Statement on Proposed Joint Amendments to Form PF
Aug. 10, 2022
Today, the Commission is considering whether to propose joint amendments with the Commodity Futures Trading Commission (CFTC) to Form PF, an important reporting tool that the Commission and the Financial Stability Oversight Council (FSOC) use, respectively, to protect investors and monitor systemic risk. I am pleased to support the proposal because, if adopted, it would improve the quality of the information we receive from all Form PF filers, with a particular focus on large hedge fund advisers.
In response to the 2008 financial crisis, Congress mandated the SEC and CFTC (the Commissions) to establish, after consultation with FSOC, reporting requirements for advisers to private funds. Congress felt it was necessary for there to be greater transparency for regulators into this field, which led the Commissions to adopt Form PF.
I had the privilege to serve as Chair of the CFTC when the Commissions jointly first adopted Form PF in 2011. As I said at the time, “With this final rule, regulators will gain transparency into an important sector of the financial marketplace to better assess risk to the overall system.”
In the decade since, regulators have gained vital insight with respect to private funds through Form PF. Since then, though, the private fund industry has grown in gross asset value by nearly 150 percent and evolved in terms of its business practices, complexity, and investment strategies. In response to the Commission’s years of experience with Form PF and the evolving private funds landscape, I asked the staff to recommend amendments to Form PF. We have considered these recommendations in two separate proposals.
In January 2022, the Commission proposed amendments to the SEC-only sections of Form PF. That proposal would, among other things, require certain advisers to hedge funds and private equity funds to provide current reporting of key events, and enhance reporting requirements for large private equity and large liquidity fund advisers.
Today, I am glad to support a second proposal, concerning the Commissions’ two joint sections on Form PF. These amendments would, among other things, expand the reporting requirements for large hedge fund advisers on their large hedge funds (hedge funds with at least $500 million in net asset value, also known as qualifying hedge funds) in three important ways.
First, the proposal would expand reporting requirements about a large hedge fund’s investment exposure. Reporting on fund exposures to different types of assets has been critical to help monitor the composition of large hedge funds’ assets. Expanding such reporting from large hedge fund advisers would enhance monitoring for systemic risk.
Second, the proposal would expand reporting requirements about a large hedge fund’s open positions and certain large positions. These requirements would provide insight into the extent of a fund’s portfolio concentration and large exposures to any specific assets. Such concentration or exposure may increase the risk of amplified losses for investors. Gathering additional data on concentration and exposure would help to protect investors and monitor systemic risk.
Third, the proposal would expand reporting requirements on large hedge funds’ borrowing and financing arrangements with counterparties, including central clearing counterparties. Gathering such information would help the Commissions and FSOC better to observe how large hedge funds interconnect with the broader financial services industry.
I believe that these proposed amendments would bring greater visibility for regulators into an important part of our capital markets. That will help protect investors and maintain fair, orderly, and efficient markets.
I want to thank my fellow Commissioners at the CFTC for their collaboration on these amendments. Subject to both Commissions’ approvals, I look forward to issuing the proposal for public comment.
I’d like to thank our colleagues at the CFTC, FSOC, the Department of the Treasury, and the Federal Reserve Board for their assistance. I’d also like to thank the staff for their diligent work on these amendments, including:
- William Birdthistle, Sarah ten Siethoff, Melissa Roverts Harke, Christine Schleppegrell, Lawrence Pace, Alexis Palascak, Timothy Husson, David Stevens, Jon Hertzke, Roberta Ufford, Michelle Beck, Holly Miller, Timothy Dulaney, Kevin Treharne, Trevor Tatum, Viktoria Baklanova, Isaac Kuznits, Andrew Deglin, Wayne Jenson, Alex Bradford, Jennifer McHugh, Thoreau Bartmann, and Kolby Quass in the Division of Investment Management;
- Meridith Mitchell, Malou Huth, Natalie Shioji, Monica Lilly, and Alice Wang in the Office of the General Counsel;
- Jessica Wachter, Ross Askanazi, Alexander Schiller, Daniel Hiltgen, and Charles Woodworth in the Division of Economic and Risk Analysis;
- Christopher Mulligan, Daniel Faigus, Natasha Greiner, and Jennifer McCarthy in the Division of Examinations;
- Dabney O’Riordan in the Division of Enforcement;
- Michelle Danis and Elizabeth Fitzgerald in the Division of Trading and Markets;
- Valerie Szczepanik and Amy Starr in the Strategic Hub for Innovation and Financial Technology; and
- Morgan Macdonald and Michael Ferrario in the Office of International Affairs.
 See Commodity Futures Trading Commission, “CFTC and SEC Approve Confidential Private Fund Risk Reporting” (Oct. 31, 2011), available at https://www.cftc.gov/PressRoom/PressReleases/6132-11.
 Per published Form PF data, in comparing 2021Q4 with 2013Q1 numbers, private fund gross asset value (GAV) has increased approximately 150% to $20.4T; private fund net asset value (NAV) has grown approximately 160% to $14T; hedge fund GAV has grown 100% to $9.8T; hedge fund NAV has grown 100% to $5.1T. https://www.sec.gov/divisions/investment/private-funds-statistics.shtml
 A large hedge fund adviser is an adviser that collectively with its related persons, had at least $1.5 billion in hedge fund assets under management as of the last day of any month in the fiscal quarter immediately preceding its most recently completed fiscal quarter. Large hedge funds advisers are required to report certain additional information on their qualifying hedge funds. A qualifying hedge fund is any hedge fund that has a net asset value (individually or in combination with fund any feeder funds, parallel funds and/or dependent parallel managed accounts) of at least $500 million as of the last day of any month in the fiscal quarter immediately preceding the adviser’s most recently completed fiscal quarter.