Asset management alert: SEC’s proposed amendments to Form PF


In remarks before the Asset Management Advisory Committee in November 2021, SEC Chairman Gary Gensler previewed several asset management related projects the Commission is planning to undertake in 2022, including a greater focus on private fund transparency. As the Chairman noted, “Private funds are growing, and today they’re worth about $22 trillion. That’s why I’ve asked staff how we can bring greater transparency to this market in order to foster competition and efficiency, within our authority. Moreover, I’ve asked staff for recommendations for the Commission’s consideration around enhanced reporting and disclosure through Form PF or other reforms.”

In late January 2022, the Commission proposed a series of amendments to the substance, form and timing of Form PF disclosures. The amendments are intended to expand the purview of the reporting framework, create more transparency, encourage more timely disclosure, and ultimately give the SEC and the Financial Stability Oversight Council (“FSOC”) a more complete view into the private fund market in order to better monitor systemic risk to the US financial system.

The SEC recommended Form PF amendments targeting the following areas:

  • Requirements for new current reporting of certain events for large hedge fund advisers and advisers to private equity funds; and
  • Revisions to reporting thresholds and requirements for large private equity advisers and large liquidity fund advisers.


Proposed form PF amendment

Reporting requirements for large hedge fund advisers and advisers to private equity funds

  • Currently, advisers are required to file Form PF only after quarter/year-ends, depending on the size and type of private funds they advise. This often results in stale information, especially in rapidly moving markets. The proposed amendments are designed to provide more timely information to the Commission when there may be an indication of market stress. The amendments would require large hedge fund advisers to report certain key events and transactions within one business day of event occurrence. The types of events covered by the proposal include “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 proposed amendments would also require private equity funds to report the following types of key events within one business day of occurrence: “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.”

Large private equity adviser reporting (section 4)

  • Currently, the threshold for reporting as a large private equity adviser is $2 billion in private fund AUM. The proposed threshold would be lowered to $1.5 Billion in private fund AUM.
  • Currently, Form PF does not collect data on certain private fund metrics important to understanding industry practices. The proposed amendments would add questions designed to improve transparency and data collection, including in the areas of investment strategy reporting; portfolio-level financing; fund-level borrowings; events of default; restructuring or recapitalization; fund-level borrowings; investment geographic information.

Large liquidity fund adviser reporting (section 3)

  • Currently, Form PF reporting does not align with Form N-MFP reporting for Money Market Funds. The proposed amendments are designed to enhance liquidity fund reporting and closely align with Form N-MFP, the objective of which is to provide a better lens into short term liquidity and financing markets to monitor risk. The following are some of the proposed areas of enhanced reporting: Net asset value computational methodology and stable pricing objectives; separate reporting of cash; revisions to creditor information; amended investor ownership reporting; transparency around disposition of securities; and changes to the definitions of weighted average life and weighted average maturity.

What's next

Although the proposed amendments are substantial, the SEC has only provided a 30-day window for public comments (from the date that the proposal is published in the Federal Register). We believe there will be a significant number of comments to this amendment and expect that the final rule will take some time as the SEC considers feedback from the public.

The vote for this proposed amendment was 3-1, with the dissenting vote from Commissioner Hester Peirce. In her statement, she notes a “fundamental shift in Form PF’s scope and purpose… Before we seek additional information through Form PF, we must show what we have done with the information we already require and show that it is insufficient to allow FSOC to monitor for systemic risk. I do not think we have done that...We owe the public a clearer understanding of the objective or subjective calculus or metric we have in mind when we say that contem poraneous reports from advisers concerning one, or a handful of, key events are significant enough to justify this added reporting burden for hundreds of advisers.”

We anticipate further rule-making proposals from the Division of Investment Management to come in 2022 as indicated by Chairman Gensler in the February 4, 2022 meeting before the FSOC. “There’s $5 trillion in money market funds, nearly $7 trillion in open-end bond funds, and $9 trillion in gross assets under management in hedge funds. The nature, scale, and interconnectedness of these fund sectors, though, also pose issues for financial stability. This is not just based on financial economic theory, but also upon the practical lessons of the past. We’ve seen such risks emanate from these sectors during the 2008 financial crisis, at the start of the COVID crisis in March 2020, and in 1998, when the hedge fund Long-Term Capital Management failed… I think the Securities and Exchange Commission has a responsibility to help protect financial stability, which maps onto many parts of our statutes, but particularly onto the ‘orderly’ part of our mission. Thus, I’ve asked SEC staff to make recommendations for the Commission’s consideration with regard to bolstering the resiliency of each of these fund sectors.”

The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.