Golden State Guidelines Proposed for Venture Capital Disclosures

April 15, 2005 ( - A California state legislator has introduced a bill that would establish common disclosure guidelines for venture capital firms when they accept money from public funds.

The legislation, introduced by State Senator Joe Simitian (D), would help venture capital firms know before they take such money what they are expected to disclose to the institutions, according to the San Jose Mercury News. Generally, they have disclosed annual returns, but are worried that further demands will be made going forward.

The bill put forth by Simitian would require the disclosure of basic information such as returns and the amount of management fees paid. It would not ask firms to disclose more confidential information that could be used against them by their competitors, such as their private valuations of their portfolio companies.

The legislation – SB 439 – would set statewide standards and likely have an effect on the national venture capital scene, due to both the large number of venture capital firms in the state, combined with some of the largest public institutional investors, such as the California Public Employees Retirement System (CalPERS).

Recently, open-government proponents have sued CalPERS, attempting to find out how much it pays in management fees on its private equity investments (See Open Government Group Sues CalPERS for Fee Disclosure ). The University of California system was also forced out of an extremely successful private equity firm – Sequoia Capital – after it was subject to a spate of Freedom of Information Act requests from outside groups (See  Sequoia Chopping Off UC Venture Ties ).

Some critics have said that the bill does not go far enough, exempting too much information, according to the newspaper.