Recently, the SEC's newest commissioner, Commissioner Daniel Gallagher, discussed certain of his beliefs, including, among other things, that the SEC should use its exemptive authority derived from the Investment Advisers Act of 1940, to provide some relief for hedge fund and private equity investment mangers from the registration provisions of said Act.
Gallagher believes that the full registration regime should not have been imposed upon investment managers for hedge fund and private fund advisers. Essentially, he believes that the SEC should use its exemptive power to provide some "balm" to their predicament. He also indicated that the SEC should rethink certain registration requirements if it does not promote capital formation.
Additionally, Commissioner Gallagher commented on the recent case of Theodore Urban, and his belief that the Commission should clarify when it believes that legal personnel are considered supervisors. As many may know, the Commission deadlocked over the case, requiring the dismissal of the charges. Commissioner Gallagher believes that it is important for the SEC to provide the standard for charging in-house counsel and other legal personnel in these matters. Commissioner Gallagher hopes that the SEC will clarify this position through a Section 21A Report under the Securities Exchange Act of 1934. He, however, said that there has not been a suitable case to do so as of yet.
Commissioner Gallagher also has indicated that he believes that the SEC needs to provide a better framework to work with in-house legal and compliance officers of broker-dealers and investment advisers. He believes that the SEC should utilize these individuals to accomplish its mission. He also thinks that, if these individuals are engaged, as opposed to challenging them, or causing them liability, the SEC would be more likely to uncover fraud and protect investors.
Finally, as we move forward, it will be interesting to see if Commissioner Gallagher will influence the SEC to change.