SEC Adopts Amendments to Form PF
Certain hedge fund and private equity fund advisers will now have to report specific triggering events to the SEC.
The Securities and Exchange Commission on Wednesday adopted a new rule which requires large hedge fund advisers and private equity advisers to file special Form PF reports for certain triggering events, in addition to their regular reports. The rule was passed by a 3-2 vote.
Currently, private fund advisers—comprising those from both large hedge funds and private equity—file Form PF quarterly or annually, depending on their size.
The new rule requires private equity advisers to file within 60 days of the end of the quarter during which certain events take place, including but not limited to: removal of a general partner, certain fund termination events and adviser-led secondary transactions.
The filings for large hedge fund advisers must be completed “as soon as practicable,” but no later than 72 hours from the occurrence of a triggering event, including: extraordinary investment losses, termination of a prime broker relationship and significant margin or default events.
Large hedge funds are defined as those with at least $1.5 billion in assets under management.
C. Dabney O’Riordan, a partner in Quinn Emanuel’s SEC enforcement practice, says an extraordinary investment loss is defined as a loss of 20% or more of a fund’s total value over the course of 10 business days or less. She adds that these additional reporting requirements will be difficult to implement and that the six-month compliance period, which begins after the rule is entered into the Federal Register, “seems short.”The amendments to Form PF passed under the authority of the Dodd-Frank Act to enable the SEC to better monitor events that could “signal risk to the broader financial system.”
SEC Chairman Gary Gensler explained in his statement on the proposal that, “History is replete with times when tremors in one corner of the financial system or at one financial institution spill out into the broader economy. When this happens, the American public—bystanders to the highway of finance—inevitably gets hurt.”
One of the SEC’s five commissioners, Mark Uyeda, who voted against the final rule, was skeptical that the rule would achieve this purpose. He argued in his statement that the SEC does not need this information and has not specified what, precisely, it intends to do with it. Further, Uyeda said the SEC has not identified any economic crises or failures that might have been prevented had this information been available to the SEC.