Alternative Investment

Heads-Up: SEC Amends Private Fund Reporting

In the first week of May, as rose blossoms peaked on Independence Avenue, the U.S. Securities and Exchange Commission (SEC) adopted sweeping amendments to Form PF.

What is Form PF and why should you care that it’s making news? It’s a confidential report the SEC requires from three types of registered investment advisors of private funds: 

• Hedge fund advisors with at least $1.5 billion in assets under management
• Private equity fund advisors with $150 million+ in assets under management
• Large private equity fund advisors $2 billion+ in assets under management

Why is the SEC revising Form PF? In short, two reasons: to mitigate risk and protect investors. In slightly more detail, the recent Form PF amendments seek to enhance the Financial Stability Oversight Council’s assessments of systemic risk and bolster the SEC’s oversight of private funds.

What does this mean for you? More detailed reporting and more stringent deadlines, for one. More specifically, the Form PF amendments will require:

• Hedge fund advisors to file a report within 72 hours of a trigger event, defined as:
  • extraordinary investment losses
  • notable margin and default events
  • termination or restriction of prime brokers
  • disruptive operations events
  • events surrounding withdrawals and redemptions

• Private equity advisors to file within 60 days of a trigger event, including:
  • Certain secondary transactions
  • Fund termination events
  • Removal of a general partner

• Large private equity advisors to file an annual report on strategies, borrowings, events of default, bridge financings, geography of portfolio investments and general partner and limited partner clawbacks

So what’s next? The new amendments must first be published in the Federal Register. The final version will take effect six months after publication for current and quarterly event reporting and one year for the remainder of the adopting amendments.

Smell the roses. Depending on which category your firm falls into, the interim period gives you six months to a year to prepare to comply with the new amendments. Our advice: For the rosiest prospects, start reviewing the requirements, building internal reporting/tracking systems, and collecting data now.

Questions about this or other SEC regulations? Reach out to Steve Vlasak, Richey May’s Business Development Partner, Alternative Investments Practice.