SEC Proposes Changes to Form PF | Eversheds Sutherland (USA) LLP

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On January 26, 2022, the United States Securities and Exchange Commission (SEC) proposed amendments to Form PF, the Confidential Reporting Form for Certain SEC-Registered Investment Advisors to Private Funds (the Proposal).1 Proposal aims to increase the frequency and volume of reports from private fund advisors2, which the SEC says will strengthen the ability of the Financial Stability Oversight Council (FSOC) to monitor systemic risk and enhance investor protection efforts. If passed, the proposal would change the current reporting requirements:

  1. Require large hedge fund advisors and private equity fund advisors to report the occurrence of certain key events/triggers within one business day of the event;
  2. Lowering the reporting threshold for large private equity advisers from $2 billion to $1.5 billion in private equity fund assets under management and requiring additional reporting on the date of private funds that they advise; and
  3. Revise how large liquidity fund advisors report certain asset, operational, portfolio, funding and investor information.

context

Form PF requires private fund advisers to report certain dates relating to their Regulatory Assets Under Management (RAUM) to the FSOC. Only SEC-registered advisers with at least $150 million in private funds RAUM should file Form PF. These private fund advisers are divided into two major groups – large advisers and small advisers.

The amount of information disclosed and the frequency of reporting depends on the group to which a particular advisor belongs.

Shorter reporting period

Currently, Form PF is filed on a quarterly or annual basis, depending on the size and type of private fund advisor. The following table outlines the current Form PF completion requirements for large hedge fund, private equity fund, and liquidity fund advisors:

In addition to existing reporting requirements, the proposed changes would require large hedge fund advisers and all private equity advisers to file reports within a day of certain “reporting events” occurring. The following table shows the types of reporting events, which differ for hedge funds and private fund advisors.

Lowering of the reporting threshold for private equity advisers

As shown in the table above, currently a category of “large advisors” includes advisors with at least $2 billion in RAUM attributable to private equity funds (as of the last day of its last completed financial year). The proposed amendments would increase the reporting threshold for large private equity advisers from $2 billion to $1.5 billion, in ARUM attributable to private equity funds, resulting in a higher number of private equity advisers. private equity under the category of large private equity advisers. The SEC cited industry growth and an increase in the number of advisers below the current threshold as justification for lowering the threshold. According to the SEC, the reduced threshold will allow it to receive Form PF reports from about the same proportion of the US private equity industry (on a committed capital basis) as when Form PF was first adopted.

Additional information on fund activities

The proposal aims to expand the list of information to be collected from large private equity advisers. This additional information would include:

  1. Investment strategies and percentage of capital deployed for each of these strategies;
  2. Restructuring and recapitalization of holding companies;
  3. Borrowing and leverage at fund level;
  4. Investments of different funds at different levels of the capital structure of the same portfolio company;
  5. Financing or credit granted to portfolio companies by the adviser and its related persons;
  6. Floating rate borrowings of controlled holding companies (CPCs) and the number of CPCs held by a reporting fund;
  7. Bridging financing and event of default; and
  8. Geographic distribution of investment by advisors in private equity funds.

In addition, the proposal would require managers of liquidity funds to report information similar to that which money market funds report on Form N-MFP, including: (i) operational information indicating whether the fund seeks to maintain a price by stable action; (ii) asset and portfolio information; (iii) the identity of the creditors of the fund; (iv) investor information; and (v) disposal of portfolio securities.

Next steps

If the proposed changes to Form PF are enacted, a number of advisers may be subject to the Form PF reporting regime, and other advisers may face additional reporting obligations. While the SEC does not expect a material increase from current reports, if the proposal goes ahead, many SEC-registered investment advisers with private funds will need to work closely with their legal counsel to revise their compliance policies and procedures in response to the new statement. conditions.

The text of the proposal was published on the Federal Register on 02/17/2022 and the comment period will remain open until 03/21/2022.

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1 The text of the Proposal is available here.

2 For the purposes of Form PF, a private fund adviser is an adviser to a pooled investment vehicle that is excluded from the definition of “investment company” under the Investment Company Act of 1940 by the section 3(c)(1) or 3(c). )(7) of this Act.

3 This category covers all private equity advisors (i.e. large and small).

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