SEC, CFTC Adopt Form PF for Systemic Risk Data Reporting by Private Fund Advisers

An EIA which summarizes the new Form PF adopted on October 21, 2011 by the Securities and Exchange Commission. This form is used to collect information from private fund advisers, primarily to assist the Financial Stability Oversight Council ("FSOC") in determining whether any such funds present systemic risks to the U.S. financial system.

Excerpt:

The SEC on October 31, 2011 adopted Form PF, which will be used to collect information from private fund advisers, primarily to assist the Financial Stability Oversight Council ("FSOC") in determining whether any such funds present systemic risks to the U.S. financial system. The SEC also adopted Rule 204(b)-1 under the Investment Advisers Act of 1940, requiring private fund advisers to file the form. At the same time, the CFTC adopted Sections 1 and 2 of the form and Rule 4.27 under the Commodity Exchange Act, requiring commodity pool operators and commodity trading advisors that are also registered with the SEC as private fund advisers to report on Form PF. The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, directs the two agencies to adopt such reporting requirements.

Although the Form remains lengthy and detailed, the agencies made a number of adjustments intended to accommodate the manner in which they believe private fund advisers actually calculate various parameters and keep their internal records. They also extended the initial filing deadlines well into 2012. The Form retains the graduated reporting scheme proposed by the agencies in January and adds a new tier: small entities are exempt from reporting altogether, and beyond that, all advisers to private funds must file at least the basic information called for by Section 1 of the Form. Larger managers of hedge funds, liquidity funds and private equity funds must file the additional information required by Sections 2a, 3 and 4 of the Form, respectively, and managers of the largest hedge funds must file further detail under Section 2b.

While this EIA summarizes the elements of the Form and requirements for compliance with the implementing rules, it cannot do justice to their complexity. The alert is divided into sections that provide an overview of different aspects of the rule or parts of the Form, starting with a description of significant changes from the proposed rule and Form and the threshold requirements determining which advisers must file the Form. The alert summarizes Part 1, which all filing advisers must complete; Part 2, which hedge fund advisers and CFTC registrants must complete; Part 3, which liquidity fund advisers must complete; and Part 4, which private equity fund advisers must complete. Next, the alert analyzes the policy purposes for which the information on the Form will be used and the confidentiality protections (such as they are) provided by the regulators. The alert concludes with a summary of the rule's effective dates, the phased commencement of filing requirements, and the required frequency of filing. [footnotes omitted]

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Arthur Delibert is a partner at K&L Gates LLP represents and advises U.S. investment companies, investment advisers, investment company independent trustees, and fund distributors. Investment company clients include single-tier funds, master-feeder funds, and multiple-class funds. As co-chair of the Training Committee, Mr. Delibert is responsible for organizing the firm's training program in the law of investment management.

Mark Perlow is a partner at K&L Gates LLP and his practice focuses on investment management and securities law. He regularly represents mutual funds, hedge fund managers, investment advisers, fund boards of directors, and broker-dealers on a variety of regulatory and transactional matters.