On January 26, 2022, the U.S. Securities and Exchange Commission (SEC) proposed amendments to Form PF, the confidential reporting form the SEC uses to collect data about certain SEC-registered investment advisers to hedge funds and certain other private funds. Data collected through Form PF is intended to enhance the ability of the Financial Stability Oversight Council (FSOC) to assess potential systemic risk within the private fund industry, as well as bolster the SEC’s regulatory oversight of private fund advisers.
The proposal would increase the amount and timeliness of confidential information that large private equity and hedge fund advisers report to the SEC. The major proposed changes to Form PF are:
- Current Reporting of Material Events. The proposal would require large advisers to hedge funds and private equity funds to file reports within one business day of certain key events that indicate significant stress at a fund that could harm investors or signal risk in the broader financial system.
- Large hedge fund advisers would need to file current reports within one business day of the occurrence of certain events related to their qualifying hedge funds, including certain extraordinary investment losses, significant margin and counterparty default events, material changes in prime broker relationships, changes in unencumbered cash, operations events, and events associated with withdrawals and redemptions.
- Advisers to private equity funds would need to file current reports within one business day of the occurrence of certain reporting events, including the execution of adviser-led secondary transactions, implementation of general partner or limited partner clawbacks, removal of a fund’s general partner, termination of a fund’s investment period, or termination of a fund.
- Reducing Reporting Threshold for Large Private Equity Fund Advisers. The proposal would lower the threshold for reporting as a large private equity fund adviser from $2 billion to $1.5 billion in assets under management.
- Additional Reporting Requirements for Large Private Equity Fund Advisers. The proposal would amend Section 4 of Form PF to gather more data from large private equity fund advisers regarding fund strategies, use of leverage and portfolio company financings, controlled portfolio companies (CPCs) and CPC borrowings, fund investments in different levels of a single portfolio company’s capital structure, and portfolio company restructurings or recapitalizations.
- Additional Reporting Requirements for Large Liquidity Fund Advisers. The proposal would require large liquidity fund advisers to report substantially the same information that money market funds would report on Form N-MFP, as the SEC currently proposes to amend it. The SEC believes that this enhanced reporting would give the SEC a more complete picture of the short-term financing markets used by both registered money market funds and private liquidity funds.
The public comment period will remain open for 30 days following publication of the proposal on SEC.gov and in the Federal Register.