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New Reporting Obligations on Form PF for Private Fund Advisers

Nov. 9, 2011

The Securities and Exchange Commission (the “SEC”) and the Commodity Futures Trading Commission (the “CFTC”) adopted joint final rules that will require many private fund advisers (each, an “adviser”) to file and periodically update Form PF. Form PF is primarily intended to provide data to the Financial Stability Oversight Counsel (“FSOC”) to assist it in monitoring systemic risk posed to the U.S. financial system by hedge funds, private equity funds, liquidity funds and certain other private funds. However, such data may be used by the SEC and the CFTC in connection with examinations and enforcement proceedings.

Form PF, Advisers Act Rule 204(b)-1 and Commodity Exchange Act (“CEA”) Rule 4.27 become effective on March 31, 2012. The compliance date for an adviser depends on the amount of assets attributable to its private funds.

As discussed in more detail below, with respect to advisers whose fiscal year ends on Dec. 31: (a) those that advise hedge funds with at least $5 billion in assets under management are required to make an initial filing by Aug. 29, 2012 (i.e., within 60 days after June 30, 2012); (b) those that advise private equity funds with at least $5 billion in assets under management are required to make an initial filing by April 30, 2013 (i.e., within 120 days after Dec. 31, 2012); and (c) those that advise liquidity funds and registered money market funds with at least $5 billion in aggregate assets under management are required to make an initial filing by July 16, 2012 (i.e., within 15 days after June 30, 2012).1 All other advisers that are required to file Form PF will not be required to file until 2013.

For general information on the relevant Sections of Form PF that are required to be completed and the timing with which they are required to be filed, based on the type of private funds advised and the asset size of such funds, see the Form PF Quick Reference Chart at the end of this alert.

Who Must File Form PF

An adviser will be required to file Form PF if it: (a) is registered or required to register with the SEC; (b) advises one or more private funds (i.e., issuers that would be investment companies but for Section 3(c)(1) or 3(c)(7) of the Investment Company Act); and (c) had at least $150 million in regulatory assets under management (calculated in accordance with the instructions to Form ADV)2 attributable to private funds as of the end of its most recently completed fiscal year.3 All advisers meeting this definition will be required to complete Sections 1a and 1b of Form PF at least annually. In addition, certain “Large Private Fund Advisers” will be required to complete additional portions of Form PF, and some will be required to file quarterly rather than annually.

A “Large Private Fund Adviser” is an adviser with:

  • at least $1.5 billion in regulatory assets under management attributable to hedge funds as of the end of any month in the adviser’s prior fiscal quarter4;
  • at least $2 billion in regulatory assets under management attributable to private equity funds as of the last day of the adviser’s most recently completed fiscal year; or
  • at least $1 billion in regulatory assets under management attributable to liquidity funds and registered money market funds as of the end of any month in the adviser’s prior fiscal quarter.

Hedge Fund. For purposes of Form PF, a “hedge fund” is generally any private fund (other than a securitized asset fund)5 that; (a) pays a performance fee or allocation that is calculated by taking into account unrealized gains; (b) may borrow in excess of one-half of its net asset value or may have gross notional exposure in excess of twice its net asset value (in each case, including committed capital); or (c) may sell assets short or engage in a transaction resulting in short exposure (other than for the purpose of hedging currency exposure or managing duration). The performance fees or allocations referred to in the first prong of this definition only relate to fees or allocations actually paid to an adviser (or a related person). The definition is not meant to capture private funds that accrue or allocate performance compensation based on unrealized gains solely for financial reporting purposes, or private funds that calculate performance compensation taking into account unrealized gains in order to reflect unrealized losses net of unrealized gains (which is common among some private equity funds). With respect to the second and third prong, the SEC noted in the adopting release that a private fund would not be a “hedge fund” solely because its organizational documents fail to prohibit the fund from borrowing or incurring derivative exposure in excess of the defined amounts or from engaging in short selling (other than for permitted purposes of hedging or managing duration), and a reasonable investor would understand, based on the fund’s offering documents, that the fund will not engage in these practices.

