Private equity firms would be required to provide expansive disclosures about the fees shouldered by investors under rules set to be considered by the U.S. Securities and Exchange Commission, Bloomberg News reported. The changes, which the regulator plans to propose next week, would force the companies to disclose specific expenses they pass on to clients. The rule would also address how frequently firms are required to provide the information, one person said. SEC Chair Gary Gensler has complained that the industry’s fees are opaque and too high, meaning investors such as pension funds may not be getting the best deal. The SEC declined to comment. New disclosure mandates could give investors more bargaining power. “This could provide more ammunition to investors to negotiate lower costs,” said Igor Rozenblit, a former SEC official and managing partner at Iron Road Partners, which advises private equity firms on regulatory risks. Private equity lobbyists are already bracing for a fight, and they plan to argue that the fees are agreed to by sophisticated parties. It’s not the SEC’s first attempt to rein in the industry during Gensler’s brief tenure. In January, the regulator proposed rules requiring that large hedge funds and private equity firms to confidentially inform officials about big losses in close to real-time — a significant change to the quarterly reports they file now.
