Proposed amendments to Form PF


On 26 January 2022, the SEC proposed amendments to Form PF. The list of amendments includes the reduction of certain reporting thresholds, immediate reporting of “key events,” and revised reporting requirements for certain types of advisers.

The original form was implemented in response to the 2008 financial crisis. It represented an initial step by the U.S. Securities and Exchange Commission (SEC) to better understand activities ongoing within the private funds space. The filing consists of extensive reporting on items like asset holdings, access to capital, and fund structure.

Reporting thresholds

During the consultation period, one item up for discussion is lowering the AUM threshold for large private equity firms to $1.5 billion (from $2 billion). This move would increase the information reported for more funds in annual reporting requirements.

The recordkeeping and reporting attached to Form PF have been such a significant lift for funds that many in the private equity space have intentionally aimed for a total AUM below the previous target. However, that threshold is likely to change—a move that would “enable the Commission and FSOC to receive reporting from a similar proportion of the U.S. private equity industry … as when Form PF was initially adopted.”

Current reports

A second proposed change is requiring “current reports,” or key events that would require an amendment or additional Form PF filing. This proposal would require large fund advisers to file current reports within one business day of specific “reporting events.”

As is typical with this type of draft legislation, there is room for interpretation in the amendment as written. What, for instance, qualifies as an “operational disruption”? And how detailed is the SEC when it asks for reporting after the removal of a fund’s general partner?

We expect to see additional clarity following the consultation period on precisely what these reporting events will be.

Reporting requirements

Additional reporting requirements are also in scope for adjustment by the SEC in the not-too-distant future. The proposed amendments relate to private fund investor reporting and documents under the Advisers Act.

This proposal would require advisers to deliver quarterly statements to their investors, including details on the fees and expenses paid by the fund for the preceding quarter. The goal is to provide more transparency to investors surrounding fund fees and performance.

However, the SEC will be more focused on best practices as they are made explicit. Examples of activity that will likely be prohibited are:

  • Accelerated payments for private funds
  • Adviser clawbacks
  • Passthrough fees and expenses
  • Limiting adviser liability

Many advisers try to steer clear of these practices already, because they increase the potential for conflicts of interest. But where the SEC didn’t explicitly disallow them before, they likely will soon.

Industry response

Although the specifics may change slightly after the consultation period, the proposed regulations represent a significant increase in oversight, likely due to the rapid increase in market size for private funds.

Many funds are concerned with the administrative burden of heightened reporting requirements, although certain record-keeping rules already require a significant portion of the above. As best practices are codified, we expect to see an increase in trust and transparency industry-wide.

Additionally, it’s worth bearing in mind that advisers will have a grace period to adjust to the changes once they’re approved. While it’s worth paying early attention, don’t panic—nothing will change overnight. 

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