates the importance of ensuring that regulators can

track financial risks wherever they originate.

The Section 404 reporting requirements as implemented by

the SEC are far from onerous. All advisers with below $150

million in assets under management are completely exempted,

and advisers with up to $1.5 billion in assets under

management must report only limited and basic information

once per year. Advisers to large private equity funds are

required to respond only once per year (advisers to other

large funds report quarterly).

HR 1105 would exempt almost all private equity fund

advisers from reporting requirements to the Securities and

Exchange Commission. The sole requirement for the exemption

is that the fund must not have outstanding borrowings that

exceed twice the fund's invested capital. But this

requirement places little if any real limitation on the

exemption, since the great majority of borrowing connected

with private equity activity is conducted through portfolio

companies, not at the fund level. (That is, companies owned

by private equity funds borrow large amounts as the direction

of the fund, but the fund itself rarely borrows a great

deal).

It is particularly distressing that Congress would consider

granting this exemption at a time when concern is growing

among regulators and market observers about risks created by

a possible bubble in the leveraged loan market, which is

dominated by loans sponsored by private equity firms. Several

warnings have been issued recently by regulators concerning

the risks being created in these markets. As Moody's

investor's service has stated:

``Private equity firms have been exploiting investors''

willingness to lend to speculative-grade companies . . .

Higher yields are drawing investors to riskier structures at

a time when interest rates remain at historical lows.''

Since leveraged loans are also being sold to small retail

investors, a bubble could impact both the stability of the

broader financial system and the retirement savings of retail

investors. The situation in the leveraged loan market clearly

demonstrates the connection between private equity activity

and important risks to financial stability and to investors.

An additional source of concern is the danger that the

exemption granted in HR 1105 could too easily be exploited to

reach beyond private equity firms alone. The distinction

between a hedge fund and a private equity fund is not a

formal legal distinction, it is simply a differentiation

between general investment strategies. While HR 1105 grants

the SEC the ability to define more precisely what a private

equity fund is, if that definition is at all overbroad then

it could be taken advantage of by a wide range of hedge funds

in order to avoid oversight.

Private equity funds already receive significant subsidies

through the tax system, as they are major beneficiaries of

the favorable treatment for `carried interest', as well as

the general tax subsidy to debt costs. It is totally

inappropriate to also grant such funds a blanket exemption

from even the limited and basic Dodd-Frank regulatory

reporting requirements. Such a blanket exemption would make

it more difficult for regulators to monitor systemic risk and

risks to investors, solely in order to exempt wealthy

managers of large private equity funds from a minor

administrative task. HR 1105 should be rejected.

Thank you for your consideration. For more information

please contact AFR's Policy Director, Marcus Stanley.

Sincerely,

Americans for Financial Reform.

Following Are the Partners of Americans for Financial Reform

All the organizations support the overall principles of AFR

and are working for an accountable, fair and secure financial

system. Not all of these organizations work on all of the

issues covered by the coalition or have signed on to every

statement.;

A New Way Forward; AFL-CIO; AFSCME; Alliance For Justice;

American Income Life Insurance; American Sustainable Business

Council; Americans for Democratic Action, Inc; Americans

United for Change; Campaign for America's Future; Campaign

Money; Center for Digital Democracy; Center for Economic and

Policy Research; Center for Economic Progress; Center for

Media and Democracy; Center for Responsible Lending; Center

for Justice and Democracy.

Center of Concern; Center for Effective Government; Change

to Win; Clean Yield Asset Management; Coastal Enterprises

Inc.; Color of Change; Common Cause; Communications Workers

of America; Community Development Transportation Lending

Services; Consumer Action; Consumer Association Council;

Consumers for Auto Safety and Reliability; Consumer

Federation of America; Consumer Watchdog; Consumers Union.

Corporation for Enterprise Development; CREDO Mobile; CTW

Investment Group; Demos; Economic Policy Institute; Essential

Action; Greenlining Institute; Good Business International;

HNMA Funding Company; Home Actions; Housing Counseling

Services; Home Defender's League; Information Press;

Institute for Global Communications; Institute for Policy

Studies: Global Economy Project.

International Brotherhood of Teamsters; Institute of

Women's Policy Research; Krull & Company; Laborers'

International Union of North America; Lawyers' Committee for

Civil Rights Under Law; Main Street Alliance; Move On; NAACP;

NASCAT; National Association of Consumer Advocates; National

Association of Neighborhoods; National Community Reinvestment

Coalition; National Consumer Law Center (on behalf of its

low-income clients); National Consumers League; National

Council of La Raza.

National Council of Women's Organizations; National Fair

Housing Alliance; National Federation of Community

Development Credit Unions; National Housing Resource Center;

National Housing Trust; National Housing Trust Community

Development Fund; National NeighborWorks Association;

National Nurses United; National People's Action; National

Urban League; Next Step; OpenTheGovernment.org; Opportunity

Finance Network; Partners for the Common Good; PICO National

Network.

Progress Now Action; Progressive States Network; Poverty

and Race Research Action Council; Public Citizen; Sargent

Shriver Center on Poverty Law; SEIU; State Voices; Taxpayer's

for Common Sense; The Association for Housing and

Neighborhood Development; The Fuel Savers Club; The

Leadership Conference on Civil and Human Rights; The Seminal;

TICAS; U.S. Public Interest Research Group; UNITE HERE.

United Food and Commercial Workers; United States Student

Association; USAction; Veris Wealth Partners; Western States

Center; We the People Now; Woodstock Institute; World Privacy

Forum; UNET; Union Plus; Unitarian Universalist for a Just

Economic Community.

