On May 3, the Securities and Exchange Commission (SEC) adopted a final rule amending Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds.  Form PF is designed to facilitate both the Financial Stability Oversight Council's ability to monitor systemic risk, as well as the SEC's regulatory oversight of private fund advisers and investor protection efforts. The final rule amendments apply to large hedge fund advisers (Large HF Advisers i.e., having at least $1.5 billion in relevant AUM), private equity fund advisers (PE Advisers i.e., having at least $150 million in relevant AUM), and large private equity fund advisers (Large PE Advisers i.e., having at least $2 billion in relevant AUM). The Commission noted that it is continuing to consider comments received relating to the proposed large liquidity fund adviser amendments (and the proposed amendments to Form N-MFP on which they are based) and thus not adopting such amendments at this time.

Current Reporting (Large HF Advisers) / Quarterly Event Reporting (All PE Advisers)

The amendments to Form PF will, for the first time, require Large HF Advisers to file a current report, as soon as practicable, but no later than 72 hours from the occurrence of a triggering event. Triggering events include, for example, certain extraordinary investment losses, significant margin/default events, terminations of prime broker relationships, and events associated with withdrawals and redemptions. The triggering events no longer include changes in unencumbered cash, as proposed. Most notably, in a change from the proposal (and consistent with commenter concerns), the SEC has adopted a 72-hour reporting timeline, rather than one business day, as proposed.

Under the final rule, all PE Advisers would be required to file reports for certain triggering events within 60 days of each fiscal quarter end (rather than within 1 business day, as proposed). The triggering events would, again, largely track those as proposed, including the removal of a general partner, certain fund termination events, and the occurrence of adviser-led secondary transactions. One triggering event, related to general partner or limited partner clawbacks, has been moved to annual reporting by Large PE Advisers (discussed more below).

Revised Reporting for Large PE Advisers

The final rule adds, largely as proposed, new annual reporting requirements for Large PE Advisers. In a departure from the proposal, the final rule will retain the $2 billion AUM reporting threshold, rather than lower it to $1.5 billion as proposed. The SEC noted that, upon additional analysis, it now believes that given recent accelerated growth in the relative percentage of large private equity fund advisers, no change is required to achieve the original intention for Form PF to capture 75 percent of the U.S. private equity industry.

The new/revised reporting requirements include, for example, information related to: (i) investment strategies; (ii) fund-level borrowings; and (iii) events of default, bridge financing to controlled portfolio companies, and geographic breakdown of investments. The SEC is not adopting certain other annual reporting items, including questions addressing: (i) restructuring/recapitalization of a portfolio company; (ii) investments in different levels of a single portfolio company's capital structure by related funds; (iii) financing of portfolio companies; (iv) floating rate borrowings of controlled portfolio companies; and (v) controlled portfolio companies owned by private equity funds. 

Final Thoughts 

In August 2022, the SEC jointly proposed with the Commodity Futures Trading Commission, additional revisions to Form PF, more specifically, updates to the Form PF quarterly reporting requirements for advisers to large hedge funds and annual reporting for all private fund advisers. The SEC notes that it continues to evaluate public comments on that joint proposal. Despite the potential synergies in considering amendments to Form PF in a holistic and consolidated manner, the SEC has moved forward and adopted its presumably first set of amendments. 

The final rule adopts, substantially as proposed, many new or otherwise revised reporting questions applicable to private fund advisers.  The challenges and cost burdens associated with the revised reporting requirements, and in particular, the new current and quarterly reporting requirements, will be significant. The new rule's effective dates and compliance dates will be the same, but run on two tracks: 6 months for current and quarterly event reporting and 12 months for the remainder of the final rule's amendments, in each case following publication in the Federal Register. Given the recent and significant regulatory attention on private funds, advisers to private funds should not delay in starting to consider the impacts and implementation challenges associated with the new Form PF amendments.