The SEC has adopted Final Rules on amendments to Form PF reporting requirements for registered investment advisers (“RIA”) to private funds. Since their introduction 12 years ago, Form PF reports have been an important tool for the SEC in supporting investor protection and the monitoring of systemic risks. These amendments, adding to both periodic and event-driven reporting, represent a significant uptick in regulatory scrutiny particularly in the private equity (“PE”) sector.
Who do the new requirements apply to?
Some of the new requirements apply only to “large” advisors in hedge fund and private equity sectors. However, the thresholds are sufficiently low to capture all but the smaller boutiques – large being defined as follows:
- Large hedge fund advisers: those with at least $1.5 billion in hedge fund assets.
- Large PE advisers: those with at least $2 billion in PE assets.
The new event-driven PF reports (see below) apply to all PE advisers with at least £150 million in PE assets.
What are the main amendments to reporting requirements?
Large hedge fund advisers:
Large hedge fund advisers must file the new Section 5 of Form PF as soon as practicable and no later than 72 hours after any of the following events in respect of a qualifying hedge fund:
- Investment losses of 20% or more of the reporting fund aggregate calculated value (“RFACV”) over a rolling 10-business day period;
- Significant increases in requirements for margin, collateral or an equivalent over a rolling 10-business day period;
- Receipt of a notice of default by the fund on a call for margin, collateral, or an equivalent, which it is unable to cover;
- A determination by the adviser that a fund cannot meet a call for margin, collateral, or an equivalent;
- Default by a fund’s counterparty on a call for margin, collateral, or an equivalent, or failure to make any other payment as contractually required (if greater than 5% of the RFACV);
- Termination or a material restriction in the relationship between the fund and one or more of its prime brokers;
- Significant disruption or degradation of a fund’s critical operations; and
- Significant withdrawals or redemptions.
Advisers can amend previously filed Section 5 reports if the adviser discovers that information filed was not accurate at the time of filing.
Private equity advisers:
All PE fund advisers with PE assets of at least $150 million will have to file newly adopted Private Equity Event Reports (Section 6 of Form PF) triggered by any of the following events in respect of their PE funds:
- Execution of an adviser-led secondary transaction; and
- Investor election to remove a fund’s general partner, terminate a fund’s investment period, or terminate the fund.
PE event reports will need to be filed within 60 days of the end of the fiscal quarter during which the event took place.
Large private equity advisers
Large PE advisers (those with PE assets of more than $2 billion) will have to make annual Form PF filings relating to:
- investment strategies;
- fund-level borrowings;
- events of default by a fund or a controlled portfolio company (“CPC”);
- bridge financings provided to a CPC; and
- the geographical exposure of a fund by country.
They will also have to report information relating to:
- Any general partner clawbacks that occurred during the reporting period; and
- Limited partner clawbacks in excess of 10% of the fund’s aggregate capital commitments, plus any subsequent limited partner clawback over the remaining duration of the fund.
When do the new requirements apply?
The current and quarterly event-driven reporting requirements will come into force 6 months after publication of the amended Form PF rules in the Federal Register. Although not yet published (at the time of writing) this is expected to apply from December 2023. All other amendments come into force 12 months after publication in the Federal Register, meaning that the first new filing for large PE advisers will be the Form PF filing for fiscal year 2024.
How Cosegic can help
We support firms with both full registered investment adviser (“RIA”) and exempt reporting adviser (“ERA”) status, including both their Form ADV and Form PF requirements. We can help with initial SEC registration and filing requirements as well as ongoing compliance obligations.
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