List of State and Local Affiliates

Alaska PIRG; Arizona PIRG; Arizona Advocacy Network;

Arizonans For Responsible Lending; Association for

Neighborhood and Housing Development NY; Audubon Partnership

for Economic Development LDC, New York NY; BAC Funding

Consortium Inc., Miami FL; Beech Capital Venture Corporation,

Philadelphia PA; California PIRG; California Reinvestment

Coalition; Century Housing Corporation, Culver City CA;

CHANGER NY; Chautauqua Home Rehabilitation and Improvement

Corporation (NY); Chicago Community Loan Fund, Chicago IL.

Chicago Community Ventures, Chicago IL; Chicago Consumer

Coalition; Citizen Potawatomi CDC, Shawnee OK; Colorado PIRG;

Coalition on Homeless Housing in Ohio; Community Capital

Fund, Bridgeport CT; Community Capital of Maryland, Baltimore

MD; Community Development Financial Institution of the Tohono

O'odham Nation, Sells AZ; Community Redevelopment Loan and

Investment Fund, Atlanta GA; Community Reinvestment

Association of North Carolina; Community Resource Group,

Fayetteville A; Connecticut PIRG; Consumer Assistance

Council; Cooper Square Committee (NYC).

Cooperative Fund of New England, Wilmington NC; Corporacion

de Desarrollo Economico de Ceiba, Ceiba PR; Delta Foundation,

Inc., Greenville MS; Economic Opportunity Fund (EOF),

Philadelphia PA; Empire Justice Center NY; Empowering and

Strengthening Ohio's People (ESOP), Cleveland OH;

Enterprises, Inc., Berea KY; Fair Housing Contact Service OH;

Federation of Appalachian Housing; Fitness and Praise Youth

Development, Inc., Baton Rouge LA; Florida Consumer Action

Network; Florida PIRG; Funding Partners for Housing

Solutions, Ft. Collins CO; Georgia PIRG.

Grow Iowa Foundation, Greenfield IA; Homewise, Inc., Santa

Fe NM; Idaho Nevada CDFI, Pocatello ID; Idaho Chapter,

National Association of Social Workers; Illinois PIRG; Impact

Capital, Seattle WA; Indiana PIRG; Iowa PIRG; Iowa Citizens

for Community Improvement; JobStart Chautauqua, Inc.,

Mayville NY; La Casa Federal Credit Union, Newark NJ; Low

Income Investment Fund, San Francisco CA; Long Island Housing

Services NY; MaineStream Finance, Bangor ME.

Maryland PIRG; Massachusetts Consumers' Coalition;

MASSPIRG; Massachusetts Fair Housing Center; Michigan PIRG;

Midland Community Development Corporation, Midland TX;

Midwest Minnesota Community Development Corporation, Detroit

Lakes MN; Mile High Community Loan Fund, Denver CO; Missouri

PIRG; Mortgage Recovery Service Center of L.A.; Montana

Community Development Corporation, Missoula MT; Montana PIRG;

Neighborhood Economic Development Advocacy Project; New

Hampshire PIRG.

New Jersey Community Capital, Trenton NJ; New Jersey

Citizen Action; New Jersey PIRG; New Mexico PIRG; New York

PIRG; New York City Aids Housing Network; New Yorkers for

Responsible Lending; NOAH Community Development Fund, Inc.,

Boston MA; Nonprofit Finance Fund, New York NY; Nonprofits

Assistance Fund, Minneapolis M;

North Carolina PIRG; Northside Community Development Fund,

Pittsburgh PA; Ohio Capital Corporation for Housing, Columbus

OH; Ohio PIRG.

OligarchyUSA; Oregon State PIRG; Our Oregon; PennPIRG;

Piedmont Housing Alliance, Charlottesville VA; Michigan PIRG;

Rocky Mountain Peace and Justice Center, CO; Rhode Island

PIRG; Rural Community Assistance Corporation, West Sacramento

CA; Rural Organizing Project OR; San Francisco Municipal

Transportation Authority; Seattle Economic Development Fund;

Community Capital Development; TexPIRG.

The Fair Housing Council of Central New York; The Loan

Fund, Albuquerque NM; Third Reconstruction Institute NC;

Vermont PIRG; Village Capital Corporation, Cleveland OH;

Virginia Citizens Consumer Council; Virginia Poverty Law

Center; War on Poverty--Florida; WashPIRG; Westchester

Residential Opportunities Inc.; Wigamig Owners Loan Fund,

Inc., Lac du Flambeau WI; WISPIRG.

Small Businesses

Blu; Bowden-Gill Environmental; Community MedPAC;

Diversified Environmental Planning; Hayden & Craig, PLLC; Mid

City Animal Hospital, Pheonix AZ; The Holographic Repatteming

Institute at Austin; UNETO.

Mr. Speaker, could I ask how much time remains on each side.

I yield 2 minutes to the gentlelady from New York (Mrs. Maloney).

I yield the gentlewoman an additional 1 minute.

I yield myself 2 minutes.

Mr. Speaker, I would now like to enter into the Record statements from the following organizations which all oppose H.R. 1105: the AFL- CIO, California Public Employees' Retirement System, and North American Securities Administrators Association.

And regarding reading the bill, I certainly did read the bill, and my point is that the bill does not require public disclosure of those matters, as the gentleman points out. It just goes to the Commission. So it doesn't go to the public. The public doesn't get the information. It stays within the custody of the Commission.

I yield to the gentleman from Texas.

Reclaiming my time, that is right. But those are public investors. They are the ones that need the information.

Mr. Speaker, I yield the balance of my time to the gentlelady from California (Ms. Waters), our ranking member and a real champion of America's working families.

Legislative Proposals to Relieve the Red Tape Burden on Investors and

Job Creators

United States House of Representatives Committee on Financial Services

Subcommittee on Capital Markets and Government Sponsored Enterprises

(Statement of Anne Simpson Senior Portfolio Manager, Investments Director of Global Governance California Public Employees' Retirement

System, May 23, 2013)

Chairman Garrett, Ranking Member Maloney, and Members of

the Committee, on behalf of the California Public Employees'

Retirement System (CalPERS), we thank you for convening this

hearing. CalPERS is pleased to submit testimony for the

record to reassert our strong support for efficient and

effective financial regulation, as enacted by the Dodd-Frank

Wall Street Reform and Consumer Protection Act (``Dodd-

Frank'').

