As the new year begins, private fund managers should take some time to consider various action items that are potentially applicable to private fund managers, some of which may be new for many managers in 2013. For a quick summary of many of these items, see the chart on pages 6-8.

Section 13

Under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934 (the Exchange Act), any person or "group" of persons that directly or indirectly acquires beneficial ownership of more than 5% of any class of equity voting securities that is traded on a U.S. exchange (including Nasdaq) may be required to file a Schedule 13D or Schedule 13G. If one or more of a manager's funds currently holds, or at any time in 2012 held, in the aggregate more than 5% of such publicly traded securities, the fund or funds may be required to file an initial or amended Schedule 13D or Schedule 13G with the Securities and Exchange Commission (SEC). If the securities were acquired before a newly public issuer became publicly listed (and in certain other cases), the initial Schedule 13G filing with respect to that issuer generally is due on February 14, 2013. (Schedule 13D filings and Schedule 13G filings in certain other cases are due throughout the year as transactions occur rather than on a set date.) If there have been any changes during 2012 to the information included in a previously filed Schedule 13G, an amendment that updates such information generally must be filed by February 14, 2013 as well.

Under Section 13(f) of the Exchange Act, managers with investment discretion over $100 million or more of U.S. publicly traded securities generally must file a Form 13F with the SEC disclosing such holdings. Managers that exercised investment discretion over $100 million of such securities as of the end of any month during 2012 generally must file Form 13F with the SEC no later than February 14, 2013 (with quarterly filing obligations thereafter for the remainder of 2013).

Fund managers that have previously filed a Form 13H (principally certain large traders of U.S. equities) must file an annual amendment by February 14, 2013.

SEC-Registered Investment Advisers and Exempt Reporting Advisers

SEC-registered investment advisers should keep in mind several key registration documents that must be updated and filed with the SEC on an annual basis. For many investment advisers that registered during 2012 as a result of the Dodd-Frank Act, the first annual update will be due in the first quarter of 2013. Updates to Form ADV Part 1 and Part 2A (the brochure) must be filed within 90 days after an adviser's fiscal year-end. An updated Part 2A (or summary of changes) must be delivered to an adviser's clients within 120 days after the adviser's fiscal year-end. Although investors in a private fund technically are not clients of an adviser, it is often considered best practice to provide the updated Part 2A (or summary of changes) to investors in the fund within such 120-day period.

SEC-registered investment advisers are required to conduct a review of their compliance program on an annual basis. SEC examiners expect to see documents reflecting the annual review.

Many SEC-registered investment advisers also will be required to file Form PF for the first time in 2013. Form PF is applicable to advisers with at least $150 million in gross assets under management attributable to private funds. The frequency and timing of the Form PF reporting obligation and the amount of information that must be reported on Form PF will vary depending on the size and type of private funds managed by the adviser. See our separate report on Form PF below: Form PF: What You Need to Know.

While exempt from most annual filing requirements, an exempt reporting adviser (e.g., an adviser to private funds with less than $150 million in assets under management or solely to venture capital funds) must file an update to the portions of Form ADV Part 1 that an exempt reporting adviser is required to complete. The update must be filed within 90 days after the adviser's fiscal year-end.

CFTC-Registered and Exempt CPOs and CTAs

Commodity Futures Trading Commission (CFTC)-registered and exempt firms face several new filing obligations in 2013. Advisers relying on an exemption from CPO registration under Rule 4.13(a)(3) or an exemption from CTA registration under Rule 4.14(a)(8) must make a simple filing reaffirming the exemption within 60 days after the end of each calendar year. NFA rules that are scheduled to become effective on February 15, 2013 have expanded the reporting obligations of CFTC-registered CPOs and CTAs. Under the new NFA rules, registered CPOs must file an annual report on Form CPO-PQR with respect to each fund they manage within 90 days after the end of each calendar year and a quarterly report on Form CPO-PQR within 60 days after the end of each calendar quarter. Registered CTAs must file Form CTA-PR within 45 days after the end of each calendar quarter.

