On May 3, 2023, the Securities and Exchange Commission (the SEC) adopted, on a 3-2 vote,1 amendments to Form PF requiring certain current event reporting for Large Hedge Fund Advisers (as defined below), certain quarterly event reporting for all Private Equity Fund Advisers (as defined below) and enhanced reporting requirements for Large Private Equity Fund Advisers (as defined below) (the Form PF Amendments).
Below we review the changes that were made to Form PF as a result of the Form PF Amendments. While the Form PF Amendments largely follow the SEC’s January 2022 Proposal,2 the SEC did make some notable changes as part of the final rulemaking. The most notable of those changes can be summarized at a high level as follows:
In addition, it should be noted that the SEC has adopted the Form PF Amendments on a separate track from another set of amendments to the form proposed in August of 20223 and which still awaits action. Therefore, private fund advisers could see separate and additional reporting obligations arise relatively shortly after these Form PF Amendments become effective.
Background
Form PF requires private fund advisers subject to the form to report certain data relating to their regulatory assets under management (RAUM) to the Financial Stability Oversight Council (FSOC). Only SEC-registered advisers with at least $150 million in private fund RAUM must file Form PF. These private fund advisers are divided into two broad groups – large private fund advisers and small private fund advisers.
The amount of information reported and the frequency of reporting depends on the group in which a particular adviser falls.
Reportable Events for Large Hedge Fund Advisers and Private Equity Fund Advisers
Currently, private fund advisers file Form PF on either a quarterly or annual basis, depending on the size and type of private fund adviser. As a result of the Form PF Amendments, the SEC is requiring certain of these advisers to file additional information upon the occurrence of certain key events, and on accelerated timelines. The SEC is also revising the reporting requirements for Large Private Equity Fund Advisers.
The following chart lays out the Form PF Amendments’ key events triggering accelerated reporting and the associated reporting timelines for each. As explained below, the key events and their reporting timelines differ depending on whether the event relates to a Large Hedge Fund Adviser or a Private Equity Fund Adviser. The following chart also lays out the revised reporting requirements for Large Private Equity Fund Advisers.
Compliance Dates
Large Hedge Fund Advisers and Private Equity Fund Advisers have 180 days following the date of publication of the Form PF Amendments in the Federal Register to comply with Section 5 and 6 requiring current or quarterly reporting for certain key events.
For the other amendments to Form PF relating to Large Private Equity Fund Advisers, such advisers have 365 days following the date of publication of the Form PF Amendments in the Federal Register to comply with the new reporting requirements.
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1 The dissenting commissioners were Commissioners Hester Peirce and Mark Uyeda. In her dissent Commissioner Peirce emphasized her disagreement with the disparity in treatment of private funds and registered investment funds caused by the Final Rule, and the short reporting timelines and compliance periods. Commissioner Uyeda’s dissent set forth concerns regarding the breadth of the Final Rule, high compliance burden and compliance costs. Both Commissioners also voiced concerns regarding two concurrent Form PF amendment proposals being adopted on separate timelines, potentially causing confusion and increasing an already steep compliance burden.
2 We summarized the 2022 Proposal in a prior legal alert, available here.
3 The August 2022 proposal to amend Form PF can be found here. At a high level, that proposal is a joint initiative with the Commodity Futures Trading Commission (the “CFTC”) and would require (i) additional reporting by Large Hedge Fund Advisers regarding investment exposures, borrowing and counterparty exposure, market factor effects, currency exposure reporting, turnover, country and industry exposure, central clearing counterparty reporting, risk metrics, investment performance by strategy, portfolio correlation, portfolio liquidity, and financing liquidity, (ii) additional basic information about advisers and the private funds they advise including identifying information, assets under management, withdrawal and redemption rights, gross asset value and net asset value, inflows and outflows, base currency, borrowings and types of creditors, fair value hierarchy, beneficial ownership, and fund performance, and (iii) more detailed information about the investment strategies, counterparty exposures, and trading and clearing mechanisms employed by hedge funds, while also removing duplicative questions.
4 When triggered, an adviser must file the following information: (1) the dates of the 10-business-day period over which the loss occurred, (2) the holding period return, and (3) the dollar amount of the loss over the 10-business-day period.
5 Secondary transactions are only subject to reporting if they are initiated by a private equity fund’s adviser or a related person of the adviser.
6 The adviser will be required to report (1) the dates of the 10-business-day period over which the increase occurred; (2) the total dollar amount of the increase; (3) the total dollar value amount of margin, collateral or an equivalent posted by the reporting fund at both the beginning and the end of the 10-business-day period during which the increase was measured (an addition from the proposal); (4) the average daily RFACV of the reporting fund during the 10-business-day period during which the increase was measured (an addition from the proposal); and (5) the identity of the counterparty or counterparties requiring the increase(s).
7 The amendments, like the proposal, will require advisers to report a margin, collateral or equivalent default or failure to make any other payment in the time and form contractually required by a counterparty. A current report for this item will be triggered if a counterparty to the reporting fund (1) does not meet a call for margin or has failed to make any other payment, in the time and form contractually required (taking into account any contractually agreed cure period); and (2) the amount involved is greater than five percent of RFACV.
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