New SEC Rules Could Hurt VC’s Newcomers

The U.S. Securities and Exchange Commission approved new rules for private funds Wednesday meant to give limited partners—the individuals and institutions that invest in these funds—more transparency. The ramifications for the much larger private equity industry have drawn most of the attention, but venture capital funds will also need to bend to the new rules. VC firms will have to provide their LPs quarterly financial statements, which remarkably isn’t standard for all firms. They’ll also have to perform annual audits for each fund they manage. 

Some venture capitalists, of course, aren’t happy, even though the new rules are less stringent than earlier proposals. “It’s completely wrong-headed,” said one venture capitalist, arguing that the SEC is trying to solve a problem that doesn’t exist. “It’s bad policy and it’s bad for the industry.”