Private Equity Fund. For purposes of Form PF, a “private equity fund” is any private fund that is not a hedge fund, liquidity fund, real estate fund,6 securitized asset fund or venture capital fund,7and does not ordinarily provide investors with redemption or withdrawal rights.

Liquidity Fund. For purposes of Form PF, a “liquidity fund” is any private fund that seeks to generate income by investing in short-term obligations in order to maintain a stable net asset value or minimize principal volatility.

The final rule includes some notable changes to the Large Private Fund Adviser thresholds. For hedge funds and private equity funds, the threshold amounts were increased from $1 billion to $1.5 billion in assets under management for hedge funds and $2 billion in assets under management for private equity funds. Additionally, the final rule relaxed the frequency with which an adviser to hedge funds and/or liquidity funds is required to measure whether it has crossed the Large Private Fund Adviser threshold from daily to monthly, and the measurement frequency for advisers to private equity funds was relaxed from quarterly to annually.

Aggregation for Purposes of Measuring Threshold Amounts

In determining if an adviser meets any threshold amount under Form PF, including the $150 million minimum reporting threshold and any Large Private Fund Adviser threshold, the adviser is required to aggregate the assets of; (a) private funds that are part of the same master-feeder structure; (b) private funds that pursue substantially the same investment objective and strategy, and invest side-by-side in substantially the same positions (“parallel funds”); (c) managed accounts that pursue substantially the same investment objective and strategy and invest in substantially the same positions as any of its private funds (“parallel managed accounts”), provided that an adviser may exclude the value of its parallel managed accounts if the value of such accounts exceeds the value of the corresponding private funds; and (d) any of the funds or accounts described in clauses (a)-(c) that are managed by related persons, where these related persons are required to be identified in Section 7.A of Schedule D to the adviser’s Form ADV.

Sub-Advisers

Form PF contains specific instructions on who should report with respect to a private fund that has one or more sub-advisers. Only one adviser is required to report with respect to any one private fund. Specifically, if an adviser is required to identify a private fund as an advisory client in Section 7.B.1 of Schedule D to Form ADV, then that same adviser is required to complete and file Form PF for that private fund. If the adviser that is required to identify a private fund as an advisory client in Section 7.B.1 is not required to file Form PF, another adviser is required to complete and file Form PF for that private fund. If none of the advisers to a private fund are required to file Form PF, then the fund will not be reported on any Form PF.

Advisers to Funds-of-Funds

For purposes of measuring threshold amounts (and responding to questions on Form PF), an adviser may disregard any assets of a private fund that are invested in the equity of other private funds (including certain non-U.S. funds that would not otherwise meet the definition of a “private fund”). An adviser to funds-of-funds (including those funds-of-funds that maintain a de minimis amount of cash, cash equivalents and currency hedges) is only required to complete Section 1b with respect to such funds.

Non-U.S. Advisers

An adviser with a principal office and principal place of business outside the United States may disregard any private fund that, during such adviser’s last fiscal year, was not a “United States person” was not offered in the United States and was not beneficially owned by a “United States person.”9

Exempt Reporting Advisers

Advisers that are exempt from registering as investment advisers with the SEC because they solely advise either venture capital funds or private funds that have aggregate assets under management in the United States of less than $150 million are not required to file Form PF.

Information to Be Reported

Form PF is primarily designed to provide FSOC with information necessary to monitor potential systemic risk created by private funds.10 In addition, the SEC and the CFTC are permitted to use information collected on Form PF for their own regulatory purposes, including in connection with examinations, investigations and investor protection efforts.

