Private equity funds (and their managers/advisers) are subject to various types of regulation under U.S. federal law, in particular under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and non-U.S. law. With the start of the new year, we want to remind our private equity clients and friends to check their internal compliance policies, fund partnership agreements, side letters and/or “tickler” lists to ensure that they are up-to-date and in compliance with the requirements – including any annual or quarterly reporting requirements – that may be imposed by law or pursuant to those compliance policies, partnership agreements and side letters.

Examples of filing and delivery requirements (in addition to tax reporting and filing and financial reporting obligations) include the following:


All U.S. and non-U.S. investment advisers that are registered with the U.S. Securities and Exchange Commission (the “SEC”) under the U.S. Investment Advisers Act of 1940 (the “Advisers Act”) must file with the SEC, within 90 days after the end of the registrant’s fiscal year, an updated Part 1 and 2A of the registrant’s Form ADV. Registered investment advisers must also update Part 2B of Form ADV but are not required to file Part 2B of FormADV with the SEC. Private equity fund advisers that are not required to register but that are exempt reporting advisers because, for example, they have less than $150 million in assets under management in the United States and only provide advice to private funds, must file with the SEC, within 90 days after the end of the adviser’s fiscal year, an updated Part 1A of the adviser’s FormADV.


All registered investment advisers who advise private equity funds will be required to file Form PF, the new systemic risk reporting form, within 120 days after the end of the registrant’s fiscal year.1 Our November 16, 2011 Client Update, SEC and CFTC Adopt Form PF for Registered Investment Advisers to Private Funds,2 describes the requirements relating to Form PF in greater detail.


A registered investment adviser must maintain, adopt and implement written policies and procedures reasonably designed to prevent violation of the Advisers Act by the adviser and its employees. The adviser also must review, no less frequently than annually, the adequacy of these policies and procedures and the effectiveness of their implementation. In addition, many unregistered advisers maintain compliance policies and procedures. If they have not already done so, registered and unregistered advisers should begin planning the annual review of their compliance policies and procedures.


Most private equity fund agreements provide for the delivery of annual audited, and sometimes quarterly unaudited, financial reports to limited partners. In addition, a fund sponsor that is a registered investment adviser may avoid certain requirements of Rule 206(4)-2 under the Advisers Act (the “Custody Rule”) if it provides fund investors with the fund’s audited financial statements, prepared in accordance with U.S. GAAP, within 120 days of the end of the fund’s fiscal year (180 days in the case of a fund of funds). A fund sponsor that does not rely on the annual audit exception should confirm that it has retained an accounting firm that will conduct the “surprise” examination required by the Custody Rule during 2013. If the fund’s custodian is a “related person” of the investment adviser, the auditing firm will also have to deliver an internal control report during 2013. Our January 5, 2010 Client Update, How the SEC’s New Custody Requirements Change the Ground Rules for Registered Investment Advisers,3 describes the requirements relating to the Custody Rule in greater detail.


As of December 31, 2012, most managers or general partners of private funds will need to rely on the exemption from registration with the U.S. Commodity Futures Trading Commission (“CFTC”) that is available under section 4.13(a)(3) of the CFTC Regulations (the “de minimis exemption”) if they trade “commodity interests.” Commodity interests include (i) futures and options on futures traded on exchanges, including security futures products that are based on a single security or narrow-based securities index; (ii) retail forex transactions; and (iii) swaps, including swaps that are traded on a designated contract market or on a swap execution facility, and swaps that are traded on a bilateral basis.

To qualify for the de minimis exemption, in addition to certain other requirements, a fund must meet either of the following tests each time a commodity interest position is established:

  • the sum of: (i) the initial margin paid for all futures, securities futures and swaps; (ii) the premiums paid for all options on futures and all over-the-counter options; and (iii) the required minimum security deposit for all retail forex transactions that are required to establish such commodity interest positions will not exceed 5% of the liquidation value of the fund (after taking into account unrealized profits and losses from such commodity interest positions, although in the case of an option that was inthe- money at the time of purchase, such in-the-money amount may be excluded); or
  • the sum of the notional amount of each commodity interest position does not exceed the liquidation value of the fund (after taking into account unrealized profits and losses from such commodity interest positions).

