Gensler says SEC weighs new rules, more disclosures from private capital funds

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U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler testifies during a Senate Banking, Housing and Urban Affairs Committee oversight hearing on Capitol Hill in Washington on September 14, 2021.

Evelyn Hawkstein | Swimming pool | Reuters

SEC Chairman Gary Gensler said Monday that Wall Street’s top regulator is preparing to roll out rules to force greater transparency and competition from the country’s largest private company and the private companies that fund it.

Gensler, who spoke with CNBC’s “Squawk Box,” said he wants to ensure that large private companies and private equity firms — many of which include public pension funds among their investors — disclose enough information to stakeholders.

“We’ve had both public companies and private companies for a long time. We’ve said that if you want to reach the general public [for capital], there’s a basic deal: share information, disclose information that’s important to investors,” Gensler said.

“We will again be working on a project around driving greater competition and efficiency in the private fund space,” he continued. “These are funds that raise money — about $17 trillion in total — from pension funds and the wealthy.”

Any effort to require private companies to disclose more financial and operational information is likely to face opposition from Silicon Valley’s young companies and startups.

Investments from venture capital funds and private equity firms are often the main source of funding for young companies looking to build production and launch products on a national or global scale.

Over the past few decades, private capital has been unable to fund companies the way public markets can, and regulators have given young companies greater privacy in business metrics to encourage innovation. In theory, as these companies mature, they will eventually tap the public markets and disclose key financial details such as earnings, revenue, business prospects and executive compensation.

But with about $17 trillion under management in private funds, many companies are delaying entering public markets, sometimes using initial public offerings as an opportunity for their wealthiest investors to cash out.

An SEC representative did not respond to CNBC’s request for more details about the agency’s plans.

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