The final rule makes a number of changes intended to make Form PF less burdensome. The certification language in Form PF requiring the individual signing on behalf of a filer to affirm “under penalty of perjury” that the information contained in Form PF is “true and correct” has been removed.11 Additionally, the final rule permits advisers to rely on their internal reporting methodologies in responding to questions on Form PF and, in certain cases, only requires an adviser to report information that it ordinarily tracks.

The portions of Form PF that are required to be completed depend on the type of private funds managed and the amount of assets of such funds.

Section 1. Each adviser required to file Form PF is required to complete Sections 1a and 1b. Section 1a seeks basic identifying information about an adviser, including the name of the adviser and its related persons, and the adviser’s large trader identification number, if any. Section 1a also requires basic information about an adviser’s private funds on an aggregate basis, including gross and net assets attributable to different types of private funds.

Section 1b requests basic information about each private fund, and generally is required to be completed separately for each private fund. Information requested by Section 1b includes both the gross and net assets of each private fund, the aggregate notional value of the fund’s derivative positions and certain information about the fund’s creditors and investor concentration. Section 1b also requires an adviser to report performance information with respect to each private fund (both gross and net of management and performance fees and/or allocations) on at least an annual basis (and an adviser that regularly calculates such information more frequently is required to also report such information on a monthly or quarterly basis, as applicable).12

The final rule adds two new questions to Section 1b that were originally proposed as part of Form ADV. First, an adviser is required to report the assets and liabilities of each private fund, broken down using the fair value hierarchy categories established under U.S. generally accepted accounting principles (“GAAP”).13 Second, an adviser is required to provide the approximate percentage of ownership of each private fund by certain types of investors.14

Section 1c is the final part of Section 1 and is only required to be completed with respect to hedge funds advised by an adviser.15 Information required to be disclosed in Section 1c includes each hedge fund’s investment strategy, significant counterparty exposure (including the identity of large counterparties), trading and clearing practices and the percentage of assets relating to transactions conducted outside of traditional trading and clearing markets.

Section 2. A Large Private Fund Adviser to hedge funds is required to complete Section 2 of Form PF. Section 2 requires more in-depth information relating to hedge funds, which the SEC has modified from the proposed rule in order to strike a balance between industry concerns expressed by commenters and providing FSOC with appropriate systemic risk information.

Section 2a requires an adviser to report aggregate information about all of the hedge funds it advises. Such information includes; (a) the value of assets invested (both long and short) in certain types of securities and commodities;16 (b) the duration, weighted average tenor or 10-year bond equivalent of fixed-income investments (including asset-backed securities); (c) the value of turnover in certain asset classes during the reporting period;17 and (d) a geographical breakdown of investments held.18

Section 2b of Form PF requires an adviser to report additional information about any hedge fund it advises that has a net asset value of at least $500 million as of the end of any month in the prior fiscal quarter (a “qualifying hedge fund”).19 Many of the questions in Section 2b relate to the portfolio of each qualifying hedge fund, including exposure to different types of assets, portfolio liquidity, unencumbered cash holdings, concentration of positions,20 the fund’s base currency, information regarding collateral practices with counterparties,21 and whether the fund cleared any trades through a central clearing counterparty during the reporting period.22 Section 2b also requires certain information regarding risk metrics of qualifying hedge funds, including value at risk (“VaR”) for each month of the reporting period (if, during the reporting period, the adviser regularly calculated VaR), and whether there are risk metrics other than VaR that the adviser considers important in managing the hedge fund’s risk.

Additionally, a number of questions in Section 2b ask about the impact of specified changes to certain identified market factors on long and short components of the fund’s portfolio. However, under the final rule an adviser is not required to respond with respect to any market factor that it does not regularly consider in “formal testing.”23 Item D of Section 2b elicits information relating to financing, including a monthly breakdown of the hedge fund’s secured and unsecured borrowing, the value of posted collateral, total notional derivatives exposure and the net mark-to-market value of uncleared derivatives positions (and the value of collateral posted in respect of such uncleared derivatives),24 a breakdown of the term of the hedge fund’s available financing and the identity of, and amount owed to, each creditor to whom the hedge fund owes an amount equal to at least 5 percent of the fund’s net asset value as of the reporting date. Finally, Item E of Section 2b requires an adviser to report information about each qualifying hedge fund’s liquidity, including information regarding side-pocket investment provisions,25 gating arrangements26 and a breakdown of percentages of the hedge fund’s net asset value that are locked up for differing periods.