Private fund management companies that cannot satisfy the de minimis test may have to register with the CFTC as commodity pool operators or commodity trading advisors, which will result in additional disclosure, recordkeeping and reporting requirements. For further details, please refer to our February 13, 2012 Client Update, Amendments to CFTC Part 4 Regulations Regarding Commodity Pool Operators and Commodity Trading Advisors,4 and our August 17, 2012 Client Update, CFTC Responds to Frequently Asked Questions – CPO/CTA: Amendments to Compliance Obligations.5


The Alternative Investment Fund Managers Directive must be implemented by all European Union Member States by July 22, 2013. Where a fund manager is based in the United Kingdom and is managing a fund, the manager must submit an application for authorization pursuant to the Directive to the UK Financial Conduct Authority (the successor to the Financial Services Authority) by the end of the 12-month period beginning on July 22, 2013. There are some limited exemptions from this authorization requirement. The FCA does not expect to begin accepting applications for authorization from managers before July 23, 2013. In the ordinary course, the FCA will determine an application for authorization within three months of receipt of a completed application.


Advisers that have portfolio investments in foreign issuers or have issued interests in their funds to foreign residents may have obligations to report these transactions on the Treasury International Capital (“TIC”) system. As we detailed in our June 28, 2011 Client Update, New Treasury International Capital Reporting Requirements for Private Funds and Others,6 the U.S. Treasury Department instituted a new reporting requirement in 2011 – the TIC SLT – regarding cross-border holdings of long-term securities. This reporting obligation adds to other pre-existing reporting requirements on other TIC forms. For the coming year, advisers to private funds will need to monitor their cross-border securities transactions and ensure that they file the appropriate TIC forms if their transactions in reportable securities exceed the various TIC filing thresholds.


In addition to forms, such as Schedule 13D, Schedule 13G and Form 4 (which must be filed following certain purchases and sales), there are certain additional filings that may need to be made periodically with the SEC, such as:

  • Form 5: Directors, officers and 10% stockholders of SEC-registered issuers (i.e., public companies) may be required to file with the SEC an annual statement of beneficial ownership on Form 5 of certain transactions (such as gifts) exempt from the Form 4 “changes in beneficial ownership” filing requirements, as well as for transactions that should have been reported on a Form 4 but were not. If a Form 5 must be filed, it is due within 45 days of the issuer’s fiscal year end.
  • Form 13F: Institutional investment managers (including private equity managers) that exercise investment discretion over $100 million or more (by fair market value) of Section 13(f) securities must report their holdings of such securities on Form 13F. For this purpose, Section 13(f) securities are, generally, securities traded on an exchange (including Nasdaq) and restricted securities of the same class. (The SEC publishes a quarterly “Official List of Section 13(f) Securities.”)7 In determining whether a fund manager has discretion over $100 million or more of Section 13(f) securities, a manager should aggregate each fund and other securities, portfolios and accounts over which it exercises investment discretion. However, when determining whether a fund manager has discretion over $100 million or more of Section 13(f) securities, the manager need not count securities issued by a person whom the manager “controls.” The 2013 filing requirement will be triggered if, on the last day of any month in 2012, Section 13(f) securities under management are in excess of $100 million. In that case, a Form 13F will need to be filed by February 14, 2013, and thereafter on a quarterly basis.

In 2010, the SEC proposed rules that, if adopted, will require 13(f) filers to also file an annual report on Form N-PX (a form currently used by registered investment companies to report on their proxy voting) to disclose how they voted on executive compensation-related shareholder advisory votes required by Section 14A of the Exchange Act (enacted as part of the Dodd-Frank Act). These proposals are often referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden parachute” votes. As proposed, the filings would have been required to be made by August 31, 2011. However, these rules have not yet been adopted.

