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SEC Proposes More Changes to Private-Funds Form

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What You Need to Know

  • If adopted, the proposal would improve the quality of the information the SEC receives from all Form PF filers, with a particular focus on large hedge fund advisers, Gensler said.
  • The changes are also designed to enhance the Financial Stability Oversight Council’s ability to assess systemic risk.
  • The plan would require more detailed information about the investment strategies employed by hedge funds.

The Securities and Exchange Commission voted Wednesday to propose amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisors to private funds — particularly large hedge fund advisors.

The amendments, which the Commodity Futures Trading Commission is concurrently considering to propose jointly with the SEC, are designed to enhance the Financial Stability Oversight Council’s ”ability to assess systemic risk as well as to bolster the SEC’s regulatory oversight of private fund advisers,” the agency said.

Comments are due by Oct. 11.

SEC Chairman Gary Gensler said at an open meeting that in the decade since the SEC and CFTC “jointly adopted Form PF, regulators have gained vital insight with respect to private funds. Since then, though, the private fund industry has grown in gross asset value by nearly 150% and evolved in terms of its business practices, complexity, and investment strategies.”

If adopted, Gensler said, the proposal “would improve the quality of the information we receive from all Form PF filers, with a particular focus on large hedge fund advisers. That will help protect investors and maintain fair, orderly, and efficient markets.”

The proposed amendments would enhance how large hedge fund advisors report certain data to the SEC as well as require further basic information about advisors and the private funds they advise, including assets under management as well as withdrawal and redemption rights.

The proposal would also require more detailed information about the investment strategies, counterparty exposures, and trading and clearing mechanisms employed by hedge funds.

Feedback ‘Critical’ in Two Areas

SEC Commissioner Jaime Lizárraga said in a statement that public feedback will be critical for two areas of the proposal.

“First, the proposal would enhance data collection on private funds’ use of trading vehicles — which can incur leverage — to provide greater clarity on the risks they present,” Lizárraga said.

“Second, the proposal would require all private fund advisers — not just advisers to qualifying hedge funds — to report whether the funds provide investors with withdrawal or redemption rights, and if so, how often. This information would be critical to understanding private funds’ susceptibility to stress during unforeseen or volatile market events,” he said.

Reacting to the SEC’s plan, Jennifer Wood, Global Head of Asset Management Regulation at the Alternative Investments Management Association in Washington, said: “The proposed changes of this magnitude will require substantial retooling of reporting systems operated by investment advisers and other fund service providers involved in Form PF reporting, including those operated by many AIMA members.”

Wood added: “With this extensive set of changes following on the heels of the other significant set of changes to Form PF proposed earlier this year, there is a not inconsiderable risk that market participants are facing multiple updates to their reporting systems next year if the final rules related to these proposals do not come out together.”

Other Proposed Form PF Changes

In January, the SEC proposed amendments to Form PF that would require current reporting on key events and would decrease the reporting threshold for large private equity advisors and require them to provide more information to the SEC about the funds they advise.

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

The comment period on that proposal was reopened until June 13.


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