Section 4. A Large Private Fund Adviser to private equity funds is required to complete Section 4 of Form PF. Section 4 requires an adviser to report certain information with respect to each private equity fund it manages. Section 4 requires certain information about guarantees of portfolio company obligations, including the amount of guarantees in respect of a portfolio company’s obligations made by the fund, the adviser and certain related persons.27 Additionally, Section 4 requires information about the leverage of the portfolio companies that the private equity fund controls, including the weighted average debt-to-equity ratio of controlled portfolio companies, the range of such debt-to-equity ratio among the portfolio companies, the aggregate gross asset value of the portfolio companies, the total amount of borrowings recorded as current and long-term liabilities on the most recent balance sheets of the private equity fund’s controlled portfolio companies and certain information on portfolio company borrowings that are payment-in-kind or zero coupon.28 An adviser is also required to report the identity of institutions providing bridge financing to controlled portfolio companies, and the amount of that financing. If a private equity fund controls a portfolio company that operates in the financial industry, it generally is required to report the name of such portfolio company, its debt-to-equity ratio and the percentage of the portfolio company owned by the fund. Finally, Section 4 requires an adviser to report whether any of its related persons co-invest in any of the private equity fund’s portfolio companies, and provide a breakdown of the fund’s investments by industry and geography. The SEC made several significant changes to Section 4 of Form PF to reflect its view that private equity funds may pose less systemic risk than other types of private funds.

Section 3. A Large Private Fund Adviser to liquidity funds is required to complete Section 3 of Form PF. Section 3 requires an adviser to report additional information with respect to each liquidity fund that it manages, including information relating to portfolio valuation, liquidity of holdings, whether the portfolio is managed in compliance with rules governing registered money market funds, the amount of assets invested in different types of instruments, information regarding open positions that represent 5 percent or more of the fund’s net asset value, information on borrowing and information on investor concentration and liquidity.

Aggregation for Purposes of Responding to Questions

Unlike the proposed rule, the final rule permits an adviser to choose whether to report the assets of funds in a master-feeder structure and parallel funds separately or in the aggregate.  Additionally, an adviser is not required to aggregate parallel managed accounts for purposes of reporting (although, as discussed under “Who Must File Form PF — Aggregation for Purposes of Measuring Threshold Amounts” above, certain parallel managed accounts are required to be aggregated for purposes of measuring whether an adviser reaches reporting thresholds). Note, however, that a question regarding the total amount of parallel managed account assets relating to each reported fund has been added to Form PF. Finally, an adviser should only report information for private funds advised by a related person if the adviser has identified the related person in Question 1(b).

When Must Form PF Be Filed

Frequency of Filing. The frequency with which an adviser is required to file Form PF depends on whether or not the adviser is a Large Private Fund Adviser and the type of private funds it advises.

  • A Large Private Fund Adviser to hedge funds is required to file Form PF on a quarterly basis, within 60 days after the end of each of the adviser’s fiscal quarters.
  • A Large Private Fund Adviser to liquidity funds is required to file Form PF on a quarterly basis, within 15 days after the end of each of the adviser’s fiscal quarters.
  • All other advisers, including advisers to private funds that are not Large Private Fund Advisers and Large Private Fund Advisers to private equity funds, are required to file Form PF on an annual basis, within 120 days after the end of each of the adviser’s fiscal years.