Form D Amendment

A fund manager that has filed a Form D with the SEC with respect to an offering of interests in a fund must file an amendment annually for so long as the offering is ongoing. The amendments are due on the anniversary date of the original Form D filing.

Privacy Laws

Federal law generally requires a fund manager to distribute its privacy policy, or a notice summarizing the policy, to all natural persons, 401(k) and IRA investors before such investors acquire an interest in any of the manager's funds, and annually thereafter. There is no specific deadline for distribution of the privacy notice, but many fund managers choose to distribute it with year-end reports. Relevant rules do not permit email or website distribution unless the recipient has consented in advance in writing. Federal regulators prepared a model privacy notice that falls into a "safe harbor" with regard to the content requirements for privacy notices, but fund managers may continue to use other types and forms of notice so long as they comply with the relevant rules.

In addition to federal requirements, a growing number of states restrict the use of sensitive personal information that a fund manager collects. For example, Massachusetts regulations require businesses that store personal information of that state's residents to (i) implement a privacy policy which includes, "to the extent technically feasible," encryption of data and (ii) assess, "at least annually," the scope of their data security measures.

Fund and Investor-Specific Matters

Fund managers should consider reviewing the governing agreements of their funds (along with side letters with investors) for any obligations to provide certain information to investors on an annual basis. Such agreements often require annual reporting with regard to ERISA status, compliance with certain material terms of a fund's governing agreements, and similar matters. Fund managers also should consider whether any fund term or investment period expiration dates are on the horizon and plan accordingly.

Certain Annual Tax Elections and Filings

U.S. Tax Elections

Certain U.S. federal income tax elections that are common in the private investment fund context are filed with the electing person's U.S. federal income tax return. Two common elections are the "electing investment partnership" and "qualified electing fund" elections:

  • "Electing Investment Partnership" Election. Internal Revenue Code Section 743 permits an opt-out of mandatory basis adjustment rules (which generally impose significant record keeping burdens when partnership interests are transferred) for funds that are taxable as partnerships for U.S. tax purposes and meet certain other criteria. An election by a fund to be an electing investment partnership is filed with the IRS by attaching the election to the fund’s tax return for the first taxable year in which the election is intended to be effective. In general, the first year in which there is a transfer of an interest in a partnership is the first year for which the partnership should consider whether it is advisable to make an election to be an electing investment partnership.
  • "Qualified Electing Fund" Election. In order to mitigate potential adverse U.S. tax consequences, U.S. funds which have invested in non-U.S. portfolio companies, and U.S. investors that have invested in non-U.S. funds that have invested in non-U.S. portfolio companies, may elect to have such non-U.S. portfolio companies treated as "qualified electing funds" (commonly referred to as a QEF election). A QEF election is applicable where the non-U.S. portfolio company is (or could be) classified as a "passive foreign investment company" (PFIC). A QEF election with respect to a PFIC is filed with the IRS by attaching the election to the U.S. fund’s or the U.S. investor’s (as the case may be) U.S. federal income tax return. In most cases, it is important for a QEF election to be made in respect of the year in which the PFIC stock was acquired. Side letters for some funds may obligate a manager to make or seek to make QEF elections, investigate whether making QEF elections is advisable, or provide information to investors in connection with QEF elections.

Section 83(b) Elections

If a person filed a Section 83(b) election with the IRS during the year (e.g., such election was filed by a person who acquired an interest subject to vesting in a general partner entity), such person must attach a copy of the Section 83(b) election that was filed to his or her U.S. federal income tax return for the taxable year in which the interest was acquired. (Note that the Section 83(b) election itself must be filed with the IRS within 30 days of acquiring the property that is the subject of the election.)