This statement includes a brief overview of CalPERS,

including how we benefit from effective financial markets

regulation and the role that shareowner rights and corporate

governance play in building investor confidence. It also

includes a discussion of our views on HR 1135, HR 1105, and

Mr. Speaker, pursuant to House Resolution 429, I call up the bill (H.R. 1105) to amend the Investment Advisers Act of 1940 to provide a registration exemption for private equity fund advisers, and for other purposes, and ask for its immediate consideration in the House.

Mr. Speaker, I ask unanimous consent that all Members have 5 legislative days within which to revise and extend their remarks and submit extraneous material for the Record on H.R. 1105, currently under consideration.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, since Congress was not in session last week, perhaps some of my colleagues missed the front page headline from The Washington Post. I read: ``Among American Workers, Poll

Finds Unprecedented Anxiety About Jobs and Economy.''

According to the report, American workers are living with ``unprecedented economic anxiety.'' More than six in 10 worry that they will lose their jobs. Nearly one in 3 say they worry a lot about losing their jobs.

The article goes on to mention an American named John Stewart who wakes up every morning at 1:30 a.m. for a 2-hour commute to catch two different buses in Philadelphia so he can get to work on time. In the newspaper, he said: ``I can't save money to buy the things I need to live as a human being.''

Mr. Speaker, we don't have to read The Washington Post. All we have to do is listen to our own constituents, since even today millions-- millions--of our fellow countrymen remain unemployed and underemployed.

I hear these stories every week myself. Recently, I heard from Ida in Wills Point, Texas, in the Fifth Congressional District that I represent. She and her 79-year-old husband own a small trucking company. She wrote me that ``because of increasing regulations in taxes in the past 4 years, we have lost all but two of our trucks.'' She goes on to write me: ``My husband is the only driver right now because I can no longer drive. He drives full-time 3,500 miles a week most weeks because we can't live on his Social Security.'' She says: ``We are really stuck in a hole.''

Millions, Mr. Speaker, are ``stuck in a hole.''

Today, we have an opportunity, Mr. Speaker, to do something to help raise many of our fellow countrymen out of that hole of economic anxiety and economic hardship. Today, we have the opportunity to pass H.R. 1105, the Small Business Capital Access and Jobs Preservation Act.

I want to commend the bipartisan group of Members--two Republicans and two Democrats--who introduced the bill: Mr. Hurt of Virginia, Mr. Himes of Connecticut, Mr. Garrett of New Jersey, and Mr. Cooper of Tennessee.

As chairman of the Financial Services Committee, Mr. Speaker, I want to thank all the members of the committee who came together across party lines to approve the bill. Mr. Speaker, nearly one-third of the Democrats who sit on our committee joined with 30 Republicans in supporting H.R. 1105. In short, Mr. Speaker, this is, indeed, a bipartisan jobs bill.

We know that small businesses face an incredible red tape burden. In fact, a recent survey of the National Federation of Independent Business said that ``government regulations and red tape are the single most important challenge that small businesses face in creating and preserving jobs.''

Mr. Speaker, I heard from another small business person in Grand Saline, Texas, in my district. He said because of overregulation ``our business has devolved from one that provides a service for a customer into one that provides that same service as an afterthought while our real efforts go into paperwork.''

Mr. Speaker, we can debate the relative merits or demerits of the Dodd-Frank Act; but even the primary author himself, former Chairman Frank, admitted that perhaps not every aspect of Dodd-Frank achieved perfection. And many of us would argue on a bipartisan basis that the part of the act that requires small business investors who are private equity advisers to register with the SEC is perhaps one of those provisions that is in need of reform.

This is a provision, Mr. Speaker, that many of us believe was aimed at Wall Street, but ends up hurting Main Street. Because of this provision embedded in Dodd-Frank, smaller firms that invest in entrepreneurs and in small businesses face yet one more significant regulatory cost, regulatory burden, more red tape.

As one of the small business investors testified before our committee, it is going to cost his company $200,000 every year to comply with the regulation. He went on to say:

While for some larger firms this is an insignificant cost,

for a medium-sized firm such as ours that offers capital to

small businesses, it is a significant expense.

And pay attention to this, Mr. Speaker. He said:

This money comes directly out of our funds intended for

investment into Main Street.

In today's economy, to help pull these people out of this hole of economic anxiety, we need more private sector, more private equity investment into Main Street. Private equity equals small business jobs.

In fact, Mr. Speaker, between 1995 and 2010, 23,000 different companies across our Nation benefited from private equity investment, employing 3 million different people, and the investments that are made by private equity historically have grown jobs at three times the rate of other companies.

And so what does this look like? I have to tell you, Mr. Speaker, it look likes an outfit called New Mountain Capital that invested in a company named Inmar, a national coupon and reverse logistics processing company. By helping them update their IT with a $100 million investment, they now support 4,200 different employees.

The face of private equity looks like Capital South Partners that invested in a North Carolina firm, Vita Nonwovens, and now they have 95 employees in High Point, North Carolina, and I should add parenthetically, another 55 employees in my native Texas. This is the face of private equity. These are some of the small business jobs that are being created.

Now, we may hear from some that this is needed to somehow battle Wall Street, but let me tell you what private equity is not. Private equity it is not Wall Street. It is not complex derivatives trading. It is not currency swaps. Mr. Speaker, it is not about systemic risk. That is not what this is about. And so, again, this was a provision aimed at Wall Street that, unfortunately, is hitting Main Street.

It is time to make sure that Americans like John in Philadelphia can live like a human being. It is time to make sure that constituents like mine, Ida and her husband, don't have to drive 3,500 miles a week just so they can put food on the table.