The final rule contains a number of important changes relating to the frequency of filing Form PF. Under the proposed rule, all Large Private Fund Advisers would have been required to file Form PF quarterly, whereas under the final rule, Large Private Fund Advisers to private equity funds are only required to file Form PF annually. The final rule also extended the filing deadlines for Large Private Fund Advisers with respect to hedge funds (from 15 days to 60 days) and private equity funds (from 15 days to 120 days), as well as advisers that are not Large Private Fund Advisers (from 90 days to 120 days).

Unlike the proposed rule, the reporting schedule is based on an adviser’s fiscal year rather than the calendar year, which the SEC believes will impose less of a burden on those advisers whose fiscal years end on a date other than Dec. 31. Additionally, the frequency with which Large Private Fund Advisers will be required to update information reported on Form PF will depend on the type of private fund to which the information relates. For example, an adviser that meets the Large Private Fund Adviser threshold with respect to hedge funds, but who also manages a private equity fund, is only required to update Form PF after the end of each of its fiscal quarters with respect to the hedge funds that it advises, and is only required to update Form PF with respect to the private equity fund it advises when it submits its fourth quarter update. Furthermore, such an adviser can initially file a fourth quarter update relating only to its hedge funds within 60 days after the quarter-end, and can subsequently amend its filing within 120 days after the quarter-end to include information about the private equity fund it advises.

Initial Filings. While the final rules are effective as of March 31, 2012, there will be a two-stage phase-in period for compliance. The compliance date for the following advisers is June 15, 2012:

  • An adviser that has at least $5 billion in assets under management attributable to hedge funds as of the last day of its fiscal quarter most recently completed prior to June 15, 2012;
  • An adviser having at least $5 billion in assets under management attributable to private equity funds as of the last day of its first fiscal year to end on or after June 15, 2012; and
  • An adviser managing a liquidity fund and having at least $5 billion in assets under management attributable to liquidity funds and registered money market funds as of the last day of its fiscal quarter most recently completed prior to June 15, 2012.

These advisers are required to file their initial Form PF after the end of their first fiscal quarter or fiscal year, as applicable, occurring on or after June 15, 2012. Therefore, an adviser with $5 billion in hedge fund assets as of March 31, 2012 is required to file its first Form PF within 60 days after June 30, 2012. An adviser with $5 billion in private equity fund assets as of June 30, 2012, and whose fiscal year happens to end on June 30, is required to file its first Form PF within 120 days after June 30, 2012.

The compliance date for all other advisers is Dec. 15, 2012. This means that most advisers will file their first Form PF based on information as of Dec. 31, 2012, within the applicable number of days following such date.

Newly registered advisers are required to file their first Form PF following the end of the first applicable reporting period to occur after the effective date of their registration.

An adviser that is transitioning from a quarterly filing to an annual filing because it is no longer a Large Private Fund Adviser to hedge funds or liquidity funds is required to check a box in Section 1a of Form PF indicating the transition and then submit the form by the deadline for the adviser’s next quarterly update. Similarly, an adviser making its final filing is required to check a box in Section 1a of Form PF indicating as much and then submit the form by the deadline for the adviser’s next quarterly or annual update, as applicable.

Confidentiality

In the adopting release, the SEC acknowledged the sensitivity of the information elicited on Form PF and reiterated that it does not intend to make public any Form PF information identifiable to any particular adviser or private fund (except with respect to SEC enforcement actions). The Dodd-Frank Act amends the Advisers Act to preclude the SEC from being compelled to reveal the information collected on Form PF. The Dodd-Frank Act also exempts the CFTC from being compelled to disclose such information to the public pursuant to the Freedom of Information Act (“FOIA”). Both the SEC and the CFTC only intend to make information reported on Form PF available to FSOC subject to the confidentiality provisions of the Dodd-Frank Act. However, the Dodd-Frank Act does allow for Form PF to be shared with Congress, upon request, and with other federal departments and agencies, or self-regulatory organizations, for purposes within the scope of their jurisdiction. Disclosure of Form PF information to Congress is only permitted upon an agreement of confidentiality. Disclosures of Form PF to federal departments, agencies or self-regulatory organizations are exempt from FOIA requests. Prior to sharing Form PF data, the SEC intends to require any recipient to represent that it has the proper controls in place in order to treat the data in a manner consistent with the Dodd-Frank Act.

