Carta Policy: Weekly Brief for August 12

Carta Policy: Weekly Brief for August 12

Author: The Carta Policy Team
Read time:  8 minutes
Published date:  11 August 2022
As policymakers break for August, Carta’s Policy Weekly will be doing the same. We will send our next weekly brief on September 2, unless news merits an

The Topline

  • House to pass Inflation Reduction Act—VC-focused provisions on QSBS, carried interest, and private market investment remain safe

  • SEC and CFTC propose expanded reporting requirements for Form PF, including crypto

  • Treasury study asserts a well-designed central bank digital currency (CBDC) may help enhance the stability of the banking system

  • FTC announces rulemaking process on consumer data privacy and security

As policymakers break for August, Carta’s Policy Weekly will be doing the same. We will send our next weekly brief on September 2, unless news merits an update in the meantime. If you have any questions, please do not hesitate to contact us. As always, thank you for reading.

Macro matters

Congress on the verge of passing the Inflation Reduction Act 

The Senate passed the Inflation Reduction Act over the weekend and the House is poised to pass it this month. The bill includes investment to combat climate change, as well as provisions to lower healthcare costs and institute a 15% minimum tax for large corporations. Although earlier this year certain moderate Democrats initially insisted on raising the State and Local Tax (SALT) deduction in exchange for their support of the reconciliation package, they have retrenched. We expect the House to pass the bill.

Economic conditions

This Consumer Price Index—the measure of inflation—was unchanged in July. Although the index increased 8.5% over a 12 month period, this flattening is a welcome sign. While prices remain high, these numbers are better than expected.

Market returns remain challenging, as state and city pension funds lost a median 7.9% in the year ending June 30, representing the lowest annual performance since 2009. Inflationary pressures, high stock valuations, and a decrease in the value of crypto investments all contributed to the loss

Capital markets

SEC & CFTC jointly propose new Form PF reporting requirements, including crypto exposure

In a party-line vote, the SEC and CFTC jointly proposed amendments to Form PF, which would require certain SEC-registered private fund advisers (over $150M in assets under management) to include more detailed information concerning the funds they manage. The SEC, which has been increasingly concerned with the growth of the private fund industry, proposed these amendments to aid the Financial Stability Oversight Council’s (FSOC) ability to assess systemic risk and bolster the SEC’s oversight of private fund advisers and investor protection efforts. These proposed requirements follow the SEC’s January Form PF proposal that would require reporting on key events, decrease the reporting threshold for large private equity advisers, and require them to report more information about the funds they advise. 

The new proposed Form PF amendments would expand reporting for large hedge fund advisers on qualifying hedge funds (over $500M) in a number of areas, including investment exposures, portfolio concentrations, and borrowing arrangements. Notably, the proposal would add a new sub-asset class for digital assets and require hedge funds to report on fund exposure to them. The proposal would also require hedge funds to include detailed information on investment strategy, including with respect to crypto. While the proposal largely focuses on hedge funds, it would require all private fund advisers who file Form PF to include more granular information around items including identifying information, assets under management, beneficial ownership, withdrawal and redemption rights, and fund performance.  

SEC Commissioners Hester Peirce and Mark Uyeda criticized the proposal for expanding the information collected on Form PF beyond its limited purpose of assisting FSOC in monitoring systemic risk. Instead, they argue the new data would be used to assist the SEC in ramping up its regulation of private markets, which will negatively impact investors and impose additional burdens and barriers to entry in the private funds space, especially when combined with other SEC actions targeting the private markets. Increasing the amount of sensitive data collected also raises cybersecurity concerns.  

Brown and Reed urge greater transparency in private fund market

Senate Banking Committee Chairman Sherrod Brown and Sen. Jack Reed sent a letter to SEC Chair Gary Gensler expressing support for its proposed rules for private fund advisers. The pair argue the proposal would enhance transparency in the private fund market and protect investors from conflicts and harmful practices consistent with the authority Congress gave the SEC to oversee the industry in the Dodd-Frank Act. While it is unlikely to see congressional action targeting private funds, support from senior Democratic senators could help Gensler move forward on the controversial proposal, which has been heavily criticized by the industry and bipartisan lawmakers. 

Crypto & digital assets

Democratic senators criticize previous crypto guidance from the OCC

In a letter, Sen. Elizabeth Warren and three other senior Democratic senators asked the Office of the Comptroller of the Currency to rescind previous guidance that has allowed banks to engage in crypto activities. The lawmakers expressed concern over several interpretative letters published in 2020 and 2021 under former Acting Comptroller Brian Brooks, which allowed banks to provide crypto custody services, issue payments with stablecoins, and bank stablecoin issuers without addressing the risks tied to crypto banking activities. The senators argued for stronger protections to mitigate the spread of crypto risks to the traditional banking system. 

