Statement on Proposed Amendments to Form PF
Jan. 26, 2022
Today’s proposed amendments to Form PF contain key enhancements to investor protection for private fund investors as well as better tools for monitoring systemic risk. The private fund space continues to grow with the latest aggregated data from Form PF showing over 3300 reporting fund advisers, overseeing or managing over 37,000 funds, with an aggregate net asset value of $11.7 trillion that is more than double the amount from just seven years ago.
Form PF provides critical data to assist the Commission in understanding – both at the firm and industry-wide levels – significant information about this vast and growing market, such as overall size, investment concentration, leverage, liquidity, and counterparty exposures. This data may also serve to inform the work of the Financial Stability Oversight Council in monitoring for activities that may pose systemic risk to financial markets.
Today’s proposed current reporting requirements, in particular, would further that goal by requiring certain advisers to timely report significant events such as deep losses, counterparty defaults or the inability to meet margin calls. These kinds of events raise not only investor protection concerns, but in some cases may also implicate systemic risks of the type that the FSOC was designed to address.
Form PF data has informed policy-making and delivered much-needed transparency in this area to the public. However, while we have worked to bolster our oversight program since the first filing requirements over a decade ago, we now know more tools are needed to effectively examine and monitor the private fund space.
Today’s proposal would provide critical tools to help the Commission and the FSOC, including its reconvened Hedge Fund Working Group, in making timely determinations as to whether certain events could pose systemic risks.
Monitoring for systemic risk is a key pillar of the FSOC’s mission, and it is important to support that mandate. I hope the recent reinvigoration of the FSOC will continue apace so that financial regulators can work together within our complex financial ecosystem to maintain a laser focus on financial stability for investors and the broader American economy. Given the growth and complexity of private funds, ensuring we have the data we need in this space is an important component of that work.
I’m happy to support today’s proposal, and I’d like to thank the staff in the Division of Investment Management for their pragmatic and forward-looking approach to today’s recommendations. I also want to thank staff in the Division of Economic and Risk Analysis and the General Counsel’s office for their hard work. Thank you.
 Private Fund Statistics, First Calendar Quarter 2021, U.S. Securities and Exchange Commission: Division of Investment Management (Nov. 1, 2021), available at https://www.sec.gov/divisions/investment/private-funds-statistics/private-funds-statistics-2021-q1.pdf. See also Annual Staff Report Relating to the Use of Form PF Data, U.S. Securities and Exchange Commission: Division of Investment Management (Dec. 3, 2021), at n.1, available at https://www.sec.gov/files/2021-pf-report-to-congress.pdf (noting that “[r]eported net assets of private funds have more than doubled since this data collection began, growing from about $5 trillion as of the end of the first quarter of 2013”) [hereinafter “Annual Report”]; Amendments to Form PF to Require Current Reporting and Amend Reporting Requirements for Large Private Equity Advisers and Large Liquidity Fund Advisers, Investment Advisers Act Release No. IA-5950 (Jan. 26, 2022) [hereinafter “Proposing Release”].
 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010), at section 111 (establishing the Financial Stability Oversight Council (“FSOC”)). See also Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF, Investment Advisers Act Release No. 3308 (Oct. 31, 2011), [76 FR 71128 (Nov. 16, 2011)], available at https://www.sec.gov/rules/final/2011/ia-3308.pdf.
 See, e.g., Annual Report, supra footnote 1, at Section III (noting how Form PF data “promotes the ability of the Commission staff to … evaluate existing regulatory policies and programs directed to private fund advisers [and] evaluate the impact of policy choices on private funds’ activities”); Private Fund Statistics, U.S. Securities and Exchange Commission: Division of Investment Management, available at https://www.sec.gov/divisions/investment/private-funds-statistics.shtml.
 See Proposing Release, supra footnote 1.
 Readout of Financial Stability Oversight Council Meeting on March 31, 2021, U.S. Department of the Treasury (Mar. 31, 2021), available at https://home.treasury.gov/news/press-releases/jy0093 (stating that “[a]t the request of Chairperson Yellen, the Council will reconvene its Hedge Fund Working Group, which last reported to the Council in 2016, to enhance interagency data sharing and improve the Council’s ability to identify, assess, and address potential risks to financial stability related to hedge funds”).
 See, e.g., Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF, Investment Advisers Act Release No. 3145 (Jan. 26, 2011) [76 FR 8068 (Feb. 11, 2011)], at text accompanying n.56 (noting that “high levels of leverage, can increase the likelihood that the [hedge] fund will experience stress or fail, and amplify the effects on financial markets”); Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management, Report of the President’s Working Group on Financial Markets (April 1999), available at https://www.treasury.gov/resource-center/fin-mkts/Documents/hedgfund.pdf, at 23 (noting that “highly leveraged investors have the potential to exacerbate instability in the market as a whole”).
 Pub. L. No. 111-203, 124 Stat. 1376 (2010), at section 112 (stating that the purposes of the FSOC include “to identify risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected bank holding companies or nonbank financial companies, or that could arise outside the financial services marketplace” and “to respond to emerging threats to the stability of the United States financial system”).
 Year in Review: Treasury’s Top Accomplishments During Year One of the Biden-Harris Administration, U.S. Department of the Treasury Press Release (Jan. 20, 2022), available at https://home.treasury.gov/news/press-releases/jy0563 (noting Secretary Yellen’s reinvigoration of the FSOC). See also Remarks by Secretary Janet L. Yellen at the Open Session of the meeting of the Financial Stability Oversight Council (Mar. 31, 2021), available at https://home.treasury.gov/news/press-releases/jy0092 (stating that the FSOC’s “task is to guard the nation’s financial system”).
 See, e.g., Report on Climate-Related Financial Risk, Financial Stability Oversight Council (Oct. 21, 2021), available at https://home.treasury.gov/system/files/261/FSOC-Climate-Report.pdf.