On January 26, 2022, the SEC proposed amendments to Form PF including:

• Requiring investment advisers to private equity funds and large investment advisers to certain hedge funds to provide current reporting of certain key events (e.g., extraordinary investment losses) that may indicate fund distress or conflicts of interest.
• Decreasing the amount of private equity assets under management that requires advisers to provide certain of Form PF’s prescribed information and requiring such large private equity advisers to disclose considerable additional information relating to the operation of their portfolio companies.
• Modifying disclosure requirements for large liquidity fund advisers to make them more consistent with certain proposed reporting requirements for money market funds.

As with a number of other recent SEC actions, the commissioners are split on this. Notably, Commissioner Hester Peirce released a dissenting statement, as she believes the more extensive disclosures required by the proposed amendments are unjustified and doubts that they “would enhance [the Financial Services Oversight Council’s] ability to monitor for systemic risk.”

For example, as to the proposed enhanced reporting requirement for private equity and certain hedge funds, Peirce pointed out that the mere possibility that isolated reports of fund distress could be indicative of systemwide instability, absent any “hard data-driven analysis,” is not enough to justify almost immediate reporting of the funds’ localized events. She characterized this as an attempt to “micromanage” the fund advisers and unduly burden them.

Concerning the proposed lowering of the reporting threshold for large private equity funds, Peirce stressed that the SEC needs to come up with a substantive reason that supports the proposal other than a mere desire to collect more data, as the current threshold already captures a substantial amount of data of private equity funds.

This Form PF reporting proposal can properly be viewed as mutually reinforcing with the other recent proposals discussed in “SEC Proposes Sea Change in Private Fund Regulation - Doing Indirectly What It Could Not Do Directly?” on page 10 of this edition. Peirce, the sole Republican on the commission, also dissented from those proposals, and her similar objections to all of these proposals are also mutually reinforcing.