Dodd-Frank Focus: Proposed Form PF, SEC Release No. IA-3145
Who is affected
The SEC is proposing new Rule 204(b)-1 under the Investment Advisers Act to require that SEC-registered investment advisers report systemic risk information to the SEC on Form PF if they advise one or more private funds. Advisers solely to venture capital funds or advisers to private funds that in the aggregate have less than $150 million in assets under management in the United States would be exempted from Form PF’s filing requirements. For CFTC-registered commodity pool operators (CPOs) or commodity trading advisors (CTAs) that are also registered as investment advisers with the SEC and advise a private fund, Form PF would serve as substitute compliance for a portion of the CFTC’s proposed systemic risk reporting requirements under proposed Commodity Exchange Act rule 4.27(d).
Use of information by the regulators
The 44-page Form PF (which has an additional 8 pages of instructions and an 11-page glossary), would elicit non-public information about private funds and their trading strategies. The SEC does not intend to make public Form PF information identifiable to any particular adviser or private fund, although the SEC may use Form PF information in an enforcement action. The SEC and CFTC would make information collected through Form PF available to the Financial Stability Oversight Council, as required by the Dodd-Frank Act. The amount of information a private fund adviser would be required to report on the proposed form would vary based on both the type of fund advised: hedge fund, liquidity fund or private equity fund; and the amount of assets under management.
Types of information requested
Information requested of hedge funds involve their investments, use of leverage and collateral practices, counterparty exposures, and market positions. Liquidity funds, defined as private funds that seek to generate income by investing in short-term obligations in order to maintain a stable net asset value per unit or minimize principal volatility, would be requested to provide information designed to allow the FSOC to assess their susceptibility to runs and to pose systemic risk. The SEC’s questions for private equity funds center on their methods of financing buyouts.
While all three types of private fund advisers will be required to report annually, “Large Private Fund Advisers” would be required to complete certain additional sections of Form PF on a quarterly basis. Large Private Fund Advisers are defined as those with assets under management of at least $1billion.
Comments should be submitted within 60 days after publication in the Federal Register, which is expected shortly. The SEC anticipates a compliance date of December 15, 2011. View proposing release and text.