Mr. Speaker, it is time, again, for this institution to put jobs first, not regulators first, but jobs first. I urge all of my colleagues to adopt H.R. 1105.

I reserve the balance of my time.

Mr. Speaker, I am now privileged to yield 5 minutes to the gentleman from Virginia (Mr. Hurt), the primary author of this legislation, a real leader on our committee and in this Congress in creating jobs.

Mr. Speaker, at this time I am very happy to yield 4 minutes to the gentleman from New Jersey (Mr. Garrett), a coauthor of the legislation and the chairman of the Capital Markets and GSE Subcommittee.

Mr. Speaker, I am now pleased to yield 2 minutes to the gentleman from Illinois (Mr. Hultgren).

Mr. Speaker, I now yield 1\1/2\ minutes to the gentlewoman from Missouri (Mrs. Wagner).

Mr. Speaker, I yield myself 30 seconds to say that the gentleman from Massachusetts sets up a straw man and then knocks it down. The activities that he describes as illegal continue to be illegal, and I would say that private equity funds provide extensive reporting to investors, including audited annual financial statements.

Private fund equity advisers are subject to the antifraud provisions of the Investment Advisors Act of 1940, whether they are registered or not, and fund offerings are subject to the antifraud provisions of the Securities Act of 1933.

The real choice becomes, are we going to get even greater protections for millionaire investors, or are we going to help struggling single moms trying to find a job in this economy?

Mr. Speaker, at this time I am happy to yield 2 minutes to the gentleman from Ohio (Mr. Stivers).

Mr. Speaker, I am very pleased now to yield 1 minute to the gentleman from Tennessee (Mr. Fincher).

Mr. Speaker, I yield myself 1 minute.

Again, I want to address the gentleman from Massachusetts who, again, I believe, sets up a straw man only to knock it down.

I would urge all Members to actually read the bill. I know that many of my Democratic colleagues now have buyer's remorse from not reading the 2,000-page ObamaCare bill, but, Mr. Speaker, this is a two-page bill, 36 lines.

And I would say to my friend, the gentleman from Massachusetts, that on page 2, that the SEC can ``require investment advisers described in paragraph (1) to maintain such records and provide to the Commission such annual or other reports as the Commission taking into account fund size, governance, investment strategy, risk, and other factors, as the Commission determines necessary.''

So to make the assertion that these records of foul play could never exist is simply not true.

I yield myself an additional 30 seconds.

I would say to my friend, the gentlelady from New York who made the assertion that the SEC is opposed to this bill, that the SEC has not opposed this bill. One member, Mary Jo White, has issued an opinion that she does not support the legislation, but the SEC has taken no official position.

With respect to a threatened veto, I don't recall that when my Democratic colleagues had the majority here that they refused to pass bills simply because President Bush threatened to veto. But I must admit, our committee has produced, I believe it is, at least 10 or 11 bipartisan bills which all received veto threats from a President who says he wants to work on a bipartisan basis. This is most regrettable.

Will the gentleman yield?

By definition, it is private equity. It is not a public fund.

Mr. Speaker, I am very happy to yield 2 minutes to the gentleman from New Jersey (Mr. Garrett), a coauthor of the legislation and the chairman of our Capital Markets and GSE Subcommittee.

I yield the gentleman an additional 30 seconds.

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, listening to some of my colleagues on the other side of the aisle, it is hard not to conclude that some of them have never met a regulation that they didn't like, regardless of what it does to the hopes, dreams, and aspirations of the unemployed and underemployed in America.

As I look over your chair, Mr. Speaker, and see the words, ``In God We Trust,'' I sometimes question whether some Members would like to take down the word ``God'' and replace it with ``regulators'': In Regulators We Trust.

The question has never been, Mr. Speaker, the question between regulation and deregulation. The question is between smart regulation and dumb regulation; and in order to make that determination, one needs to see what cost is being imposed, again, on the hopes and dreams and aspirations of the unemployed and the underemployed.

Why does this underlying regulation need to be there in the first place? Is it systemic risk? Well, even the chairman of the SEC has admitted that private equity played no role in the financial crisis.

We know in terms of the economy, private equity may represent somewhere on the order of 1.5 to 2 percent of GDP. There is no evidence of interconnectedness, which many maintain is at the root of systemic risk.

So what are they trying to protect? Well, investor protection. This is all about giving additional protection to millionaire investors at the expense of single moms trying to make ends meet. I am not really sure that meets the test of smart regulation.

We know already that private equity fund advisers are subject, as they well should be, to the antifraud provisions of the Investment Advisers Act of 1940, whether they are registered or not. Fund offerings are subject to the antifraud provisions of the Securities Act of 1933. The SEC still has the ability to ensure that proper documentation is maintained.

No, we do not want to see any investor, regardless of sophistication or income, be subject to coercion or fraud. But, at the same time, we don't want to deny small businesses--the job engine in America--the funding they need to put America back to work.

There are many companies today that we recognize--Dunkin' Donuts, Baskin-Robbins, Petco, Skype, J.Crew--that all have benefited from private equity. Where would the tens of thousands, if not hundreds of thousands, of jobs they represent be today if private equity had to face yet another burden that is going to cost these small investment firms half a million dollars, a million dollars?

Today, we haven't really heard that much about company likes Entrust or Universal Smart Comp, but maybe they are tomorrow's Petco or tomorrow's Toys ``R'' Us.

And so it really comes down to this, Mr. Speaker, again: Are there going to be additional protections for multimillionaire investors, or are there going to be additional protections and opportunities for unemployed single moms trying to make ends meet?

Our side of the aisle said, Let's help the single mom. Let's pass H.R. 1105, and put America back to work.

I yield back the balance of my time.

Mr. Speaker, I rise in opposition to the amendment.

I yield myself such time as I may consume.

Mr. Speaker, the amendment, regardless of how well-intentioned it may be, functionally guts the bill and is essentially redundant of current law in Dodd-Frank.

