The staff of the U.S. Securities and Exchange (SEC) recently posted responses to frequently asked questions (FAQs) regarding the implementation of Rule 204(b)-1 (Rule) and new Form PF (Form) under the Investment Advisers Act of 1940, as amended (Advisers Act). The Form must be completed by SEC registered investment advisers that manage $150 million or more in regulatory assets under management attributable to private funds. The FAQs cover issues relating to the categorization of hedge funds, liquidity funds and private equity funds under the Rule, as well as aggregation of assets principles and fund of funds reporting issues.

Hedge Funds

An adviser should not categorize a private fund as a commodity pool for reporting purposes if the private fund’s commodity interest positions satisfy either of the de minimis tests in Regulation 4.13(a)(3)(ii)issued by the Commodity Futures Trading Commission. “Hedge fund” is defined to include any commodity pool, so this relief means that private funds falling within the de minimis exemption will not automatically be considered hedge funds for reporting purposes. The categorization of a private fund as a hedge fund may change from reporting period to reporting period. With respect to any fiscal quarter, a private fund should be categorized as a hedge fund if it met the definition of a hedge fund as of the last day of any month in the fiscal quarter immediately preceding an adviser’s most recently completed fiscal quarter. The FAQs provide an example of the timing of such categorization.