  • Schedule 13G: All 5% beneficial owners of SEC-registered issuers that are exempt from the “long-form” filing requirements of Schedule 13D must nonetheless disclose such holdings (and any changes in such holdings that have not been previously reported) on the “short-form” Schedule 13G. Eligible Schedule 13G filers include investors that acquired shares pre-IPO, certain qualified institutional acquirers and investors that are considered “passive” (because they hold less than 20% of the securities and did not acquire the securities with the intent to exercise control with respect to the issuer). If a Schedule 13G must be filed, it is due within 45 days of the end of the calendar year in which the reporting requirement was triggered.
  • Form 13H: In 2011, the SEC adopted Rule 13h-1, which requires that certain entities that exercise investment discretion over trading in NMS securities (generally, preferred and common equity securities, and options on equities, that are traded or listed on a U.S. exchange) in excess of stated thresholds file Form 13H with the SEC to identify themselves as “large traders.” The relevant trading thresholds are: (1) during any calendar day, two million shares or shares with a fair market value of $20 million; or (2) during any calendar month, 20 million shares or shares with a fair market value of $200 million. For purposes of determining large trader status, a private fund manager must aggregate the trading activity in NMS securities for itself, the funds that it manages, and all persons controlled by it or by such funds (such as controlled portfolio companies) – with a presumption of “control” applying to a 25% or greater stake. Note that any principal who controls the private fund manager, including by having a presumption of control from owning 25% or more of the manager, may also have a filing obligation.

Upon filing of a Form 13H, the SEC will issue a Large Trader Identification Number, which must then be provided to registered broker-dealers with whom trades are effected. If a private fund manager wishes to avoid the need to monitor trading activity levels for these purposes, it may also voluntarily elect to file a Form 13H and be treated as a large trader.

Annual updates to the Form 13H are required, as well as quarterly updates if information on the Form 13H has changed during a given calendar quarter. For private fund managers who filed a Form 13H in late 2011 or any time during 2012, the initial annual update is due within 45 days following December 31, 2012.


Certain private equity funds are required by U.S. law to send a privacy notice to each limited partner who is an individual at the start of the partner’s relationship with the fund and annually thereafter. The privacy notice must describe the fund’s policy regarding disclosure of current and former limited partners’ non-public information and, in certain cases, must permit any limited partner who is an individual to opt out of the fund’s disclosure of such information.

On November 16, 2009, the U.S. Federal Trade Commission, the SEC and other U.S. federal regulators joined together to issue a long-anticipated model privacy form that private equity funds and other financial institutions may use to make privacy disclosures. Use of the model form is not mandatory, but firms that elect to use the two-page model benefit from a regulatory safe harbor.8


  • Annual VCOC/Plan Assets Certifications: Many private equity funds operate as “venture capital operating companies” (“VCOCs”) in order to avoid being deemed “plan assets” subject to the U.S. Employee Retirement Income Security Act of 1974 (“ERISA”), and have agreed with some or all limited partners to deliver an annual certification as to the fund’s VCOC status. Other funds have agreed to ensure that the capital commitments of “benefit plan investors” not exceed 25% of the fund’s total capital commitments (the “25% test”) so that the fund’s assets are not deemed “plan assets” subject to ERISA, and some of these have agreed with some or all limited partners to certify that this is the case. Funds should conduct the VCOC or “25% test” analysis as applicable, whether or not they are required to certify compliance with the test; and should prepare to deliver any required certifications in a timely manner.
  • Form 5500: Some private funds are operated as “plan assets” subject to ERISA. Such funds typically agree either to (a) file as a direct filing entity (“DFE”) on IRS Form 5500 or (b) provide ERISA investors with the necessary information concerning the fund to include on the investor’s IRS Form 5500. If a fund files as a DFE, the return (Form 5500) is generally due 9½ months after the end of the fund’s fiscal year.

Under current Department of Labor guidance, a private fund that relies on the “25% test” described above is also required to provide information to its ERISA investors concerning direct and indirect compensation received by its manager or general partner as well as placement fees paid in connection with a plan’s purchase of an interest in the fund. This information is reported on the Form 5500 of the ERISA investor. Private funds should comply with requests by ERISAinvestors (including those set forth in side letter provisions) because ERISA investors are required to identify on Form 5500 each service provider, such as a fund manager, that fails to provide the necessary information.


Private equity fund agreements as well as side letters often also include a number of additional annual and/or quarterly non-financial reporting or certification requirements. Be sure to check your partnership agreements and side letters carefully for any additional contractual obligations.

In addition to the obligations addressed above, there are various tax filing and reporting obligations that we would be happy to discuss with you. Also, although this Client Update focuses mainly on contractual and U.S. federal legal requirements, many other jurisdictions (e.g., the jurisdictions where a non-U.S. fund and/or its manager is organized or operates) impose or are in the process of implementing additional filing and regulatory requirements, which we can also assist our clients in evaluating.