Lead Left Interview – Scott Gluck

The Lead Left: Scott, tell us about your role at Venable. 

Scott Gluck: Thanks, Randy. My practice focuses on federal government affairs and regulatory work involving financial entities with a particular focus on private equity funds and their portfolio companies. I also advise sponsors on matters including fund formation and compliance with federal regulations under the Investment Advisers Act of 1940 – basically anything where private equity funds or their portfolio companies interact with the federal government.

TLL: We met in DC as part of the Association for Corporate Growth’s (ACG) initiative to educate lawmakers on private equity.

SG: Yes, I serve as ACG’s “boots on the ground” in Washington, D.C. and work with them on a daily basis to advance their legislative and regulatory agenda.

TLL: And you actually worked for a private equity firm at one point, correct?

SG: Correct. I served as in-house counsel in Los Angeles for a firm called Markstone Capital. After that I served as Director of Special Initiatives for the National Republican Congressional Committee.

TLL: So do you think Congress finally understands what private equity is all about?

SG: The challenge is that the private equity industry historically has not been active on Capitol Hill in terms of explaining to regulators, legislators and their staff what it is that PE does. For example, it’s still not widely understood that most PE investors are pension funds, so the money that PE funds make from successful investments actually benefit policemen, firefighters, teachers, etc.  The pension fund beneficiaries are obviously major constituents of every U.S. Senator and Representative.

TLL: That has to be frustrating from your perspective. 

SG: It is a time-consuming, never ending process.  For example, the VC community has been educating Congress for over twenty years! All that hard work paid off though when, in the Dodd-Frank Act, Congress decided to require PE firms to register with the SEC, but exempt VC firms from registration..

TLL: So most staffers still don’t get what PE is all about. 

SG: No, but we are working on it.  I’ll give you one example. ACG had a briefing session with the top staff person for a Senator on the Senate Banking Committee to discuss middle market private equity firms. The very first question we got was about high-frequency trading, so clearly he didn’t understand the difference between a hedge fund and a PE fund.  That isn’t his fault though – the differences aren’t intuitive.  The PE industry needs to go out and explain to Capitol Hill what PE is.

TLL: I’m sure whatever view they have is  not favorable to the industry. 

SG: Well if all you saw were the television commercials from the last Presidential election, you’d think that all PE does is over-leverage companies, fire management, then take big dividends. That is simply not true.

TLL: Besides you and Venable, who’s helping in the education effort?

SG: ACG is starting to get very involved, thanks to Pam Hendrickson [ACG Global Chairman, and COO of The Riverside Company], Richard Jaffe [Co-Chair of ACG’s Policy Committee and Partner at Duane Morris] and Gretchen Perkins [Co-Chair of ACG’s Policy Committee and Partner at Huron Capital Partners]. Also, the Private Equity Growth and Private Capital Council (PEGCC), which represents large PE firms. And I would also add the Small Business Investor Alliance (SBIA). Finally, the Loan Sales & Trading Association (LSTA) is a great organization representing the banks and institutional funds in the loan market.

TLL: Let’s talk about the two biggies, Dodd-Frank and Volcker.

SG: Both have enormous implications for the entire PE industry. And both, for better or worse, are pretty much baked legislatively. There are some modifications for CLO’s that have passed the House of Representatives, but not the Senate. And the compliance date has been pushed back for a year. However, it is challenging to come up with modifications that would change anything significant related to Dodd-Frank yet still have a realistic shot at passing Congress and be signed by the President.  Divided government at work.

To be continued the week of July 14