United States: SEC And CFTC Adopt Substantial Amendments To Form PF

The Securities and Exchange Commission (the "SEC") and the Commodity Futures Trading Commission (the "CFTC," and together with the SEC, the "Commissions") recently voted to jointly adopt amendments to Form PF (the "Amendments"). The Amendments significantly increase the amount of information required to be included on Form PF and limit the flexibility in responding to a number of questions on the form.¹ The Amendments represent the latest increase in the regulatory burdens placed on private fund advisers. In particular, many Form PF filers just recently implemented, on December 11, 2023, compliance with the SEC's amendments to Form PF for large hedge fund advisers and advisers to private equity funds to promptly report certain events.²

Notably, the Amendments will (i) enhance reporting requirements of large hedge fund advisers and qualifying hedge funds, (ii) enhance reporting on basic information about advisers and the private funds they advise, (iii) require more detailed information about the investment strategies, counterparty exposures, and trading and clearing mechanisms employed by hedge funds, and (iv) generally require large hedge fund advisers to report information on a disaggregated basis for masterfeeder funds and parallel funds. Certain of the changes in the Amendments overlap with disclosures currently included in

CFTC Form CPO-PQR, such as information regarding withdrawals and redemptions, identifying sub-asset classes and portfolio exposures, counterparty exposures, and providing monthly performance information. The Amendments also will make certain timing changes that more closely align Form PF with Form CPO-PQR. While these changes may be thematically consistent with the information already provided in Form CPO-PQR, the presentation between the forms would still differ.

The Commissions proposed the Amendments in August 2022 (the "Proposed Amendments") to address "information gaps and situations where revised information would improve" their understanding of the private fund industry and potential systemic risk within it.³ The Amendments represent a joint proposal of the Commissions, and they also reflect input from other members of the Financial Stability Oversight Council ("FSOC"), including the Department of the Treasury and the Federal Reserve Board.⁴

The Commissions note in the Proposing Release that since Form PF was initially adopted, the private fund industry has grown in size and evolved in terms of business practices, complexity of fund structures, and investment strategies and exposures. The value of private fund net assets reported on Form PF has more than doubled, growing from $5 trillion in 2013 to $14 trillion in through the first quarter of 2023, while the number of private funds reported on the form has increased by nearly 130 percent.⁵ Citing the increasing complexity and evolution of the private funds space, the Commissions indicated that the Amendments are designed to enhance the information private fund advisers file on Form PF and improve data quality.

In light of these developments, the Amendments are part of a broader regulatory effort to increase transparency of private funds. On August 23, 2023, the SEC adopted new rules and amendments under the Advisers Act that substantially modify existing regulatory requirements and create new compliance obligations for private fund advisers (the "Private Fund Adviser Rule").⁶ In addition, the May Amendments, which amend the SEC-only sections of Form PF (sections 3, 4, 5, and newly adopted section 6), will, among other things, create new reporting requirements and require large hedge fund advisers and advisers to private equity funds to report certain events within 72 hours of the event. While the Amendments and the May Amendments do not directly overlap in the sections of Form PF they address, together they provide for a comprehensive overhaul in Form PF's structure.

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Footnotes

1. See Form PF; Reporting Requirements for All Filers and Large Hedge Fund Advisers, Investment Advisers Act of 1940 (the "Advisers Act") Release No. 6546 (Feb. 8, 2024) (the "Adopting Release"), available here.

2. Amendments to Form PF to Require Event Reporting for Large Hedge Fund Advisers and Private Equity Fund Advisers and to Amend Reporting Requirements for Large Private Equity Fund Advisers, Advisers Act Release No. 6297 (May 3, 2023) (the "May Amendments"). For a discussion of the May Amendments, please see the Willkie Farr & Gallagher LLP ("Willkie") Client Alert, available here.

3. See Amendments to Form PF to Amend Reporting Requirements for All Filers and Large Hedge Fund Advisers, Advisers Act Release No. 6083 (Aug. 10, 2022) (the "Proposing Release") at 8-9, available here. Please also see the Willkie Client Alert on the Proposed Amendments, available here. 

4. See Statement on Form PF, Gary Gensler, SEC Chairman (Jan. 26, 2022), available here.

5. See Adopting Release at n.5.

6. See Private Fund Advisers; Documentation of Registered Investment Adviser Compliance Reviews, Advisers Act Release No. 6383 (Aug. 23, 2023) (the "Private Fund Adviser Rule Release"). For a discussion of the new rules and amendments, please see the Willkie Client Alert, available here.

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