Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
A Small Entity Compliance Guide1
On October 31, 2011, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) issued a joint release adopting new reporting requirements for certain advisers to hedge funds and other private funds. Under the new SEC rule, SEC-registered investment advisers with at least $150 million in private fund assets under management (private fund advisers) must periodically file a new reporting form (Form PF) with the SEC.
The new rule implements provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act under which the SEC was required to adopt reporting requirements for private fund advisers. The information reported on Form PF will be provided to the Financial Stability Oversight Council for use in monitoring risks to the U.S. financial system.
In the joint release, the CFTC also adopted a new rule. Under this rule, private fund advisers that are also registered with the CFTC as commodity pool operators or commodity trading advisors will satisfy certain proposed CFTC reporting obligations by filing private fund information on Form PF. In addition, such advisers are permitted to report on Form PF regarding commodity pools that are not “private funds” to comply with certain proposed CFTC reporting obligations. As a result, these advisers may consolidate certain of their reporting with respect to private funds and non-private fund commodity pools.
The SEC does not intend to make public data reported on Form PF that is identifiable to any particular adviser or fund, and the Dodd-Frank Act provides special confidentiality protections for this data. However, the SEC may use Form PF data in an enforcement action.
Under the reporting requirements, only SEC-registered advisers with at least $150 million in private fund assets under management must file Form PF. These private fund advisers are divided by size into two broad groups — large advisers and smaller advisers. The amount of information reported and the frequency of reporting depends on the group to which the adviser belongs.
“Large private fund advisers” are:
All other respondents are considered “smaller private fund advisers.” However, this is not intended to imply that these advisers are a small entity for purposes of SBREFA, only that they fall under certain of the Form’s reporting thresholds.
Under the Commission rules, for purposes of the Advisers Act and the Regulatory Flexibility Act, an investment adviser generally is a small business if it: (1) has assets under management having a total value of less than $25 million; (2) did not have total assets of $5 million or more on the last day of its most recent fiscal year; and (3) does not control, is not controlled by, and is not under common control with another investment adviser that has assets under management of $25 million or more, or any person (other than a natural person) that had total assets of $5 million or more on the last day of its most recent fiscal year. Advisers that are regarded as small under this definition typically will have no obligation to report on Form PF because they are unlikely to satisfy the minimum threshold for registering with the SEC or, if registered, the minimum threshold for reporting on Form PF (which is $150 million in private fund assets under management).
See Instructions 1, 5 and 6 to Form PF for more information regarding calculating assets under management for purposes of the thresholds.
Smaller Private Fund Advisers
Advisers that have at least $150 million in private fund assets under management but do not exceed a “large adviser” threshold must file Form PF only once a year, within 120 days of the end of the fiscal year. These advisers are required to report only basic information regarding the private funds they advise. This includes limited information regarding size, leverage, investor types and concentration, liquidity, and fund performance. Smaller advisers managing hedge funds must also report hedge fund specific information about fund strategy, counterparty credit risk, and use of trading and clearing mechanisms.
Large Private Fund Advisers
Large private fund advisers must provide more detailed information than smaller advisers. The focus and frequency of the reporting depends on the type of private fund the adviser manages.
There is a two-stage phase-in period for compliance with Form PF filing requirements.
Most private fund advisers must begin filing Form PF following the end of their first fiscal year or fiscal quarter, as applicable, to end on or after December 15, 2012. For instance, a smaller private fund adviser with a December 31 fiscal year end would need to file its first report no later than April 30, 2013.
However, the following advisers must begin filing Form PF following the end of their first fiscal year or fiscal quarter, as applicable, to end on or after June 15, 2012:
The final adopting release and Form can be found on the Commission's website at http://www.sec.gov/rules/final/2011/ia-3308.pdf and http://www.sec.gov/rules/final/2011/ia-3308-formpf.pdf. The proposing release can be found on the Commission's website at http://www.sec.gov/rules/proposed/2011/ia-3145.pdf.
The text of the new Advisers Act rule can be accessed through the “Laws and Rules” section of the Division of Investment Management page of the Commission's website at http://www.sec.gov/divisions/investment.shtml.
Contacting the Commission
The Commission’s Division of Investment Management is happy to assist small investment advisers with questions regarding the Form PF reporting requirements. The Division’s Office of Investment Adviser Regulation answers questions submitted by email at firstname.lastname@example.org or by telephone at (202) 551-6787.
Questions regarding other investment management matters concerning small companies may be directed to the Division’s Office of Chief Counsel by email at IMOCC@sec.gov or by telephone at (202) 551-6825.
1 This guide was prepared by the staff of the U.S. Securities and Exchange Commission as a “small entity compliance guide” under section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended (SBREFA). The guide summarizes and explains rules adopted by the SEC but is not a substitute for any rule itself. Only the rule itself can provide complete and definitive information regarding its requirements.