The DI Wire had a chance to speak with Greg Mausz, president of ADISA, who also serves as executive vice president of operations and due diligence at Preferred Apartments Communities (NYSE: APTS). Throughout his 17-year career in the financial services industry, Mausz either directly raised or oversaw the capital raise of more than $8 billion.
Now that the SEC has introduced its Regulation Best Interest, how do you think it will impact the various sectors of the financial industry, in addition to how it will affect financial firms? For example, what are the implications for credentialing organizations, political campaigns in 2020, and investor relations?
It’s having a cascading affect throughout the industry as people assess their business to address any potential conflicts of interest. This includes the broker-dealers, registered investment advisor and also the company’s with private offerings and how they will structure their investments. They want to make sure their products will not pose any difficulties for the broker-dealers to present to investors. People know they have a year to get ready and we can see they are already working to prepare for when Reg BI takes effect.
Most importantly, Reg BI provides greater investor protections while allowing for broad access to professional financial advice for all investors – for which ADISA has long advocated.
The SEC is considering simplifying private securities offerings to expand the current definition of “accredited investor” and limiting the restrictions on the secondary trading of exempt securities. Are you in favor of these changes? The potential to cast a wider net of investors sounds appealing, but wouldn’t an increase in secondary trading possibly lead to more liquidity that could stifle returns?
We very much like the idea of expanding the definition of “accredited investor” as it would bring a lot more capital into our space, which would increase the value of private investments. There’s always been some secondary trading of exempt securities. We don’t anticipate that making adjustments there would have a significant impact on the industry.
Private placements play an important role in our economy. They are a catalyst that drives capital into the economy, fueling the growth of small businesses and helping to generate jobs across the U.S. They can also play an important role in investor portfolios, so we believe that thoughtful expansion of access to private placements can be very positive.
Has ADISA responded to the SEC’s request for comments for simplifying private securities offerings?
ADISA’s Legislative and Regulatory Committee is currently preparing comments for submission. This is an important issue for our membership, and ADISA expects to play a significant and active role.
Do you have any insight regarding the DOL fiduciary rule that is expected to make a comeback at the end of the year, particularly in light of the recent resignation of Labor Secretary Alexander Acosta?
We expect the DOL to introduce a new version of the fiduciary rule later this year or in early 2020. Unlike the version that was vacated in the federal courts, however, this one will be compliant with the SEC Reg BI rule and conform with the limits outlined by the courts. Unlike Reg. BI, of course, it will have power over only retirement accounts subject to ERISA. Unlike the original fiduciary rule, we believe the new version will be a responsible rule that will enhance investor protections while allowing for broad access to professional investment advice and investment options.
A small group of Senators introduced a bipartisan bill (S.1344) a few months ago, which would require the Treasury Department to collect data on the number of opportunity zone funds created and the impact the funds are having on underserved communities. The data would have to be reported on an annual basis to Congress. Does ADISA support this legislation?
At ADISA, we fully support this bill. The metrics that they are requesting are not overly intrusive or time-intensive to gather. The added reporting for the opportunity zones program will help provide transparency and credibility for our industry and what we accomplish.
Can you tell our readers what they can expect at the ADISA Research & Due Diligence Forum? What do you think will be the most popular panels/discussions?
I think everyone will be very interested in learning what they need to do to stay in compliance with Reg BI and qualified opportunity zones. It will also be a very good opportunity for people to network.