Pursuant to Title IV of the Dodd- Frank Wall Street Reform and Consumer Protection Act, the Securities Exchange Commission (“SEC”) and the Commodity Futures Trading Commission adopted joint rules under Section 204(b)-1 of the Investment Advisers Act of 1940 (“Advisers Act”) that require SECregistered private fund advisers with at least $150 million in regulatory assets under management (“RAUM”) to report certain information to the SEC, at least annually, on Form PF. Such reporting will enable the Financial Stability Oversight Council to periodically monitor key information relevant to assessing systemic risk posed by private funds. However, unlike Form ADV, the information provided on Form PF will generally be confidential.
Private Fund Advisers Subject to Form PF
Any investment adviser registered with the SEC that advises one or more private funds is required to file Form PF. The scope and frequency of the Form PF filing depends on the size of the adviser and on the types of private funds managed by the adviser. These private fund advisers are divided by size into two broad groups — large advisers and smaller advisers. The “large private fund advisers” are:
- Advisers with at least $1.5 billion in assets under management attributable to hedge funds;
- Liquidity fund advisers with at least $1 billion in combined assets under management attributable to liquidity funds and registered money market funds; and
- Advisers with at least $2 billion in assets under management attributable to private equity funds.
All other respondents are considered “smaller private fund advisers.” For purposes of Form PF, the various types of funds are defined as follows:
- Private Fund: Any fund that is exempt from registration under the Investment Company Act of 1940 (“Investment Company Act”) in reliance on either section 3(c)(1) (privately offered funds with no more than 100 beneficial owners, the securities of which are owned by “accredited investors”) or section 3(c) (7) (privately offered funds, the securities of which are owned by “qualified purchasers”).
Hedge Fund: Any private fund (other than a securitized asset fund) that:
- pays a performance fee or allocation, the calculation of which may take into account unrealized gains;
- may borrow an amount in excess of 50% of its net asset value (including any uncalled committed capital) or that may have a gross notional exposure in excess of twice its net asset value (including any uncalled committed capital); or
- may sell securities or other assets short (other than for the purpose of hedging currency exposure or managing duration).
- Liquidity Fund: 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.
Private Equity Fund: Any private fund that:
- is not a hedge fund, liquidity fund, real estate fund, securitized asset fund or venture capital fund; and
- does not offer redemption rights in the ordinary course.
For purposes of calculating RAUM, Form PF provides that an adviser must calculate its assets under management attributable to private funds in accordance with the requirements of Part 1A of Form ADV (basically, the gross value of all assets in a private fund (regardless of the nature of those assets) plus any uncalled capital commitments to the fund). For purposes of determining whether an adviser meets the $150 million minimum reporting threshold or is a “large private fund adviser” as described above, the adviser must aggregate together (i) assets of managed accounts advised by the firm that pursue substantially the same investment objective and strategy and invest in substantially the same positions as private funds advised by the firm (unless the value of those accounts exceeds the value of the private funds with which they are managed), and (ii) assets of private funds advised by any of the adviser’s related persons other than related persons that are separately operated.
Reporting Frequency, Deadlines and Disclosure Scope
The reporting frequency (e.g., quarterly or annually) and filing deadline for Form PF depend on the amount of RAUM and the type of private fund, as illustrated by the table to the right:
Click here to view table.
The scope of an adviser’s reporting obligation also varies based on the type of private fund it is advising, as well as its RAUM. Generally, advisers to hedge funds and liquidity funds are subject to more extensive reporting requirements than private equity funds, and “large private fund advisers” are subject to the most extensive reporting requirements. The table attached hereto as Annex A details the disclosure required in each section of Form PF, and indicates which sections are applicable to the various types of private funds.
Fees and Filing Mechanics
Form PF may be filed electronically via the Private Fund Reporting Depository, an extension of the Investment Adviser Reporting Depository. A $150 fee will be assessed for the initial Form PF and each subsequent annual or quarterly filing.
Click here to view Annex A.