Finally, in the adopting release, the SEC indicated that it is developing its own internal controls to protect the confidentiality of Form PF. A Form PF electronic filing system with appropriate confidentiality protections is currently being developed. Additionally, the SEC is studying whether it can establish access levels designed to permit SEC staff and employees to only have access to information reasonably necessary in connection with their duties. The SEC did suggest in the adopting release that if it has not developed the proper confidentiality controls in advance of the initial filing date of Form PF, it will consider delaying compliance.

CFTC and CEA Rule 4.27

In conjunction with the adoption of Advisers Act Rule 204(b)-1 by the SEC, the CFTC has adopted CEA Rule 4.27 and Sections 1 and 2 of Form PF. The CFTC rule provides that a CFTC-registered commodity pool operator (“CPO”) or commodity trading adviser (“CTA”) that is also registered with the SEC as an investment adviser and otherwise required to file Form PF is required to file Form PF with respect to any commodity pool it manages that is a private fund, and may file Form PF with respect to any commodity pool it manages that is not a private fund. In filing Form PF with respect to such commodity pools, a CPO or CTA will have satisfied certain filing requirements with respect to these pools under CFTC rules (which the CFTC has not yet adopted).

A CPO or CTA completing Form PF with respect to commodity pools should treat such commodity pools as “hedge funds” for purposes of Form PF. Accordingly, such a filer should complete only Section 1 (including Section 1c) and, if it meets the Large Private Fund Adviser threshold with respect to hedge funds, Section 2 on behalf of its commodity pools.

Administrative Detail

The adopting release indicates that Form PF will be filed electronically on a filing system developed and maintained by the Financial Industry Regulatory Authority, as an extension of the existing Investment Adviser Registration Depository. The filing system will be programmed to reflect the heightened confidentiality protections afforded Form PF data. Each filing of Form PF (both quarterly and annual filings) will be subject to a $150 filing fee.

***

 

The SEC adopting release can be found here, and Form PF can be found here.

Form PF Quick Reference Chart

HEDGE FUNDS Initial Filing
(assumes December 31 fiscal year end)
Updates Form PF Sections to Complete
Advisers to hedge funds with at least $5 billion in assets August 29, 2012 Quarterly, within 60 days of after fiscal quarter-end 1a, 1b, 1c, 2
Advisers to hedge funds with at least $1.5 billion but less than $5 billion in assets March 1, 2013 Quarterly, within 60 days after each fiscal quarter-end 1a, 1b, 1c, 2
Advisers to hedge funds and other private funds with at least $150 million but less than $1.5 billion attributable to hedge funds April 30, 2013 Annually, within 120 days after each fiscal year-end 1a, 1b, 1c
PRIVATE EQUITY FUNDS Initial Filing
(assumes December 31 fiscal year end)
Updates Form PF Sections to Complete
Advisers to private equity funds with at least $2 billion in assets April 30, 2013 Annually, within 120 days after each fiscal year-end 1a, 1b, 4
Advisers to private equity funds and other private funds with at least $150 million but less than $2 billion attributable to private equity funds April 30, 2013 Annually, within 120 days after each fiscal year-end 1a, 1b
LIQUIDITY FUNDS Initial Filing
(assumes December 31 fiscal year end)
Updates Form PF Sections to Complete
Advisers to liquidity funds (and registered money market funds) with at least $5 billion in assets July 16, 2012 Quarterly, within 15 days of after fiscal quarter-end 1a, 1b, 3
Advisers to liquidity funds (and registered money market funds) with at least $1 billion but less than $5 billion in assets January 15, 2012 Quarterly, within 15 days of after fiscal quarter-end 1a, 1b, 3
Advisers to liquidity funds and other private funds with at least $150 million but less than $1 billion attributable to liquidity funds (and registered money market funds) April 30, 2013 Annually, within 120 days after each fiscal year-end 1a, 1b