And I grant the gentlelady, who is a very senior and thoughtful member of our committee, that her provision is perhaps more articulate than the underlying law, but section 408(n) of Dodd-Frank already says:

In prescribing regulations to carry out the requirements of

this section with respect to investment advisers acting as

investment advisers to mid-sized private funds, the

Commission shall take into account the size, governance,

investment strategy of such funds.

It goes on to say:

The Commission shall provide for registration and

examination procedures with respect to the investment

advisers of such funds which reflect the level of systemic

risk.

So, again, it is essentially redundant of what is already in current law.

According to the Private Equity Growth Council, on average it is taking $1.8 million for the initial Dodd-Frank compliance cost and an additional $1.3 million each year in Dodd-Frank compliance costs. All for what? We already have underlying investor protections in place.

There is no evidence presented whatsoever that this has anything to do with systemic risk, all at the cost of jobs, at a time when, again, Mr. Speaker, tens of millions of our countrymen are struggling. They are underemployed, unemployed.

Again, who are we going to help? Are we going to help regulators? Are we going to help millionaire investors? Are we going to help struggling Americans trying to pay the bills? We should oppose this amendment, Mr. Speaker.

At this time, I would be very happy to yield 2 minutes to the gentleman from Virginia (Mr. Hurt), again, the author of H.R. 1105.

Mr. Speaker, how much time do I have remaining?

I yield myself the balance of my time.

Mr. Speaker, again, historically, private equity has invested in tens of thousands of small businesses, and it has helped create millions of jobs in America.

The question today is: Are we going to put a roadblock in place of private equity--the small business investment engines--so that we can somehow help regulators?

With all due respect to our regulators--and there are many good ones and many great ones at the SEC--I have never met a regulator who turned down the opportunity to regulate more. I have never met him.

So the question is: Are we going to grant an even greater ability to take funds away from small businesses to create a work product that doesn't meet the commonsense test, the jobs test, the smell test--or any other test--at a time when people are still suffering and wondering how are they going to put gas in the tank; how are they going to take their kids to school; how are they going to afford their health care bills since, clearly, they cannot keep their health insurance even if they want to.

How are they going to do this?

We need private equity to fund small business to get America back to work. We need to defeat this amendment. We need to pass the underlying bill. It is time to be pro-jobs.

With that, Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I rise in support of H.R. 1105, the Small Business Capital Access and Job Preservation Act, a bipartisan bill that our colleagues, Representatives Cooper, Himes, Garrett, and I introduced earlier this year. I thank all of them for their leadership on this issue.

I would also like to thank Chairman Hensarling and again Chairman Garrett for their support and leadership on this bill, as we were able to achieve a bipartisan vote out of the Financial Services Committee.

Every Member of this body can agree that with millions of Americans out of work, our top focus in Congress should be, and it must be, enacting policies to spur job creation throughout our Nation.

Today, the House takes up another bill to encourage economic growth and job creation by increasing the flow of private capital to small businesses that are found on Main Streets all across America. At a time when the available avenues of capital and credit for small businesses continue to decrease, capital investments from private equity into our communities are more important than ever.

Unfortunately, Dodd-Frank has placed a costly and unnecessary regulatory burden of SEC registration on advisers to private equity while exempting advisers to similar investment funds. These registration requirements do not improve the stability of our financial system, and they restrict the ability of private equity to invest capital in our small businesses to spur job growth.

In Virginia's Fifth District, my district, there are literally thousands of jobs that exist because of the investment of private equity. These critical investments allow our small businesses to innovate, expand their operations, and create the jobs that our communities need. If enacted, the unnecessary burdens on advisers to private equity funds that do not have excessive leverage would be eliminated, and they would be given the same exemption from the SEC's registration requirements that venture capital advisers enjoy.

These registration requirements, which do not make the financial system any more stable, impose an undue burden on small and mid-sized private equity firms, and decrease the ability of their investment to create jobs.

During our Financial Services Committee hearing on the bill, witnesses discussed the cost these requirements have imposed on private equity firms. They force investment advisers to private equity to expend substantial resources that disproportionately affect small and mid-sized funds with costs of hundreds of thousands of dollars annually, or more, to comply with these requirements.

It is important to note that most people, including SEC Chair Mary Jo White, concede that private equity funds did not cause the 2008 financial crisis and are not a source of systemic risk, despite that argument being the impetus for the registration requirement under Dodd- Frank. These funds are not highly interconnected with other financial market participants; and, therefore, the failure of a private equity fund would be highly unlikely to trigger cascading losses that would lead to a similar financial crisis. Additionally, these funds invest primarily in illiquid assets, including small Main Street businesses found across our country. These businesses are diversified across multiple industries and therefore lack concentrated exposure to any single sector.

Furthermore, investors in private equity firms are all sophisticated investors who negotiate for the strongest investor protections. These sophisticated investors include public pension funds, university endowments, nonprofit foundations--many of whom are the primary beneficiaries of private equity successes. Those investors typically are represented by counsel and heavily negotiate fund terms in advance of investing, including reporting governance and conflicts of interest.

It should also be noted that H.R. 1105 does nothing to change current Federal law with respect to common law and statutory fiduciary protections owed by investors to advisers to private equity funds. There are already existing significant investor protections available both contractually and in the form of State and Federal fiduciary duties and antifraud protections--investor protections that exist whether or not the advisers are registered with the SEC.

In the end, the costs of unnecessary registration represent real capital that otherwise could be used to invest in companies such as Virginia Candle in our district--a company that, through private equity investment, expanded from a garage in Lynchburg, Virginia, to millions of homes across the world.

Beyond Virginia Candle in Virginia, private equity-backed companies employ over 7.5 million people. Let me say that again: private equity- backed companies employ over 7.5 million people nationwide in over 17,000 U.S. companies. The impact of the registration requirements stand to diminish job creation in each of the congressional districts represented on this floor today.

