On January 26, 2022, the US Securities and Exchange Commission (SEC) voted to propose amendments to Form PF in order to enhance the reporting requirements and obligations of certain registered investment advisers to private funds.1 The purpose of the proposed amendments, as described by the SEC, is “to enhance the Financial Stability Oversight Council’s (FSOC) ability to assess systemic risk as well as to bolster the [SEC’s] regulatory oversight of private fund advisers and its investor protection efforts in light of the growth of the private fund industry.”
The proposed amendments include three significant changes:
- First, the proposed amendments would require large hedge fund advisers and advisers to private equity funds to file reports within one business day of the occurrence of certain “key events.” Notable “key events” for large hedge fund advisers include, but are not limited to, extraordinary investment losses, counterparty defaults, certain margin events and investor redemptions. Notable “key events” for advisers to private equity funds include, among others, certain secondary transactions, clawbacks and terminations of fund investment periods.
- Second, the proposed amendments would reduce the reporting threshold for large private equity advisers to $1.5 billion from $2 billion in assets under management and would also require more disclosure of fund strategies and use of leverage, among other topics.
- Third, the proposed amendments would impose reporting requirements on large liquidity fund advisers that would be substantially the same as the reporting requirements of money market funds pursuant to Form N-MFP, as subject to proposed amendments.
In dissenting to the proposed amendments, Commissioner Hester M. Peirce described the proposal as “a fundamental shift in Form PF’s scope and purpose” and questioned the SEC’s assertion that the proposed amendments would further enhance FSOC’s ability to monitor systemic risk.
Market participants and the general public are invited to comment on the proposed amendments. The comment period will be 30 days following the proposal’s publication in the Federal Register.