Haynes and Boone's Newsroom
On January 25, 2011, the Securities and Exchange Commission (the “SEC”) proposed new Rule 204(b)‑1 (the “Proposed Rule”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), that would implement various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) by creating a new Form PF for use by the Financial Stability Oversight Council (the “FSOC”) and other regulatory agencies in assessing systemic risks posed to the U.S. financial system. The Proposed Rule would require advisers to hedge funds, private equity funds and liquidity funds periodically to report certain information with the SEC on new Form PF.
Scope of the Proposed Rule
Under the Proposed Rule, SEC-registered investment advisers that advise one or more private funds1 (“Private Fund Advisers”) would be required to file Form PF electronically with the SEC.2 A commodity pool operator (a “CPO”) or commodity trading adviser (a “CTA”) that is also registered with the SEC as an investment adviser and manages one or more private funds also would be required to file Form PF with respect to an advised commodity pool that is a private fund.3 The content of information required to be reported and the frequency of the reporting requirements would vary based on the assets under management of the Private Fund Adviser and the types of private funds advised by such Private Fund Adviser. The information reported on Form PF generally would remain confidential except in very limited circumstances.
All Private Fund Advisers would be required to complete Section 1 of Form PF. In addition, “Large Private Fund Advisers” would be required to complete additional sections of Form PF. “Large Private Fund Advisers” generally would be defined as:
- advisers managing hedge funds4 that collectively have at least $1 billion in assets as of the close of business on any day during the most recently completed calendar quarter;
- advisers managing liquidity funds5 that have combined liquidity fund and registered money market fund assets of at least $1 billion as of the close of business on any day during the most recently completed calendar quarter; or
- advisers managing private equity funds6 that collectively have at least $1 billion in assets as of the close of business on the last day of the most recently completed calendar quarter.
For purposes of determining whether it is a Large Private Fund Adviser, a Private Fund Adviser generally would be required to aggregate (i) assets of managed accounts that pursue substantially the same investment objectives and strategies and invest in substantially the same positions as the applicable private funds and (ii) private fund assets advised or managed by any of the adviser’s related persons.
Frequency of Reporting Requirements
Newly registering Private Fund Advisers would be required to submit their initial Form PF within 15 days of the end of the next occurring calendar quarter after registering with the SEC. Large Private Fund Advisers would be required to complete and file a Form PF within 15 days of the end of each calendar quarter. All other Private Fund Advisers would be required to complete and file a Form PF on an annual basis, within 90 days of the end of their fiscal year.
To continue reading the alert, including an overview of reporting requirements, click on the PDF linked below. For additional information regarding the Proposed Rule and Form PF, please contact one of the attorneys listed below:
” is defined under the Advisers Act as a private investment fund relying on an exemption found in Section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940, as amended. 2
Neither exempt nor state-registered advisers would be required to file Form PF. 3
The Commodity Futures Trading Commission ("CFTC
") has proposed rules that would require CFTC-registered CPOs and CTAs that are not also registered with the SEC to complete and submit forms CPO-PQR and CTA-PR, which require information that is substantially similar to the information required to be reported on Form PF. 4
” would be defined as any private fund that (i) has a performance fee or allocation calculated by taking into account unrealized gains; (ii) may borrow an amount in excess of one-half of its net asset value (including any committed capital) or may have gross notional exposure in excess of twice its net asset value (including any committed capital); or (iii) may sell securities or other assets short. 5
” would be defined as any private fund that seeks to generate income by investing in a portfolio of short-term obligations in order to maintain a stable net asset value per unit or minimize principal volatility for investors. 6
“Private equity fund
” would be defined as any private fund that is not a hedge fund, liquidity fund, real estate fund, securitized asset fund or venture capital fund and does not provide investors with redemption rights in the ordinary course. 7
” would be defined as (i) all of the adviser’s officers, partners, or directors (or any person performing similar functions), (ii) all persons directly or indirectly controlling, controlled by, or under common control with the adviser, and (iii) all of the adviser’s employees (other than employees performing only clerical, administrative, support or similar functions).