I ask all of my colleagues today to join me in voting ``yes'' on H.R. 1105 and pass this bill from the House in order to increase the flow of private capital to our small businesses so that they can innovate, grow, and create jobs for the American people.

Small Business Investor Alliance,

December 3, 2013.

Hon. John A. Boehner,

Speaker, House of Representatives,

Washington, DC.

Hon. Nancy Pelosi,

Democratic Leader, House of Representatives,

Washington, DC.

Dear Speaker Boehner and Democratic Leader Pelosi: On

behalf of the Small Business Investor Alliance (SBIA), the

premier organization of lower middle market private equity

funds and investors, we urge you to support passage of the

bipartisan Small Business Capital Access and Job Preservation

Act (H.R. 1105), sponsored by Representatives Robert Hurt

(VA-5), Jim Himes (CT-4), Scott Garrett (NJ-5), and Jim

Cooper (TN-5). Passage of H.R. 1105 would reduce expensive

regulatory costs for small business investors enabling

increased capital formation and job creation for growing

small businesses.

Private equity funds are critical to the capital raising

process for many small businesses. In fact, a Pepperdine

University study found that private equity backed businesses

generated 129 percent more revenue growth and 257 percent

more employment growth than non-private equity backed

businesses. America needs more private equity small business

investing, not less.

It is commonly overlooked that small business investors are

generally small businesses too. They are being held back by

expensive regulatory costs as a result of new expanded SEC

registration requirements put into place by the Dodd-Frank

Act. Investment Adviser registration is very costly in both

money and time, especially for smaller funds that do most of

the small business investing. Most of our private equity

funds do not have legal departments, compliance teams, and

other forms of overhead that are required by the new

regulatory system. Compliance costs are often $250,000 or

more per year--a heavy expense to a small business investment

fund. Many of the new burdens are caused by the fact that the

SEC rules are designed to deal with publicly traded

businesses and investing, not for investing in domestic,

privately-held small businesses. Small business investors are

not mutual funds, multi-national conglomerates, or giant

financial institutions and should not be treated as such.

Private equity funds, particularly those supporting small

businesses, are not a systemic risk and did not contribute to

the financial crisis. H.R. 1105 would reduce regulatory

costs, but would still maintain record

retention and information for regulators and thus maintain

investor safeguards.

Congress can reduce unnecessary burdens for our private

equity funds and allow them to do what they do best--invest

in job creating small businesses to empower them to succeed,

create jobs, and grow the economy. SBIA strongly supports

passage of the bipartisan Small Business Capital Access and

Job Preservation Act.

Sincerely,

Brett Palmer,

President.

I thank the chairman.

Mr. Speaker, I rise in opposition to the gentlelady's amendment.

I appreciate her work and interest on this important issue; but with all due respect, this amendment would defeat the entire purpose of the bill.

If adopted, all advisers to private equity who are currently undergoing the burdensome and unnecessary registration process would still be required to do so. Additionally, it would establish an entirely subjective, so-called ``simplified'' compliance standard that would have to be defined by the Securities and Exchange Commission. There is no reason to believe that such a so-called simplified standard would provide any meaningful relief for those private equity companies investing in small companies across this country.

As has been stated, small and mid-sized private equity firms are expending hundreds of thousands of dollars in annual compliance costs and would still have to be registered with the SEC. Instead of addressing this problem, this amendment, if adopted, would continue to restrict the ability of small and mid-sized private equity firms to invest in small businesses.

As Members of both parties have pointed out, there are not persuasive arguments that private equity generates systemic risk; and, indeed, to the extent that leverage at the fund level could potentially trigger such risk, we have already adopted a standard proposed by Mr. Himes in committee that would require registration for advisers to firms with leverage that exceeds 2 to 1.

I know that the gentlelady understands that access to private capital is the lifeblood for small business. The current SEC registration requirements are unnecessary. They produce a significant burden on private equity firms and, therefore, restrict the flow of private capital to small businesses across the country.

I urge this body to defeat this amendment and to vote in favor of the underlying bill.

Mr. Speaker, I rise in opposition to the motion to recommit.

Mr. Speaker, with all due respect to the gentleman from Nevada, the problem with his motion to recommit is that it would punish a company like Vitamin Shoppe. Vitamin Shoppe is a leading U.S.-based vitamin and supplements distributor. Earlier this year, Vitamin Shoppe went global, opening its first international franchise in Panama City, Panama. By partnering with a private equity fund, Vitamin Shoppe grew its business from a Northeast-based specialty retailer to a national chain, adding more than 400 stores and 2,500 new jobs.

With all due respect, this bill is not about overseas jobs. This bill is not about Wall Street. This bill is about Main Street American jobs to the tune of 7.5 million jobs working in 17,000 U.S. companies. This bill is about encouraging private capital investment in those Main Street jobs. This bill is about not adding $500,000 in compliance costs to Main Street job creation.

To put this in perspective, I dare say, of every congressional district represented on this floor, this bill is about a window manufacturer in Rocky Mount, Virginia, in Virginia's Fifth District, our district, which has operated there for the last 70 years. It has provided good jobs in our community. It has provided jobs for generations of people living in Franklin County, Virginia, and for families who have worked there for generations. In the last 10-20 years in Rocky Mount, Virginia, just like all across southside Virginia and so many congressional districts across this country, we have seen hard times because of the loss of thousands of manufacturing jobs. We have seen over the last 10-20 years double digit unemployment.

This window manufacturing plant was able to survive because of private equity investment, and now that window manufacturing company boasts 1,000 employees. Those jobs still exist today because of a private equity investment.

Last night we had a meeting of the Rules Committee, and one member of the committee asked a question. He said: If a big PE firm has to pay an extra $500,000 for compliance costs, what is the big deal?

