Over recent years, the Securities and Exchange Commission (SEC) has been incrementally increasing transparency within the traditionally murky territory of private equity. Now, it appears that lawyers are noticing the shift, and in many cases, are capitalizing on the potential work opportunities.
The SEC’s ongoing implementation of new fee disclosure and short-sale reporting rules for private fund advisors appears to be the inflection point. Bloomberg Law’s survey data suggests that securities and transactions lawyers anticipate these regulations will stimulate a rise in securities legal work.
According to the recentState of Practice Survey by Bloomberg Law, of the 156 lawyers specialized in securities and transactional law, 100 predicted a surge in securities work this year. Over half of these respondents attributed their predictions to an expected influx of private equity legal work.
Despite the alarming indicators faced by private equity in the previous year, including economic uncertainty and elevated borrowing costs, there is robust optimism in the industry. Notably, nearly half of the surveyed lawyers speculated that a significant boost in private equity legal work would emerge from an increase in investment fund inflows.
Additionally, dry powder, or unallocated capital in the private equity industry, continues to accumulate, reaching several trillion dollars. This massive reservoir of liquid capital is inspiring confidence among lawyers and industry insiders, fostering expectations that private equity will rebound strongly in 2024.
However, these encouraging signs come with some caveats. The SEC’s new regulations have sparked concerns about potentially heightened enforcement actions and litigation. More specifically, 41% of survey respondents stated that an amplified emphasis on enforcement and litigation by both the SEC and PE firms will subsequently shape the volume of their work.
While legal challenges to the new regulations are making waves, with some fund representatives arguing that the SEC has overstepped its mark with these rules, the outcomes of these contests are yet to be decided. Given the uncertainty surrounding these developments, it’s clear that the legal profession needs to stay abreast of the evolving landscape. Notably, the broader implications of these evolving regulations might reshape the industry beyond 2024.