What Drives Dodd-Frank Act Compliance Cost for Private Funds?

CLS Blue Sky Blog

Are Dodd-Frank Act compliance costs forcing smaller private investment fund advisers out of the market?  Several policy makers have suggested that Dodd-Frank Act compliance costs affect smaller firms more than larger firms and many financial studies have shown that an inverse relationship exists between the size of a regulated firm and the per-unit cost of compliance. If the administrative and compliance costs created by Title IV of the Dodd-Frank Act should disproportionally affect smaller private fund advisers, it is conceivable that over time smaller fund advisers could get forced out of the market or merge with other funds. Private fund advisers who are contemplating a startup may not enter the market. A disproportionate effect of Title IV of the Dodd-Frank Act on startup private funds and smaller advisers could create barriers to market entry and precipitate a trend toward consolidation among smaller private fund advisers. A surplus of larger private fund advisers with correspondingly…

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