It seems to me that it would be better, perhaps, to ask that question to an employee at that windows manufacturing firm in Rocky Mount. If asked, I suspect he would say, you know: I have a good job. I love my job. I work 60 hours a week to be able to pay my mortgage, to pay my bills and take care of my family. He would say, Please, to all of you in Washington, do everything that you can to make sure that 1 year from now I still have my job and make sure that my neighbor has a job, too.

That is a big deal, and that is what this bill is about. I urge the defeat of this motion to recommit, I urge the adoption of this good jobs bill, and I ask for your vote for H.R. 1105.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I thank the chair.

Before I give my remarks, I just want to say in response that I believe the chairman said that he is not opposed to all regulations. I think he said he is in favor of regulation, but make sure that it is smart and appropriate regulation--at least, that is my position, as well.

Understand, too, to the gentleman's point, that even when this legislation is passed, the SEC still will have significant authority, will still have its enforcement division, will still have its new asset management unit, which has recently recruited industry professionals with asset management experience to serve as specialists in this unit to do the investigations that the gentleman wants to have continue, and it will continue even after the passage of this legislation.

With that said, I want to again thank the chairman. I want to thank the gentleman from Virginia (Mr. Hurt), and also the gentleman from Connecticut (Mr. Himes), as well, for their hard work on this very important legislation, as well as all our cosponsors on both sides of the aisle. For that reason, I am pleased to support H.R. 1105. And do make no mistake about it; this is bipartisan legislation, and it is all about helping small businesses and helping to create more jobs in this country.

Today, more than 17,700 companies, backed by private equity employ over 7.5 million people. In my home State of New Jersey alone, 597 private equity-backed companies support more than 377,000 workers, while the New Jersey Division of Pensions and Benefits has invested billions on behalf of retirees and private equity firms. Hopefully, all those facts give you the facts you need to know how important it is to the creation of jobs. Yet despite their long track record supporting small business nationwide, the Dodd-Frank Act has imposed enormous and numerous burdens on private equity firms, forcing most fund advisers to spend literally millions of dollars complying with new SEC registration and reporting requirements.

While these burdensome regulations no doubt crimp the flow of much- needed investment dollars to America's small businesses, there is little or no evidence that they are needed to promote the stability of our financial system or to protect investors. Unlike, say, Federal housing policy and the government-sponsored enterprises Fannie Mae and Freddie Mac, private equity did not cause the financial crisis and is not--and never has been--a source of systemic risk.

As former SEC Chair Mary Schapiro admitted back in 2011: ``Private equity funds have less potential to pose systemic risk than any other type of private funds.'' Indeed, if the SEC is so concerned about the systemic risk of private equity funds, their recent examinations of private equity advisers certainly do not show it.

As Chair White recently said: Neither the SEC's examinations staff nor the Division of Investment Management ``has conducted examinations of an adviser to a private fund based primarily on systemic risk concerns.''

She also said: SEC examiners ``have not to date reviewed systemic risk issues as part of their examinations of private funds.''

Thirdly: None of the advisers to private funds that withdrew their registration in 2012 ``had systemic market impact.''

And so now we must ask ourselves this question: Do we really want the SEC, already saddled with a multitude of unfinished, nongermane Dodd- Frank mandates expending valuable resources on risks that don't even exist? In addition, because only sophisticated investors may invest in these private equity funds, the need to protect investors in this case is more limited compared to other areas of the security market.

While I wholeheartedly support the SEC's mission to protect investors, the agency with limited resources should be devoted, first and foremost, to protecting the less sophisticated, the retail mom-and- pop investors. They need the most protection.

It was Paul Kanjorski, who was in Congress when Dodd-Frank went through. He said:

I, for one, could care less about high-wealth individuals

who want to contribute their money to a group of investors.

If they want to take the shot of losing it, it does not

really affect the rest of society.

It also bears mentioning that this legislation in no way alters the many existing tools the SEC already has to prevent and punish fraud in the private equity industry for the benefit of sophisticated investors and the broader economy.

I urge support of H.R. 1105 at a time when most small businesses continue to have difficulty getting credit and need to grow. Passing this bipartisan legislation, commonsense legislation, should be no a no-brainer.

I thank the chairman for yielding.

Mr. Speaker, let's step back for a moment and just see where we may agree on certain points.

I guess at the 30,000-foot level we agree on the fact that we want to work together on legislation that will try to prevent the next financial crisis. We agree that we want to try to protect investors.

It is after that level, however, when we get into the details that we disagree.

As far as protecting and trying to make sure the next financial crisis does not occur, there has been no evidence either today on the floor or in the committee process during the discussion of this debate or in any of the debates when we discussed Dodd-Frank that the origin of the last financial crisis was from private equity. No evidence. Or from hedge funds. No evidence. Or from venture capital. No evidence whatever. So to say that we need to have extensive, overbearing, overlapping, extraneous regulation on private equity to prevent the next one, they have no evidence to say that was the cause in the past.

We say, just as the gentleman from Connecticut said before, venture capital is excluded from it. Why not private equity as well? And that is why we have come together in a bipartisan manner to make sure the next crisis doesn't occur in an area such as this.

In the second area, the point was made as far as the cost. The gentleman from Massachusetts said, Well, we're talking about the larger funds here. If he was at the hearing last night in the Rules Committee, he would have heard one of his colleagues, Mr. Polis from Colorado, refute that point.

Why is that? This is what he said. When you are talking about firms, $150 million, $200 million sounds like large firms, right? But that is just how much money is under management. The actual money they are actually spending in the company is just a fraction of it. A little tiny fraction, as he pointed out. It is around 2 percent.

So if you are talking about a $150 million fund under management, it sounds big. Actually, that is around a $3 million business. And now you are asking that $3 million business to have to pay upwards of half a million dollars each year for all their compliance costs and the examination, which goes to the last point by the gentlelady from New York.

