On October 20, the Securities and Exchange Commission (the "SEC") provided notice that it will be holding a meeting on Wednesday, October 26 to consider whether to adopt a rule that will require hedge fund and other private fund advisers to report information for use by the Financial Stability Oversight Council (the "FSOC") in its evaluation of risks to the financial stability of the United States. Earlier this year, in Release No. IA-3145, the SEC and the Commodity Futures Trading Commission released proposed joint rules under the Commodities Exchange Act and the Investment Advisers Act of 1940 (the "Advisers Act") to implement certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). The proposed rules would require (i) investment advisers registered with the SEC that advise more than one private fund client and (ii) commodity pool operators and commodity trading advisers registered with the SEC as investment advisers that advise more than one private fund to complete a Form PF. To date, nearly forty comment letters have been submitted regarding the proposed rules and the Form PF.
The Dodd-Frank Act established the FSOC to monitor risks to the United States' financial stability. In addition to creating the FSOC, the Dodd-Frank Act amended adviser registration requirements under the Advisers Act to expand the scope of investment adviser registration requirements. Congress rationalized that registration of such advisers would provide information about private funds' sizes, strategies, and positions. Together with the information provided by registered investment advisers in their Form ADVs, the SEC and CFTC were empowered to require registered investment advisers to report systematic risk information to the SEC on the Form PF. The proposing release noted that the Form PF is intended to be complementary to, not duplicative of, the Form ADV required to be completed by registered investment advisers. In its current form, the Form PF runs forty-four pages. Among other disclosures, the Form PF requires an investment adviser to provide information regarding the adviser's identity, assets under management, borrowings, investor base, and investment strategies. Depending on the types of funds managed by the investment adviser and the amount of assets under management, additional information and more frequent reporting is required. The proposing release explains that the information is intended to monitor systematic risk, something the Form ADV was not designed to collect. Given that much of the information requested by the Form PF is non-public information, the proposed rules state that the information provided by advisers in the Form PF will not be made available to the public, but may be disclosed to Congress, federal regulators, self-regulatory organizations or otherwise in enforcement proceedings.