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SEC Proposes Changes to Form PF for Private Equity, Hedge Fund Advisors

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What You Need to Know

  • SEC and FSOC have identified significant information gaps, Gensler said.
  • Reporting of extraordinary investment losses or significant margin and counterparty default events would be required.
  • Peirce said the enhanced reporting seems intended primarily to provide the SEC with more information to support its regulatory and enforcement programs.

The Securities and Exchange Commission on Wednesday proposed to amend Form PF, the confidential reporting form for certain SEC-registered investment advisors — like hedge funds and private equity funds — to private funds.

The proposed amendments would require current reporting on key events and would decrease the reporting threshold for large private equity advisors and require them to provide additional information to the SEC about the funds they advise, according to the agency.

The securities regulator also proposed to amend requirements concerning how large liquidity advisors report information about the liquidity funds they advise.

The proposal, explained SEC Chairman Gary Gensler, does three things:

  • Requires certain advisers to hedge funds and private equity funds to provide current reporting of events that could be relevant to financial stability and investor protection, such as extraordinary investment losses or significant margin and counterparty default events.
  • Updates the periodic reporting by large private equity advisers; and
  • Updates reporting by large liquidity fund advisers to correspond with reporting the Commission recently proposed for money market funds.

“I support today’s proposal because, if adopted, it would help federal regulators to assess systemic risk, including the Financial Stability Oversight Council, the SEC, the Federal Reserve Board, and others,” Gensler said. “It also would bolster the Commission’s oversight of private fund advisers and the protection of investors in those funds.”

Form PF, adopted in 2011, “sheds light on a growing part of the financial sector that was not transparent to regulators: these private funds,” Gensler said.

Form PF provides the Commission and FSOC “with important, confidential information about the basic operations and strategies of private funds and has helped establish a baseline picture of the private fund industry for use in assessing systemic risk,” Gensler said.

Since the adoption of Form PF in 2011, “a lot has changed,” Gensler continued. “In that time, the private fund industry has grown in size to a net asset value $11 trillion and evolved in terms of business practices, complexity of fund structures, and investment strategies and exposures.”

The Commission and FSOC “now have almost a decade of experience analyzing the information collected on Form PF,” he continued. “We have identified significant information gaps and situations where we would benefit from additional information.”

For example, the SEC “would benefit from more timely information during fast-moving market events such as the March 2020 dysfunction in the Treasury market,” Gensler said.

SEC Commissioner Hester Peirce, a Republican, dissented, stating that “Congress did not conceive of Form PF to facilitate the Commission’s desire to inoculate well-heeled investors against downturns, losses, or fund failures. Today’s proposal disregards these facts and represents a fundamental shift in Form PF’s scope and purpose.”

Although the SEC’s proposal “cites monitoring and, where possible, mitigating or forestalling, market-wide disruptions as rationales for the proposed changes in reporting, the release provides scant evidence that the amendments to Form PF would enhance FSOC’s ability to monitor for systemic risk,” Peirce maintained. “Rather, the enhanced reporting seems intended primarily to provide the Commission with additional information to support its regulatory and enforcement programs.”


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