SEC Adopts Amendments to Enhance Private Fund Reporting, now is the time to start to update your files to make compliance seamless.

SEC Adopts Amendments to Enhance Private Fund Reporting, now is the time to start to update your files to make compliance seamless.

The SEC has adopted some changes to Form PF, while they won’t go into effect for some time, it’s always good to start thinking about how you might collect the additional information early.? It will make compliance with the new form much less painful.

On February 8, 2024, the Securities and Exchange Commission adopted amendments to Form PF, 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, which the CFTC concurrently adopted, are designed to enhance the ability of the Financial Stability Oversight Council (FSOC) to monitor and assess systemic risk and to bolster the SEC’s oversight of private fund advisers and the agency’s investor protection efforts. The SEC and CFTC also agreed to a memorandum of understanding related to the sharing of Form PF data.

The amendments to Form PF 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 to provide better insight into the operations and strategies of these funds and their advisers and improve data quality and comparability.

Further, 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 to provide greater insight into private funds’ operations and strategies, to assist in identifying trends, including those that could create systemic risk, to improve data quality and comparability, and to reduce reporting errors. The amendments will also require more detailed information about the investment strategies, counterparty exposures, and trading and clearing mechanisms employed by hedge funds, while also removing duplicative questions, to provide greater insight into hedge funds’ operations and strategies, to assist in identifying trends, and to improve data quality and comparability.

The amendments will become effective one year after publication in the Federal Register. The compliance date for the amendments is the same as the effective date.

Below is a summary of some the updates:

Enhance Reporting by Large Hedge Fund Advisers on Qualifying Hedge Funds

The amendments will enhance large hedge fund adviser reporting on qualifying hedge funds (i.e., those with a net asset value of at least $500 million) to provide better insight into the operations and strategies of these funds and their advisers and improve data quality and comparability. This includes insight as to 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.

Enhance Reporting on Basic Information About Advisers and the Private Funds They Advise

The amendments will require advisers to report additional information about themselves and their private funds to improve data quality and comparability, reduce reporting errors, and assist in identifying trends, including those that could create systemic risk. This includes reporting on 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.

Enhance Reporting Concerning Hedge Funds

The amendments will require more detailed reporting on Form PF about hedge fund investment strategies, counterparty exposures, and trading and clearing mechanisms employed by hedge funds, while also removing duplicative questions, to provide greater insight into hedge funds’ operations and strategies, assist in identifying trends, and improve data quality and comparability.

Amend How Advisers Report Complex Structures

The amendments will generally require separate reporting for each component fund of a master-feeder arrangement and parallel fund structure to provide better insight into the risks and exposures of these arrangements. Additionally, the amendments will require advisers to identify trading vehicles used by reporting funds and to report them on an aggregated basis to provide greater visibility into trading vehicles for the Commissions and FSOC and enhance the Commissions’ efforts to protect investors by identifying areas in need of outreach, examination, or investigation.

Remove Aggregate Reporting for Large Hedge Fund Advisers

Form PF currently requires large hedge fund advisers to report certain aggregated information about the hedge funds they advise. Such information can obscure the data about hedge funds, including by masking the directional exposures of individual funds. The amendments will remove the aggregate reporting requirement.