The Securities and Exchange Commission (SEC) adopted amendments to Form PF last week.
Form PF is the confidential reporting form for certain SEC-registered investment advisers to private funds, including those that also are registered with the Commodity Futures Trading Commission (CFTC) as commodity pool operators or commodity trading advisers.
The amendments are designed to enhance the ability of the Financial Stability Oversight Council (FSOC) to monitor systemic risk and strengthen the SEC’s oversight of private fund advisers.
“Since Form PF first was adopted, the SEC, CFTC, and FSOC have identified gaps in the information we receive from private fund advisers,” SEC Chair Gary Gensler said. “These amendments to Form PF will enhance the Commissions’ and FSOC’s understanding of the private fund industry as well the potential systemic risk posed by the industry and its individual participants. In addition, the adoption also furthers investor protection efforts.”
More specifically, the amendments seek to provide better insight into the operations and strategies of these funds and their advisers and improve data quality and comparability. Further, they will enhance how large hedge fund advisers report investment exposures, borrowing and counterparty exposure, market factor effects, currency exposure, turnover, country and industry exposure, central clearing counterparty reporting, risk metrics, investment performance by strategy, portfolio liquidity, and financing and investor liquidity.
Also, the amendments will require additional basic information about advisers and the private funds they advise, including identifying information, assets under management, withdrawal and redemption rights, gross asset value and net asset value, inflows and outflows, base currency, borrowings and types of creditors, fair value hierarchy, beneficial ownership, and fund performance.
This information will help provide greater insight into private funds’ operations and strategies, assist in identifying trends, and reduce reporting errors. In addition, they will require more detailed information about the investment strategies, counterparty exposures, and trading and clearing mechanisms employed by hedge funds.
The amendments were concurrently adopted by the CFTC. The SEC and CFTC also agreed to a memorandum of understanding related to the sharing of Form PF data.
The amendments will become effective one year after publication in the Federal Register.