Following Dodd-Frank legislation, the SEC is going to require private equity fund advisers to register with the SEC, which broadens the registration requirements that currently apply to financial advisers Several members of Congress are complaining (see their letter here) and asking the SEC to not require registration by advisers to funds that are not highly leveraged. They argue that the typical private equity fund investor is “highly sophisticated” and making illiquid investments. My response: sure, the typical one is. I expect the typical adviser-investor relationship is not a concern. That does not mean that we do not want to keep track and be able to find the relationships/advisers that are problematic. The other argument is that private equity does not post systemic risk issues. This is silly. As the letter notes “private equity has a key role to play in our economic recovery.” A hit to the equity in private equity firms could easily be a systemic problem, like a hit to the equity of investment banks. Finally, the issue of leverage seems misguided. A fund can use zero leverage, but by holding equity in a venture with a lot debt, it is in effect leveraged. The exemption could incentivize funds to be less levered and individual start-ups or private firms to become more levered. And the SEC could not track advisers who advised funds that invested in highly levered private firms. The big question: why the big fuss? Who is it that is trying to keep this information out of the SEC and out of the market?