 

 

 

For assistance, please contact the following lawyers in the Financial Services Area:

Investment Management Partners:

Marion Giliberti Barish
marion.barish@bingham.com, 617.951.8801

David C. Boch
david.boch@bingham.com, 617.951.8485

Lea Anne Copenhefer
leaanne.copenhefer@bingham.com, 617.951.8515

Steven M. Giordano
steven.giordano@bingham.com, 617.951.8205

Michael Glazer
michael.glazer@bingham.com, 213.680.6646

Richard A. Goldman
rich.goldman@bingham.com, 617.951.8851

Barry N. Hurwitz
barry.hurwitz@bingham.com, 617.951.8267

Roger P. Joseph, Practice Group Leader; Co-chair, Financial Services Area
roger.joseph@bingham.com, 617.951.8247

Amy Natterson Kroll
amy.kroll@bingham.com, 202.373.6118

Michael P. O’Brien
michael.obrien@bingham.com, 617.951.8302

Nancy M. Persechino
nancy.persechino@bingham.com, 202.373.6185

Paul B. Raymond
paul.raymond@bingham.com, 617.951.8567

Toby R. Serkin
toby.serkin@bingham.com, 617.951.8760

L. Kevin Sheridan Jr.
kevin.sheridan@bingham.com, 212.705.7738

Edwin E. Smith, Co-chair, Financial Services Area
edwin.smith@bingham.com, 617.951.8615

