Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The SEC has proposed amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, to:

  • Require new current reporting of certain events for large hedge fund advisers and advisers to private equity funds;
  • Decrease the reporting threshold for large private equity advisers; and
  • Revise reporting requirements for large private equity advisers and large liquidity fund advisers.

New Current Reporting for Large Hedge Fund Advisers and Advisers to Private Equity Funds

Currently, Form PF requires advisers to file Form PF months after their quarter- and yearends, depending on the size and type of private funds they advise.

The proposal would require large hedge fund advisers to file current reports within one business day of the occurrence of one or more reporting events with respect to their qualifying hedge funds pertaining to certain 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.

The proposal also would require advisers to private equity funds to file current reports within one business day of the occurrence of one or more reporting events pertaining to the 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.

The proposal is designed to allow the SEC and FSOC to receive more timely information about certain events that may signal distress at qualifying hedge funds and private equity funds or market instability.

Large Private Equity Adviser Reporting

The proposed amendments would reduce the threshold for reporting as a large private equity adviser from $2 billion to $1.5 billion in private equity fund assets under management. According to the SEC, lowering this threshold will enable the Commission and FSOC to receive reporting from a similar proportion of the U.S. private equity industry based on committed capital as when Form PF was initially adopted.

Additionally, the proposal would amend section 4 of Form PF for large private equity advisers to gather more information regarding 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.

The proposed amendments are designed to provide useful empirical data to FSOC to better assess the extent to which private equity funds or their advisers may pose systemic risk and to inform the Commission in its regulatory programs for the protection of investors.

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