SEC Proposes Significant Amendments to Form PF and One-Business-Day Reporting Requirements
- Timothy Silva, Elizabeth Mitchell
- 2.3.2022
On January 26, 2022, the Securities and Exchange Commission (SEC) proposed amendments to private fund reporting rules that would increase the information required to be reported to the SEC on Form PF and the frequency of reporting for advisers to certain hedge funds, and substantially expand reporting for advisers to certain private equity funds.1
- Most notably, the proposed amendments would add a one-business-day reporting requirement for purportedly “key events” applicable to hedge funds and/or private equity funds managed by large private fund advisers.
- The proposed amendments would also reduce the assets under management for a private equity fund adviser to qualify as a “large private equity fund adviser” subject to reporting on Form PF and substantially expand the periodic reporting required for such funds (in addition to adding the one-business-day reporting).
- Finally, the proposed amendments would expand the reporting obligations applicable to large liquidity fund advisers.
A more detailed summary is set forth below.
This alert provides details regarding the SEC’s proposal. The release spans 236 pages and contains 120 questions, many of which include multiple subparts. Nevertheless, the SEC has set an aggressive, 30-day comment period. Parties interested in commenting should begin preparing responses as soon as possible.
I. One-Business-Day Reporting Requirements
Currently, Form PF is a periodic filing required on a quarterly or annual basis depending on the type of filer. Advisers having at least $1.5 billion in “regulatory assets under management” attributable to hedge funds (“large hedge fund advisers”) file quarterly reports within 60 calendar days of their first, second and third fiscal quarters. All other advisers, including private equity fund advisers, file their annual updates within 120 calendar days after their fiscal year ends.
According to the SEC, the proposal is designed to allow the SEC and the Financial Stability Oversight Council (FSOC) to “receive more timely information about certain events that may signal distress at qualifying hedge funds and private equity funds or market instability.” Nevertheless, it is unclear how the SEC or FSOC would utilize such information in practice. We do expect Form PF data will be shared with the SEC’s divisions of Enforcement and Examinations, and the SEC acknowledges the use of Form PF data in examinations and enforcement investigations in the proposal.2
The proposed rule would require large hedge fund advisers and all private equity advisers to file Form PF within one business day of the occurrence of certain “reporting events” described in the proposed new form.
Large Hedge Fund Advisers:
Proposed One-Business-Day Reporting Events
Private Equity Fund Advisers:
Proposed One-Business-day Reporting Events
II. Lower AUM Threshold for Large Private Equity Adviser Reporting
The SEC is proposing to reduce the threshold for reporting as a large private equity adviser from $2 billion to $1.5 billion in private equity fund assets under management.
III. Additional Reporting for Large Private Equity Advisers
Additionally, the proposal contains an expansion of reporting obligations for private equity sponsors at the portfolio level. Specifically, the amendments would require large private equity advisers to provide more information regarding fund strategies, use of leverage and portfolio company financings, controlled portfolio companies and controlled portfolio company borrowing, fund investments in different levels of a single portfolio company’s capital structure, and portfolio company restructurings or recapitalizations. According to the SEC, the proposed amendments are designed to “provide useful empirical data to FSOC to better assess the extent to which private equity funds or their advisers may pose systemic risk and to inform the [SEC] in its regulatory programs for the protection of investors.”
IV. Large Liquidity Fund Adviser Reporting
The SEC is also proposing to require large liquidity fund advisers (i.e., advisers to combined money market and private money-market-like liquidity funds with $1 billion in assets under management) to report additional information regarding the liquidity funds they advise. In particular, the proposal would revise how large liquidity fund advisers report operational information and assets, as well as portfolio, financing and investor information. The proposal would also require new information regarding the disposition of portfolio securities.
V. Conclusion
The substantive changes in the proposal would represent significant departures from prior practice. We expect that the information provided on the amended Form PF would be used more often in conjunction with the SEC’s enforcement program, rather than FSOC’s monitoring of systemic risks. As discussed above, given the brevity of the comment period, we encourage affected firms to consider responses sooner rather than later. Please contact us to learn more or to discuss a strategy for preparing a comment submission.