Study suggests a well-designed CBDC may enhance financial stability

According to a working paper from the Treasury Department’s Office of Financial Research (OFR), a well-designed central bank digital currency (CBDC) may help enhance the stability of the banking system. Unlike private cryptocurrencies such as Bitcoin, a Fed-issued CBDC would be backed by the U.S. central bank. The OFR’s noted a CBDC would increase liquidity service access for individuals and businesses, and provide a new source of real-time information that would allow policymakers to monitor the flow of funds into a CBDC and allow regulators to make faster policy reactions to a crisis or troubled banks. 

Chairman Jay Powell has not indicated whether the Federal Reserve will issue such a currency, but has stated it does not plan to issue a CBDC without support from elected officials. He believes it is more important to get the digital dollar right than to be first to market, due to the important global position a Fed-issued CBDC would hold. 

Taxation & accounting

GAO recommends the IRS improve outreach efforts to small businesses and their owners

The Government Accountability Office found limited use of the tax provisions passed as part of the 2020 CARES Act, meant to support families and businesses affected by the COVID-19 pandemic. Findings note this is especially true among small businesses, in part due to a poor understandings of the provisions and barriers to access. Based on the study, less than 7% of eligible small businesses used the employer and self-employed leave credits or payroll tax deferrals. While the IRS made efforts to provide information on the pandemic relief tax incentives to small businesses, the GAO determined that those measures did not offer relevant and complete information to taxpayers.

Additional resources may help IRS outreach to these small businesses. Congress is likely to provide the IRS an additional $80 billion—largely for enforcement—as part of the Inflation Reduction Act, though Commissioner Charles Rettig was compelled to affirm that these funds are not for the purposes of scrutinizing small businesses. 

Understanding small business tax incentives

Congress regularly passes tax incentives to support the development of startups and small businesses, which have the potential to create more jobs—or entirely new industries. Since the GAO found that the IRS resources are not reaching small businesses, our Carta policy tax expert, Amy Miller, is here for you: She recently highlighted some of the tax incentives that startup founders and other small business owners can use to save on their taxes.

Who will take the lead on ESG standard-setting?

SEC Commissioners Hester Peirce and Mark Uyeda sent a letter to the Financial Accounting Foundation (FAF), which oversees the accounting standards bodies, urging it not to participate in and contribute to future sustainability reporting guidelines. The Commissioners warned FAF about the risks of becoming involved in the writing of sustainability standards, which the SEC Commissioners believe could lead to a diminishing of the independence and effectiveness of both the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). The letter goes on to highlight two major concerns: 

  • Accounting and sustainability standards are fundamentally different

  • Introducing ESG related standard-setting would undermine the integrity of current accounting standards and FAF’s role as a guardian of the independence of those standards 

Currently, there are no official sustainability standard setters in the U.S. other than the International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB), but many organizations have become actively involved in sustainability standards. 

On ESG policy more broadly, the Financial Stability Oversight Council (FSOC), responsible for identifying risks to the financial stability of the U.S., issued a fact sheet on their climate-related financial risk efforts. The CFTC has issued a request for information on climate-related market risk. And the SEC has been actively working on ESG rulemaking on a number of fronts, including a proposal to require public company disclosure of climate-related information, as well as proposed rules to help prevent investment companies and their advisers from falsely marketing themselves under ESG labels. 

Antitrust, privacy, and technology

FTC begins digital privacy rulemaking process

The Federal Trade Commission launched its long-awaited privacy rulemaking process, which could lead to strict regulations on how companies collect and use people’s personal information online. In a press release, the FTC said it would specifically seek feedback on “the harms stemming from commercial surveillance and whether new rules are needed to protect people’s privacy and information.” In his dissent, Republican Commissioner Noah Phillips (who also announced his resignation this week) argued that the rulemaking will “recast the commission as a legislature, with virtually limitless rulemaking authority where personal data are concerned.” Separately, Democratic FTC Commissioner Alvaro Bedoya endorsed the American Data Privacy and Protection Act and suggested the legislation should proceed concurrently with the rulemaking process. The federal privacy legislation continues to stall while awaiting a House vote and still lacks the support of Senate Commerce Committee Chair Maria Cantwell.

Upcoming events

SEC Speaks – Sept. 8-9 at 8:30 a.m. ET.

Notable SEC proposed rules and comment deadlines

Fund names


*60 days after publication in the Federal Register, which has not occurred


Sign up below to receive Carta’s Policy Weekly Brief:


DISCLOSURE: This publication contains general information only and eShares, Inc. dba Carta, Inc. (“Carta”) is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein. 

All product names, logos, and brands are property of their respective owners in the U.S. and other countries, and are used for identification purposes only. Use of these names, logos, and brands does not imply affiliation or endorsement. ©2022 eShares Inc., d/b/a Carta Inc. (“Carta”). All rights reserved. Reproduction prohibited.

The Carta Policy Team
Carta’s Policy Team aims to connect the policymaking community and venture ecosystem to build an ownership economy and advance policies that support private companies, their employees, and their investors.