Certain Form PF Filers Will Have New Questions, More Reporting :: Impacts Advisers to Private Equity Funds and Large Hedge Funds

May 3, 2023

On May 3, 2023, the U.S. Securities and Exchange Commission (SEC) announced the adoption of amendments to the Form PF. This rule will impact all Form PF Large filers and all Form PF filers who manage private equity (PE) funds.

The changes include the addition of two new reporting sections, new and amended questions and glossary updates.

What Does This Mean for Me?

New Section 5 “Current Reporting Events” will require Large Hedge Fund Advisers to disclose:

• Certain extraordinary investment losses
• Substantial changes in margin and, instances of margin or counterparty default
• Certain changes to prime broker relationships, including terminations of, or restrictions on, a fund
• Critical operational disruptions or deterioration
• Sizable, or suspension of, withdrawals and redemptions, including inability to fulfill redemption requests

Details and Deadlines: The rule specifies dollar amounts, date ranges and circumstances that trigger disclosure of certain reporting events. The deadline to report these events will be within a tight deadline of 72 hours from the reportable event occurrence.

New Section 6 “Private Equity Event Reports” will require Private Equity Fund Advisers to disclose:

• Investor determinations to remove a general partner or to terminate a fund’s investment period or to terminate a fund in accordance with the fund’s governing documents
• Adviser-led secondary offerings that are initiated by a private equity fund’s adviser or one its related persons

Details and Deadlines: The rule specifies conditions that prompt the requirement for the disclosure of these events. Quarterly reports are required to be filed within 60 days of the fiscal quarter end.

Amendments may be made to reports filed in sections 5 and 6.

Amendments to Section 4 that affect Large Private Equity Fund Advisers – In Form PF Section 4, additional questions will be included to assist regulators with risk and market trend monitoring and to help regulators understand specific PE fund adviser practices to better formulate questions that will improve the quality of the data the regulators collect from the Form PF. Other questions and reporting frequencies include:

• Annually report information about limited partner clawbacks greater than 10% of a fund’s aggregate capital commitments, including the effective date and reason for the clawback; all general partner clawbacks are reportable
• Reporting on fund strategy types
• Changing geographic exposure reporting to identify largest country exposures based on percent of net asset value
• More detail on fund level borrowings
• More detailed information on reported events of default

Will the Filing Fees Increase?

Yes.  In addition to current filing fees, reports made under the new sections 5 and 6 will have associated filing fees. The SEC will review and approve these additional fees at a later date.

Are There Items That Will Remain the Same?

Yes.

• The thresholds for a Large Private Equity Fund and Large Hedge Fund will stay the same; $2 billion and $1.5 billion, respectively
• The SEC and the Financial Stability Oversight Council (FSOC) will continue to use this data to track and gage systemic risk
• The Form PF responses will remain confidential in terms of protecting the identity of the adviser or the fund, however, as has been done previously, the SEC does aggregate or mask data for industry reporting, risk assessment and enforcement
• Filings will still be made through the Private Fund Reporting Depository (PFRD)

What Happens Next?

Impacted advisers will need to prepare for compliance with the rule by updating policies and procedures, reviewing current operations and workflows to ensure that data and information needed for the new and amended questions is available and that reportable events are identified and reported within deadlines. Training of relevant adviser personnel will also be important. Fairview® is available to discuss the rule in detail and how your firm and compliance program will be affected.

We will continue to monitor for any additional guidance, FAQs, the exact compliance date, and amount of additional fees provided by the SEC.

There will be two separate effective/compliance dates.

1. For new sections 5 and 6, the effective/compliance date will likely be around November 4, 2023, which is six (6) months after the date of publication in the Federal Register[1]
2. For the amended, existing sections, the effective/compliance date will likely be around May 7, 2024, which is one (1) year from the date of the publication in the Federal Register.

Fairview® provides full-service compliance support for registered investment advisers by creating and implementing comprehensive, sustainable compliance programs, ongoing testing, and evaluations to ensure firms are remaining compliant with SEC regulations. If your firm requires assistance with understanding and implementing SEC regulations, we can help. Contact us today for more information about our services.

[1] Typically appears in the Federal Register about 3 days after the agency files with the Office of the Federal Register.