Saturday, December 24, 2022

Congressional Delay Re: PEU Side Letters

reported on another way private equity underwriters (PEU) can influence elected officials:

Wall Street firms and their political allies — including a U.S. senator with substantial private equity holdings — are trying to stop federal regulators from intervening to protect retirees by banning firms from giving some investors preferential treatment. And there are no rules requiring lawmakers with investments in private equity to disclose whether they are being given special investment preferences while they lobby to protect those asset managers. 

The new battle revolves around the secret “side letters” that private equity, hedge fund, and real estate firms ink with individual investors, giving them privileges not afforded to others in the same investment funds.
...side letters “can create preferred liquidity terms or disclosures. This can create an uneven playing field among limited partners based upon those negotiated terms.”

It should be no surprise that political insiders can look after their PEU brethren and benefit disproportionately while doing so.  

The Blue political team took bold action by slowing down political comment.

Democrats were raking in more than $34 million of campaign cash from private equity and investment firms, a dozen Senate Democrats sent a letter to Gensler demanding that the SEC slow down its rulemaking process by extending comment periods 

A Tennessee Senator from Hall Capital went further with a letter demanding a stop to the rule from further consideration.
...the American Investment Council, the top lobbying group for private equity, is also fighting the reforms
Politicians Red and Blue love PEU and increasingly, more are one.  
All the lobbying has already resulted in one key win for the (PEU) industry: a line slipped into Congress’s end-of-year omnibus spending bill.

That unrelated spending legislation currently states that Congress “strongly encourages the SEC to reconduct the economic analysis for the [side letter rule] to ensure the analysis adequately considers the disparate impact on emerging minority and women-owned asset management firms, minority and women-owned businesses, and historically underinvested communities.”
It's their PEU brethren they serve and only a miniscule number are minority and women-owned.