Stephen C. Tirrell
stephen.tirrell@bingham.com, 617.951.8833

Authored by: Steven W. Hansen

Endnotes

1Advisers whose fiscal year ends on a date other than Dec. 31 may have to file sooner. For example, an adviser to private equity funds with at least $5 billion in assets, whose fiscal year ends on June 30, would have to make an initial filing by Oct. 29, 2012. 
2The definition of “regulatory assets under management” measures assets gross of outstanding indebtedness and accrued but unpaid liabilities. 
3The minimum reporting threshold of $150 million in private fund assets under management is a change from the proposed rules, which would have required all SEC-registered advisers to one or more private funds to file Form PF, regardless of assets under management.
4For example, to determine if an adviser is a Large Private Fund Adviser at the end of the second quarter of any year, the adviser must look to its hedge fund assets under management at the end of each month in the first quarter.
5A “securitized asset fund” is defined as a private fund whose primary purpose is to issue asset-backed securities and whose investors are primarily debt-holders.
6A “real estate fund” is defined as a private fund that is not a hedge fund, that does not provide investors with redemption rights in the ordinary course and that invests primarily in real estate and related assets.
7Form PF incorporates the definition of “venture capital fund” from Advisers Act Rule 203(l)-1.
8Affiliated or related advisers may elect to report with respect to each of their private funds on the same Form PF.
9The instructions to Form PF with respect to non-U.S. funds have been made more consistent with the requirements of Regulation S. The instructions now relate to private funds that were not offered “…in the United States” instead of “…to a United States Person”. Additionally, the definition of “United States Person” in the instructions references the definition in Advisers Act Rule 203(m)-1, which tracks the definition of “U.S. Person” under Regulation S, but includes a special rule for discretionary accounts maintained for the benefit of United States Persons.
10FSOC may use Form PF data to act in a number of ways, including determining whether an adviser (or any nonbank financial company) should be subject to the supervision of the Board of Governors of the Federal Reserve System.
11The SEC was persuaded to remove this certification, because, as commenters pointed out, Form PF elicits information that is based on estimates. An adviser that is registered with the CFTC as a commodity pool operator or a commodity trading adviser must acknowledge that any material misstatements or omissions on Form PF constitute a violation of the CEA.
12The SEC made three changes with respect to reporting performance information that are intended to reduce the burden on advisers. First, the requirement to report changes in net asset value during a reporting period was omitted. Second, advisers are permitted to report performance gross and net of both management and performance fees and/or allocations, whereas under the proposed rules, performance information was required to be reported gross and net of performance compensation only (which most advisers do not ordinarily track separately). Third, monthly and quarterly performance reporting is only required with respect to advisers that ordinarily calculate performance with such frequency.
13Note, advisers are only required to break down assets by level (not by class). Additionally, advisers are not required to report the valuation of assets and liabilities within the breakdown in accordance with GAAP, nor are such valuations required to be audited.
14With respect to beneficial interests outstanding prior to March 31, 2012, advisers are only required to use good faith estimates with respect to the type of investor. Furthermore, advisers may report only the size of an ownership interest, rather than the type of owner, of certain non-U.S. investors about whom advisers may not reasonably be able to obtain identifying information. 
15Section 1c must be completed by an adviser required to file Form PF if it advises one or more hedge funds, regardless of whether or not the adviser is a Large Private Fund Adviser.
16The amount of detail required with respect to asset-backed securities has been reduced. The final rule also distinguishes between foreign exchange derivatives used for investment and those used for hedging. Disclosure regarding physical real estate has been added, and investments in money market funds has been separated from other types of cash equivalents.
17The final rule requires turnover to be broken down by asset class (including equities, corporate bonds, sovereign bonds and futures), and to be expressed as a value rather than a percentage. The SEC expects that these changes from the proposed rule will make it easier for advisers to report on Form PF.
18The final rule requires less detail than the proposed rule, focusing on regions rather than countries, with additional disclosure on investments in certain countries of interest. 
19In determining whether a private fund is a qualifying hedge fund, the adviser is required to aggregate any private funds that comprise the same master-feeder structure, parallel funds, certain parallel managed accounts and the private funds and parallel managed accounts of relevant related persons, as discussed under “Who Must File Form PF — Aggregation for Purposes of Measuring Threshold Amounts” above. 
20The information required to be disclosed regarding positions includes the total number of open positions held by a hedge fund and, for each position greater than 5% of the hedge fund’s net asset value, the position’s portion of the hedge fund’s net asset value.
21The questions regarding collateral practices relate to the hedge fund’s five largest counterparties, and rehypothecation of the fund’s aggregate collateral. The SEC noted in its release that the final rule reduced the amount of information regarding collateral that is required to be disclosed.
22The proposed rule would have required an adviser to identify the three central clearing counterparties to which the fund has the largest net credit exposure, and provide the amount of that exposure. In response to comments that advisers may not have easy access to such information, the SEC did not require such information in the final rule; however, the SEC did note that if many hedge funds clear transactions directly through central clearing counterparties, the SEC may consider requiring such information in the future.
23If the adviser uses models or other systems capable of simulating the effect of a market factor listed on Form PF, it is required to report a numerical response with respect to such market factor. If the factor is relevant, but not regularly tested, the adviser is required to check a box indicating the relevance of such factor, but is not required to report a numerical response.
24The final rule adds a question regarding the net market value (in addition to the notional value) of derivatives positions and posted collateral. However, in the final rules, the SEC also reduced the scope of transactions that are required to be reported and the amount of detail regarding collateral that is required to be reported.
25Form PF now requires advisers to indicate whether assets have been placed in a side-pocket since the end of the prior reporting period.
26Advisers are only required to provide numerical responses to the questions concerning gating arrangements if investors have liquidity rights in the ordinary course of business.
27The final rule adds the requirement that guarantees by the adviser and certain related persons be reported. 
28With respect to such borrowings, the final rule requires an adviser to report whether a private equity fund or any of its controlled portfolio companies has experienced an event of default on any of its debt during the reporting period.

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