On January 26, 2011, the SEC proposed new Rule 204(b)-1 under the Advisers Act, to implement certain recordkeeping and filing requirements under the Dodd-Frank Act. Specifically, proposed Rule 204(b)-1 would require advisers to private investment funds, including advisers to hedge funds, private equity funds and “liquidity funds” (i.e., private money market funds), to file periodically new Form PF with the SEC. The content and frequency of an adviser’s reporting obligations on Form PF would vary based on the types of private funds advised and the adviser’s assets under management. For example, advisers to “hedge funds” and “liquidity funds” would generally be subject to more comprehensive reporting requirements than advisers to “private equity funds,” with certain “large private fund advisers” subject to the most comprehensive and frequent reporting requirements. Large private fund advisers with $1 billion or more in assets under management would be required to file Form PF on a quarterly basis. All other private fund advisers would be required to file Form PF annually. Information collected by the SEC on Form PF would be made available to the CFTC (as it relates to commodity pools managed by CPOs and CTAs) and the Financial Stability Oversight Council. Under the proposed rule, information reported on Form PF would remain confidential.
Information to be reported on proposed Form PF would include, among other things:
- identifying information of the adviser, as well as the adviser’s gross and net assets under management in total, and gross and net assets under management attributable to certain types of private funds, and
- fund-specific information such as the name of the fund, gross and net assets, aggregate notional value of the fund’s derivative positions, information regarding creditors and outstanding debt, performance information and investor information.
The proposed Rule would require hedge funds to disclose information relating to investment strategies, use of trading algorithms, counterparty trading exposure and general trading and clearing practices. Large private fund advisers would also generally be required to disclose a greater range of information, including the market value of assets invested (on a short and long basis) in different types of securities and commodities, the duration of fixed income portfolio holdings, the turnover rate of the adviser’s portfolios during the reporting period and the geographic breakdown of investments held. Depending on the type of fund and amount of assets under management, other information would also be required on Form PF.
Comments on the proposal are due by April 12, 2011.