Overview of the Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) was enacted on July 21, 2010 and marked the most comprehensive financial regulatory reform since the Great Depression. The Act was created in response to the U.S. financial crisis.

Throughout the legislative and regulatory process, the PEGCC informed lawmakers and regulators on the implications Dodd Frank would have for the private equity community.


Overview of the Hart-Scott-Rodino Antitrust Improvements Act

Signed into law on September 30, 1976, the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) is a set of amendments to U.S. antitrust laws, which established a premerger notification program to provide information about a merger or acquisition to the Federal Trade Commission (FTC) and the Department of Justice (DOJ).

This pre-merger notification includes submitting an HSR Report Form (HRS Form) with pertinent business information about each company. The companies cannot complete their transaction until a waiting period – typically 30 days – has passed or the government has terminated the waiting period. This allows regulatory agencies time to review the proposed merger or acquisition and contact all involved parties regarding any anticompetitive issues.

In the summer of 2010, the FTC and DOJ announced the most sweeping proposed changes to the HSR Form since its inception and, in some cases, increased the amount of information that must be submitted to the FTC and DOJ, placing a heavier burden on the filing parties.

In October 2010 , the PEGCC filed a comment letter in response to the proposed changes to the Hart-Scott-Rodino reporting rules. In it, the PEGCC addressed the fact that many of the proposed amendments to the Hart-Scott-Rodino Form would substantially increase the burden on reporting persons and agency staff without significantly improving the effectiveness of antitrust review.

When the FTC and DOJ announced final changes to the HSR Form in July 2011, the agencies did revise some of the requirements in response to concerns raised by the PEGCC and other interested parties. These revisions include:

  • A pared-back requirement for production of offering memoranda and outside consultant/advisor materials
  • A requirement to produce synergy/efficiency studies prepared for officers/directors of the ultimate parent entities of the parties or any of their controlled entities in connection with the transaction subject to HSR reporting;
  • Pared-back reporting requirements for products manufactured outside of the U.S. and imported into the U.S.; and
  • A revised definition of “Associate,” intended to include entities that are under common investment or operational management with the filing person Entities that merely provide non-binding advice on investment decisions and/or provide non-managerial assistance will not be considered “Associates” in the final rule.

Nevertheless, as highlighted in the PEGCC comment letter, the final rules will impose additional burdens on private equity and other investment funds. All Hart-Scott-Rodino filings made on or after August 18, 2011, will have to use the new HSR Form.

[1] See Graham http://faculty.fuqua.duke.edu/~jgraham/website/JACFHowBig.PDF

PEGCC Comment letter to FTC on Hart-Scott-Rodino Form Changes

Overview of The Foreign Account Tax Compliance Act

The Foreign Account Tax Compliance Act (FATCA) requires that “Foreign Financial Institutions” (FFIs) enter into reporting agreements with the Internal Revenue Service (IRS) and provide the IRS with relevant information. The PEGCC is interested in the FATCA regime because many of our member firms have a sizable number of entities in their funds families that are expected to become participating FFIs, and numerous others that will need to otherwise comply with FATCA reporting or certification procedures.

The PEGCC supports FATCA’s overarching policies of ensuring transparency and compliance with the tax laws, and is committed to working with regulators to further those policies. The comment letter submitted to regulators on April 30, 2012, addresses areas where the FATCA regulations could be streamlined to achieve the regulatory goals more effectively and reduce burdens on private equity firms. A central goal of the comment letter to is encourage regulators to create a centralized compliance option for investment fund families. The PEGCC recommends that the regulators change the proposed rule to:

  • Allow fund families to enter into FFI agreements on a consolidated basis, where one entity (the “Compliance Member”) is authorized by other entities within the family to act on their behalf and to bind them all to the terms of a single FFI agreement;
  • Allow the Compliance Member to comply with the FATCA reporting requirements on behalf of the members of its group on a centralized basis, such that the Compliance Member would interact directly with the IRS on behalf of the group and would take legal and financial responsibility for the group’s compliance with FATCA;
  • Not require investment funds (particularly private equity funds, which are subject to practical and legal constraints regarding the redemption of their investors’ interests) to incur the potentially severe financial hardship of redeeming investors that are recalcitrant account holders as a condition of avoiding a default under an FFI agreement, but rather use alternative means of incentivizing investors not to become recalcitrant account holders;
  • Rationalize the rules for information reporting in tiered partnership structures and adapt them better to investment fund structures; and
  • Integrate FATCA reporting for partnerships with current obligations of some foreign partnerships to file Form 1065 and related Schedules K-1.

For more information on the PEGCC position on FACTA please click here.

Related Information, Comment Letters, Releases and News