Monday, March 12, 2012

In Letter to SEC, House Leader Urges Volcker Rule Exemption for Venture Capital Funds

In a letter to the SEC, Representative Bob Goodlatte (R-VA) urged that the final regulations implementing the Dodd-Frank Volcker Rule provisions exempt venture capital funds or provide that they are a permitted activity under Section (d)(I)(J). The Congressman noted that the Notice of Proposed Rulemaking issued by the federal regulators did not take a position on the issue, which he said is fairly straightforward.

Congress passed the Volcker Rule in an attempt to limit highly risky activities by banks that threaten the safety and soundness of the U.S. financial system, he explained. Congress also clearly allowed for flexibility so the rule would not stifle other types of activities that are critical to the nation's economic health. Rep. Goodlatte, who is Vice Chair of the Agriculture Committee, further noted that venture capital investing is exactly the type of activity Congress sought to exclude from the Volcker Rule because it is critically necessary to the economic recovery.

Venture capital investing helps startup companies around the country create jobs, build products, invest in research and development and generate life-changing solutions in fields like energy and life sciences, he posited. Further, the venture ecosystem is one of the bright spots in the U.S. economy. In 2010, venture-backed companies employed 11.9 million people and generated $3.1 trillion in revenues. Therefore, the legislator emphasized that it is vital that the final regulations do not create an unnecessary barrier to future venture investing, especially because it does not carry the risks the Volcker Rule aimed to limit.