Form PF 2.0: Significant Amendments Implemented by the SEC and CFTC

On February 8, 2024, the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) jointly adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. The SEC and CFTC originally proposed these amendments on August 10, 2022 due to concerns by the regulators that the current reporting needed to be enhanced to permit the Financial Stability Oversight Council (FSOC) to monitor systemic risk and to and bolster regulatory oversight of private fund advisers.

This is the second set of substantive amendments to Form PF; the first set, approved on May 3, 2023, required large hedge fund advisers and private equity fund advisers to report certain prescribed events and includes additional reporting for large private equity fund advisers.

New reporting requirements

This set of amendments to Form PF has a set of amended reporting requirements that apply to all Form PF filers, a second set of amendments that apply only to advisers to hedge funds, and a third set of amendments that apply solely to large hedge fund advisers that advise qualifying hedge funds, which we summarize below.

Changes for all Form PF filers

• The amendments remove the ability from the current Form PF to aggregate master and feeder fund structures for all private fund advisers. Filers will now have to separately report each component fund of a master-feeder arrangement and parallel fund structure. However, a “disregarded feeder fund” (defined as a feeder fund that invests all of its assets in a single master fund, U.S. treasury bills, and/or cash and cash equivalents) would not be subject to disaggregated reporting. Also, filers will no longer have to separately report “parallel managed accounts,” although filers will continue to be required to report the total value of all parallel managed accounts related to each reporting fund.
• The amendments expressly state in the Form PF instructions that advisers must include the value of private fund investments in other private funds (including internal and external private funds) when determining whether the adviser meets the filing threshold to file Form PF, whether it meets the thresholds for reporting as a large hedge fund adviser, large liquidity fund adviser, or large private equity fund adviser, and whether a hedge fund is a qualifying hedge fund. Additionally, filers must not “look through” a reporting fund’s investments in internal private funds or external private funds (other than a trading vehicle), unless the question instructs the adviser to report exposure obtained indirectly through positions in such funds or other entities.
• The amendments require advisers to identify trading vehicles in section 1b of Form PF and report on an aggregated basis for the reporting fund and all trading vehicles (whether fully owned by the reporting fund or partially owned) on a consolidated basis. Filers will also be required to identify the relevant party that bears certain risk exposures to allow the SEC to understand how the reporting fund makes use of its fund structure, including any trading vehicles.
• The amendments will require all quarterly filers (large hedge fund advisers and large liquidity fund advisers) to file on a calendar quarter basis, rather than on a fiscal quarter basis. This would only affect a small number of filers, as over 99% of current filers have a fiscal quarter or year-end on the calendar quarter or year end.
• Amendments were made to sections 1a and 1b of Form PF to collect additional identifying information regarding the adviser, its related persons, and private fund assets under management, along with additional identifying information about the private funds’ assets, financing, investor concentration, and performance. Amended requirements include, but aren’t limited to, new or amended reporting of additional fund types, withdrawal and redemption rights, amendments to reporting gross asset value and net asset value, fund inflows and outflows, borrowings and types of creditors, and gross and net performance.

Changes for hedge fund advisers

Certain amendments have been made to section 1c of Form PF to report certain additional information and remove certain questions redundant to other reporting within the form. These amendments include additional reporting concerning hedge fund investment strategies (including use of digital assets), borrowing and financing arrangements with counterparties, and revision to information reported about trading and clearing mechanisms.

Changes for large hedge fund advisers

In addition to removing aggregate reporting currently required in existing section 2a, the amendments re-designate existing sections 2a and 2b of Form PF into a consolidated section 2, which will require additional fund-level reporting about the reporting fund’s investment exposure, open and large position reporting, borrowing and counterparty exposure, and market factor effects. Additional amendments to section 2 include certain reporting on the reporting fund’s turnover and exposure to currency, country, and industry, as well as central clearing counterparty and risk metrics reporting. An initial review of these amendments indicates that the volume and complexity of the data needed to meet the requirements of these amendments to Form PF will increase significantly from current reporting standards.

Changes for liquidity fund advisers

Certain amendments have also been made to section 3 of Form PF to revise the data reported relating to the identifying and operational information of the reporting fund. Section 3 will also require additional reporting with respect to the cash holdings, subscriptions, and redemptions. Additionally, section 3 includes certain reporting on the reporting fund’s investors and expanded reporting on portfolio holdings, maturity, liquidity, and sales of securities. As with the amendments to section 2, the requirements of the amendments to section 3 will add to the reporting burden for reporting advisers.

Additional changes to note

Given the significant increase in reporting requirements resulting from these amendments, over fifty changes or additions have been made to the Glossary of terms in the Form PF instructions. Other noteworthy elements include no change to the existing definition of “hedge fund” and amendments to the reporting of:

• Percentages rounded to the nearest one hundredth of one percent
• Derivatives consistent with reporting on Form N-PORT and rule 18f-4 of the Investment Company Act
• Long, short, and derivative values

Finally, amendments were made to Form PF to ease temporary hardship exemption reporting and to better align Form PF definitions and questions with those of Form CPO-PQR.

The effective and compliance date will be one year from the date the rule is published in the Federal Register.

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