Registered investment advisers who manage private funds with at least $150 million in regulatory assets are required to file Form PF with the SEC on a periodic basis. Information obtained on the Form PF is designed to provide the SEC and the public a fair idea of the systematic risks taken on by the adviser through its management of the private funds. Private funds are those funds managed by the adviser that rely on certain exceptions to the definition of an investment company in order to avoid registration under that act. So what does the SEC do with the information it receives on the filed Form PFs?

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC in its second annual report to Congress reported on its use of the data obtained from the filed Form PFs. The report describes the SEC’s Office of Compliance Inspections and Examinations’ (“OCIE”) use of the data in its examinations of the advisers who submit the filed report. The staff reportedly reviews the filed Form PFs before it goes on an examination of the private fund adviser, looking for inconsistencies among the filed Form PF, the adviser’s Form ADV and actual business practices. In addition, the SEC reports that its Enforcement Division Asset Management Unit uses the information collected on Form PFs to conduct its Aberrational Performance Inquiry (“API”). The API program provides the SEC the ability to identify private fund performance that is outside of the norm and becomes a focus of possible enforcement action. Already, the information collected from the API program has led to several recent enforcement actions against advisers who manage private funds.