Venture capitalists not treated as hedge funds under new House bill

Venture capitalists breathed a collective sigh of relief Thursday when a proposal from the House Financial Services Capital Markets Subcommittee did not seek to treat them like private equity firms or hedge funds.

Venture capital investors had been lobbying against such a measure, saying that being required to register with the Securitiesand Exchange Commission like hedge funds and other private pools of money was unnecessary and expensive.

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The Private Fund Investment Advisers Registration Act, announced by subcommittee chairman Paul Kanjorski (D-Penn.), "recognizes that venture capital firms do not pose systemic financial risk and that requiring them to register under the Advisers Act would place an undue burden on the venture industry and the entrepreneurial community," said Mark Heesen, president of the National Venture Capital Association, which represents about 400 venture firms.

NVCA's chairman, Terry McGuire, who is also a partner of Polaris Ventures in Boston, will testify before the committee at a hearing on the issue Tuesday.

On Thursday, Rep. Barney Frank (D-Mass.), chairman of the financial services committee, said in a hearing that venture capitalists would not have to worry about the registration requirements.

A recent study commissioned by NVCA showed that venture-backed companies accounted for 12.1 million jobs and $2.9 trillion in revenue in 2006.

Read more about the issue here.