SEC Proposes Amendments to Private Fund Reporting
On January 26, 2022, the SEC voted to propose amendments to Form PF. The Proposed Rule is designed to enhance the data aggregated through private fund reporting. Chairman Gensler stated, “the Commission and Financial Stability Oversight Council (FSOC) now have almost a decade of experience analyzing the information collected on Form PF. We have identified significant information gaps and situations where we would benefit from additional information.”
Potential impacts of the proposal
Addition of current reporting for large hedge fund advisers and advisers to private equity funds
In addition to the current quarterly filing requirement for qualifying hedge funds, the proposed rule would require additional reports within one business day of certain extraordinary events. These include 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.
Additionally, advisers to private equity funds would be required to file similar reports within one business day following the occurrence of extraordinary events which include 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.
Large private equity adviser reporting
The proposed amendments would reduce the reporting threshold for large private equity advisers from $2 billion to $1.5 billion in private equity fund assets under management. The proposal would also amend Section 4 of Form PF to gather more information than the form currently requires to allow the FSOC to better assess the systemic risk relating to the activities of private equity funds, certain of their portfolio companies, and the creditors financing private equity transactions, which in turn will assist the SEC in protecting investors in such private equity funds. The additional details encompass information relating to 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.
Large liquidity fund adviser reporting
The proposed amendments would bring the large liquidity fund adviser reporting closer into alignment with information reported by money market funds on the Form N-MFP.
Where the proposal stands
The proposal is open for comment and will remain so for 30 days. Comments may be submitted electronically via www.sec.gov/rules/submitcomments.htm, via email email@example.com, or via paper comments sent in triplicate to Secretary, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All comments should refer to File Number S7-01-22.
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