SEC and CFTC Propose Reporting Changes for Hedge Funds and Other Investment Advisers to Private Funds

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have jointly proposed amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. If adopted, these changes increase the reporting of fund exposure, strategies, and fund information, and may change the structure, data, and information needed by your firm to meet this reporting obligation.

According to the SEC’s news release, the amendments “are designed 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.”

According to the SEC’s fact sheet, the proposed changes to Form PF would:

  • Enhance Reporting by Large Hedge Fund Advisers on Qualifying Hedge Funds
  • The proposal would enhance large hedge fund adviser reporting on qualifying hedge funds (those with a net asset value of at least $500 million), including how large hedge fund advisers report 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.
  • Enhance Reporting on Basic Information About Advisers and the Private Funds They Advise
  • The proposal would require advisers to report additional information about themselves and their private funds, 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.
  • Enhance Reporting Concerning Hedge Funds
  • The proposal would remove duplicative questions and require more detailed information about hedge fund investment strategies, counterparty exposures, and trading and clearing mechanisms.
  • Amend How Advisers Report Complex Structures
  • Currently, Form PF allows advisers to report complex structures either in the aggregate or separately, as long as they do so consistently. The practice obscures risk profiles and makes comparisons of complex structures difficult. The proposal generally would require advisers to report separately each component fund in complex fund structures, such as master-feeder arrangements and parallel fund structures.
  • Remove Aggregate Reporting for Large Hedge Fund Advisers
  • Form PF currently requires large hedge fund advisers to report certain aggregated information about the hedge funds they advise. Such information can obscure the data about hedge funds, including by masking the directional exposures of individual funds. The proposal would remove the aggregate reporting requirement.

The proposal will be published on and in the Federal Register. The public comment period will remain open for 60 days after the date of issuance and publication on or 30 days after publication in the Federal Register, whichever period is longer. For information about the proposed changes to Form PF, contact us. We are here to help.