U.S. Tax Filings with Respect to Non-U.S. Entities

A private investment fund and its investors should consider on an annual basis whether any U.S. tax filing requirements must be satisfied with respect to any non-U.S. entities in which the fund invests. Such filing requirements are generally applicable to U.S. persons (which may include a fund formed under U.S. law or a U.S. investor – including U.S. fund managers – in a fund formed under the laws of any jurisdiction) that own (directly or indirectly) more than a certain threshold interest in the non-U.S. entity or engage in certain transactions with such entity. The filing requirements are generally satisfied by attaching the appropriate IRS forms to the U.S. person's U.S. federal income tax return. The IRS forms which may be applicable include, among others, IRS Form 5471 (with respect to certain non-U.S. corporations, including a non-U.S. corporation that is a "controlled foreign corporation" with respect to the U.S. person), IRS Form 926 (with respect to certain contributions of property to a non-U.S. corporation), IRS Form 8621 (with respect to certain non-U.S. corporations that are PFICs), IRS Form 8865 (with respect to certain non-U.S. partnerships), IRS Form 8858 (with respect to certain non-U.S. disregarded entities) and IRS Form 8938 (with respect to certain foreign financial assets).

Tax Side Letter Undertakings

A manager may have agreed in side letters to cause a fund to satisfy certain annual tax reporting obligations, notify investors if the fund has engaged in certain types of transactions, or provide certain tax information to investors on an annual basis that relate to an investor's unique tax status.

State Taxes

State franchise taxes are not due until June 1st for limited partnerships and limited liability companies in Delaware. Filing requirements and deadlines for state franchise taxes (and potential annual report filings) in any other states or foreign jurisdictions may vary.

Report of Foreign Bank and Financial Accounts

With very limited exceptions, the Report of Foreign Bank and Financial Accounts (FBAR) requires a U.S. person who has a financial interest in, or signature authority over, one or more financial accounts in a foreign country to report those accounts annually if the aggregate value of all such U.S. person's foreign financial accounts exceeds $10,000 at any time during the calendar year. The FBAR must be received by the U.S. Department of The Treasury on or before June 28, 2013 (not merely postmarked by that date) rather than June 30, 2013, because June 30, 2013 is a Sunday. Under the rules, an individual has "signature or other authority" only if such individual has the authority (alone or in conjunction with another) to control the disposition of money, funds or other assets held in a financial account "by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained." While there continues to be no general FBAR filing requirement for most owners of hedge fund and private equity fund interests, a hedge fund or private equity fund itself may have a filing obligation under certain circumstances, as well as officers and employees with signature authority for such funds and any owner of such funds with a controlling interest. For example, a U.S. fund may be required to file an FBAR if it owns directly or indirectly a foreign bank account, and an officer may be required to file an FBAR with respect to his or her signature authority over the foreign bank accounts owned directly or indirectly by the fund or a portfolio company.

In 2011, the Financial Crimes Enforcement Network (FinCEN) released guidance (FinCEN Notice 2011-1 and FinCEN Notice 2011-2) that provided an extension of time to file FBARs for officers and employees of certain entities who had signature authority over, but no financial interest in, certain foreign financial accounts. Last year, pursuant to FinCEN Notice 2012-1, this deadline was extended for reports for 2011 and prior years from June 30, 2012 to June 30, 2013. This deadline was extended again recently for reports for 2012 and prior years to June 30, 2014 pursuant to FinCEN Notice 2012-2. Among the limited categories of individuals covered by these notices are officers and employees of investment advisers registered with the SEC with signature or other authority over the foreign financial accounts of entities that are not registered investment companies (officers and employees with signature or other authority over the foreign financial accounts of registered investment companies generally are exempt from filing the FBAR).

Summary of Certain Upcoming U.S. Regulatory and Filing Deadlines

The list below briefly summarizes various reporting obligations and filing deadlines for private fund managers under U.S. rules, many of which are discussed in more detail above.

Click here to see table.


As with any new year, 2013 brings a number of annual filings and other obligations for private fund managers. The foregoing list is illustrative in nature and by no means exhaustive. Given the complexity of many of the regulations and the individual circumstances applicable to any fund, fund managers should discuss all of these matters with their various legal and tax advisors.