Cadwalader Clients & Friends Memo: The SEC Approves Final Version of Form PF

Cadwalader Clients & Friends Memo: The SEC Approves Final Version of Form PF

The Securities and Exchange Commission (the "SEC") held an open meeting on Wednesday, October 26, 2011, regarding the adoption of a rule requiring certain registered investment advisers to hedge funds and other private funds to report information on Form PF for use by the Financial Stability Oversight Council ("FSOC") in monitoring systemic risk to the U.S. financial system. The new rule, Rule 204(b)-1 under the Investment Advisers Act of 1940, would implement sections 404 and 406 of the Dodd-Frank Act and was initially proposed, along with the Form PF, on January 26, 2011. See 76 Fed. Reg. 8068 (Feb. 11, 2011).

At the meeting on Wednesday, the SEC unanimously approved the final version of Form PF and highlighted the manner in which the final form differs from the form as proposed. This memorandum summarizes the key Form PF changes that were highlighted at the meeting. The SEC has not yet published the full text of the adopting release or the final version of the Form PF. This memorandum will be updated after those are published.

"Tiered" Threshold for Reporting

The SEC introduced a "tiered" threshold of assets under management ("AUM") approach for purposes of determining an adviser's Form PF reporting obligations. In particular:

  • The SEC introduced a "tiered" threshold of assets under management ("AUM") approach for purposes of determining an adviser's Form PF reporting obligations. In particular:
  • The SEC excluded advisers with less than $150 million in private fund AUM from the Rule 204(b)-1 reporting requirement.
  • The AUM threshold for advisers to hedge funds with heightened reporting requirements ("Large Hedge Fund Advisers") was increased from $1 billion to $1.5 billion. The SEC noted that for this purpose, AUM should be determined on a gross basis rather than a net basis.
  • The AUM threshold for advisers to private equity fund with heightened reporting requirements ("Large Private Equity Fund Advisers") was increased from $1 billion to $2 billion. The SEC noted that this change was made to target private equity advisers that are likely to have the most influence over the private equity market.

The AUM threshold for advisers to liquidity funds ("Large Liquidity Fund Advisers") was not increased and therefore remains at $1 billion. 

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