On November 20, 2012, the Division of Investment Management of the Securities and Exchange Commission (the “SEC”) posted additional responses (the “Responses”) to frequently asked questions regarding Form PF. For details on previously posted SEC responses regarding Form PF, please see the July 16, 2012 Investment Management Regulatory Update and the August 22, 2012 Investment Management Regulatory Update.
Investment advisers registered or required to register with the SEC under the Investment Advisers Act of 1940 (the “Advisers Act”) that advise one or more private funds (i.e., 3(c)(1) or 3(c)(7) funds) and that have at least $150 million in private fund assets under management (“private fund advisers”) are required to file Form PF with the SEC for the purpose of reporting systemic risk information to the SEC. Additionally, private fund advisers that are also registered with the Commodity Futures Trading Commission (the “CFTC”) as commodity pool operators (“CPOs”) or commodity trading advisors (“CTAs”) and are required to file Form PF under the Advisers Act must file Form PF with the SEC to satisfy certain CFTC filing requirements with respect to their commodity pools that are private funds. Such CPOs and CTAs may file Form PF with the SEC to satisfy certain CFTC filing requirements with respect to their commodity pools that are not private funds. Please see the November 18, 2011 Investment Management Regulatory Update for a discussion of the final Form PF rules and the June 19, 2012 Investment Management Regulatory Update for a discussion of the initial Form PF deadlines.
The Responses provided guidance on the following Form PF topics:
General Filing Information. The Responses noted that the Private Fund Reporting Depository has been updated to allow a reporting adviser to add a relying adviser or a special purpose vehicle as a related person in reliance on the no-action letter issued to the American Bar Association on January 18, 2012 in Question 1(b). This allows such related person to be included in Question 1(b) even though it does not have a separate CRD or SEC file number.
In addition, the Responses clarified that a reporting adviser may use the CFTC Interim Compliant Identifiers (“CICIs”) of its reporting funds in response to questions that request a reporting fund’s Legal Entity Identifier (“LEI”). The CFTC has designated DTCC-SWIFT as the provider of CICIs to certain market participants under the CFTC’s jurisdiction and expects that CICIs will become LEIs when the global LEI system is established.
Private Fund Categorization. The Responses provided guidance related to the reporting on an adviser’s Form ADV regarding a private fund that meets the definition of both a liquidity fund and a hedge fund. The reporting adviser should categorize any such private fund as “other” on the reporting adviser’s Form ADV, Schedule D. According to the Responses, this will enable the reporting adviser to complete the sections applicable to liquidity funds and hedge funds with respect to such private fund. The Responses also instructed a reporting adviser that needs to change the categorization of a private fund on its Form ADV, Schedule D to file an other-than-annual amendment to its Form ADV to reflect such change before filing its Form PF.
Fund of Funds. The Responses also provided guidance on excluding the assets of disregarded private funds (i.e., funds of funds) and any private fund’s equity investments in other private funds for purposes of responding to Questions 3, 8, 9 and 10. If the reporting adviser chooses to exclude such disregarded private funds and equity investments in accordance with Instruction 7, then such disregarded private funds and equity investments should be excluded with respect to (i) reporting the breakdown of regulatory assets under management and net assets in Question 3 and (ii) reporting the reporting fund’s gross asset value in Question 8 and net asset value in Question 9. However, the value of the reporting fund’s equity investments in other private funds should still be reported in Question 10 even if the reporting fund is a disregarded private fund.
Rehypothecation of Collateral and Other Credit Support. The Responses clarified that when responding to Question 38 regarding the rehypothecation of collateral and other credit support by the reporting fund or by such reporting fund’s counterparties, cash collateral should not be included in calculating the rehypothecation percentages.