We would love to try to find some common ground on her amendment, but her amendment simply goes to the first point and the initial filing of the forms and what have you. After that, there is the extraneous additional examinations and all the other costs that are so overly burdensome that we have found both in a bipartisan manner, as Mr. Himes from Connecticut has already pointed out, is overly burdensome and unnecessary.

If there was some other way to pull this together in a bipartisan manner more so than we have already done, I would do so, but I am glad that the gentleman from Virginia and also the gentleman from Connecticut have been able to come together on all the points to come to a final bill in a bipartisan manner. And I support the legislation.

I thank the gentleman for yielding.

Mr. Speaker, I would like to remind my colleagues that we are still recovering from a massive financial crisis that cost this country $16 trillion, and I would venture to say that we should be more focused on protecting investors, not removing investor protections. And I would say that all investors deserve to be protected--sophisticated investors, retail investors, pension investors. All investors should be protected, which is why the Obama administration has come out so strongly in opposition to the underlying bill and why the Securities and Exchange Commission, whose mission is to protect investors, is so adamantly, strongly opposed to this bill.

Now, I am sympathetic to the point that my colleagues have raised on the other side of the aisle and on this side of the aisle that some of the reporting and registration requirements are onerous. So let's address that. Let's direct the SEC to come forward with simplified forms, to do it quickly, within 6 months. Let's save money. Let's simplify the process. But let's not remove important investors' protections, such as the fiduciary duty to act in the client's best interest. What is wrong with that? I think that is a moral responsibility, such as the obligation to disclose conflicts of interest.

Now, that is not onerous. How difficult is it to say, yes or no, I have not had any conflict of interest? Or if you are advising your client to invest in your business, then disclose your conflict of interest. What is so onerous about that? That is not onerous. That is easy.

And what is wrong with the obligation to disclose fees? Everyone talks about transparency. That is why we are opposing this bill. We want it to be transparent, and we want to protect investors.

I feel that there are many ways that we could address this that would come forward with a strong piece of legislation that President Obama could sign into law. Instead, he has got a lot of ink in his veto pen, and he has said right out front that he would veto this bill.

Now, if they want to simplify disclosure and registration requirements, then let's do that. Let's require the SEC to come forward with it. Let's simplify the process and save the cost for small businesses. We want to save that cost.

Honest private equity firms have grown jobs in this country, and it is important to grow jobs. It is important to support them in every single way. But removing all investor protections, according to the Obama administration, would literally assault the safety and soundness and the strong financial security that we are trying to build in this country.

What is wrong with protecting investors? That is what we are saying. I have an amendment which would do just that, protect the investors but simplify the forms and maintain the cost.

If their goal is to save money for the small firms, then let's do that, but let's not erase very important investor protections in the process.

Mr. Speaker, I have an amendment at the desk.

Mr. Speaker, I first want to commend the chairman and the ranking member for their hard and dedicated work on the Financial Services Committee.

I would also like to commend the vice-chairman, Congressman Hurt, for his work on this bill. I agree with him that private equity funds did not cause the financial crisis.

I also agree that many private equity funds--and especially the small private equity funds that invest in middle-market businesses--support jobs across our country. I also agree that for many small equity funds, the cost of complying with every single requirement in the Investment Advisers Act can be burdensome and costly.

However, while I share the goal of reducing unnecessary regulatory burdens on small private equity funds with under $1 billion in assets, I believe that there are better ways to accomplish this goal to reduce the burden, to reduce costs without eliminating important investor protections.

I would say that we should have equality in this country--and equality of treatment for everyone, including investors. If you are a small investor, a large investor, a teacher, an unemployed worker, and you have invested, whoever you are, you should have protections. Aren't we a country of laws and equality of treatment? So my amendment would direct the SEC to create a simplified disclosure form for fund advisers between $150 million and $1 billion, while also retaining important investor protections.

We would reduce the burden, reduce the reporting, reduce the disclosure, simplify the forms, make it easier, but protect the fiduciary duty to act in a client's best interest. Isn't that the moral, right thing to do?

There is the obligation to disclose conflicts of interest and the obligation to disclose fees. I thought we all supported transparency. Well, let's have transparency in these investment funds, too.

I would ask my colleagues on the other side of the aisle who are objecting to this amendment how much of a burden is it to disclose whether or not you have a conflict of interest. You just have to check yes or no, I have a conflict of interest. Then maybe you have to disclose what that conflict is. But that is the fair and right thing to do.

How burdensome is it to disclose fees? Tell people what you are charging them. And how burdensome is it to have the necessary fiduciary duty to act in the client's best interest? Most people think that you are acting in their best interest. I think they would be horrified to know that some Members of this body want to roll back that protection for them.

I would also like to note that in August the SEC did provide relief for

smaller private equity funds from what the industry tells me is one of the most burdensome aspects of registration--the so-called custody rule--which requires that the funds use independent custodians for stocks that don't even trade. So private equity funds have already gotten relief, and I applaud the SEC for this commonsense decision.

The reforms in my amendment would build on this relief and would direct the SEC to act quickly on simplified forms--within 6 months--and save these small businesses money so that money can go out into the community.

The underlying bill grants a complete exemption to private equity fund advisers with under 2 to 1 leverage, which is pretty much the entire industry, because the funds themselves are not leveraged. It is the companies the funds invest in that are leveraged.

The underlying bill is opposed by the Securities and Exchange Commission, whose prime mission is to protect investors, and by President Obama's administration. He has even threatened a veto.

If the problem is the high cost of registry at the SEC and preparing the required disclosures, then the solution is to simplify the registration and disclosures for small equity funds. That is what my bill does. But it also protects investors.

It does not exempt the entire industry from investor protection, which is what the underlying bill does, and I do not believe that that is the intent of my colleagues on either side of the aisle.

So my amendment accomplishes the express goal of saving money and simplifying, but protects the integrity of our financial system and investors.

I urge everyone to support my amendment, and I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.