SEC Proposes Changes to Improve Private Funds Reporting | Alston and bird

Private equity funds could find themselves with much heavier logistical reporting burdens if the Securities and Exchange Commission’s proposed changes to Form PF are finalized. Our securities group and investment management team are considering three ways the proposal would reduce the spread between the bonds of private equity firms and those of publicly traded companies.

  • Large hedge funds and private equity funds would only have one day to report certain major events
  • Reporting threshold would drop to $1.5 billion in assets under management
  • Reporting requirements for large cash funds would mirror those of money market funds

On January 26, 2022, the Securities and Exchange Commission (SEC) proposed changes to a confidential reporting tool, Form PF, that would require greater and more frequent disclosure by private equity advisers and large fund advisers. speculative. The SEC and the Financial Stability Supervisory Board (FSOC) use information collected by Form PF, first adopted in 2011, to monitor market activity, flag systemic risks and inform policymaking . While the proposed changes may better equip the SEC and FSOC to analyze and assess the private funds market and industry through greater access to information, critics note that they will also likely impose significantly greater logistical burdens. burdensome to private equity firms.

Current requirements

Under the current framework, advisors required to file Form PF have months to file after the end of the fiscal year or quarter in which the reported event occurred. Exact timelines vary depending on the size and type of fund advised. Only large private equity advisers who manage $2 billion or more in private equity fund assets are subject to Form PF reporting requirements. The SEC noted that, as currently drafted, Form PF does not require up-to-date disclosures from advisers whose funds are under stress, which could harm investors and create systemic risk.

Proposed changes

The proposed amendments would primarily affect the disclosure obligations of private equity advisers in three ways:

  1. Require new routine reporting of certain events for large hedge fund advisers and private equity fund advisers.
  2. Lowering of the reporting threshold for large private equity advisers.
  3. Revise reporting requirements for large private equity advisers and large liquidity fund advisers.

1. New Current Reporting for Large Hedge Fund Advisors and Private Equity Fund Advisors

Top Hedge Fund Advisors

The proposed changes would require large hedge fund advisers subject to Form PF reporting requirements to submit the form within one business day of an event indicating material stress within the fund that may harm investors or signal risk. in the broader financial system. These events include:

  • Certain extraordinary investment losses.
  • Significant Margin and Counterparty Default Events.
  • Significant changes in relationships with prime brokers.
  • Changes in unencumbered cash.
  • Operations Events.
  • Events associated with withdrawals and redemptions.

Private Equity Fund Advisors

In addition, the proposed amendments would require private equity fund advisors to submit current reports within one business day of the occurrence of reporting events related to:

  • The execution of secondary trades directed by an advisor.
  • Implementation of general partner or limited partner recoveries.
  • Dismissal of the general partner of a fund.
  • End of a fund’s investment period.
  • End of a fund.

One-day reporting would significantly reduce the reporting time currently allotted to advisers, with the goal of providing the SEC and FSOC with more contemporaneous information about certain events that could signal eligible fund distress or market instability.

2. Report from a leading private equity advisor

The proposed changes would lower the reporting threshold for large private equity advisers to $1.5 billion, from $2 billion in private equity fund assets under management. It would cast a wider net that would subject more large private equity advisers to reporting requirements. Notably, the SEC pointed out that the current threshold encompasses a smaller proportion of the industry than when it was introduced. The proposed change aims to reset the parameters to require disclosure of the same proportion of advisors (75%) subject to reporting on Form PF as when it was introduced in 2011.

In addition, the SEC is proposing changes to Section 4 of Form PF that would result in increased disclosure obligations for these large private equity advisers to:

  • Fund strategies.
  • Use of leverage and financing from portfolio companies.
  • Controlled holding companies (CPC) and CPC loans.
  • Fund investments at different levels of the capital structure of a single holding company.
  • Restructurings or recapitalizations of holding companies.

The proposed changes are intended to provide the FSOC with enhanced ability to assess systemic risk posed by private equity funds and their advisers, as well as inform the SEC of its regulatory programs for investor protection.

3. Reporting obligations for large liquidity fund advisers

The proposed amendments would modify current reporting requirements for large liquidity fund advisers to reflect those that would apply to money market funds reporting on the amended Form N-MFP proposed by the SEC on December 15, 2021. Form N – Proposed MFP adds numerous reporting requirements applicable to money market funds, including disclosures about a fund’s shareholders and the disposition of unmatured portfolio investments. The collective objective of the amendments to Form N-MFP and Form PF is to provide a more complete picture of the short-term funding markets in which money market funds and liquidity funds invest, enabling the SEC and the FSOC to better assess short-term funding markets and facilitate the monitoring of these markets.


The proposed changes have drawn strong reactions from private equity firms and have been discussed by legal and financial experts.

Proponents of the proposal, including SEC Chairman Gary Gensler, point to its ability to provide the SEC and FSOC with more accurate and up-to-date data from a wider range of private equity firms on a wider range of topics. Gensler noted that “the private fund industry has grown to $11 trillion and has evolved in terms of business practices, complexity of fund structures, investment strategies and exposures.” Gensler further pointed out that the use of the PF form for a decade has revealed informational gaps in the data it captures. Specifically, the SEC cited recent market events, such as the COVID-19 pandemic and January 2021 market volatility for certain stocks, as the basis for receiving more current and robust information from market participants. Marlet.

Those who oppose the proposal cite the imminent huge burden it would place on private equity advisers by forcing them to disclose more events in a much tighter time frame. Although one of the aims of the amendments is to identify sources of systemic risk, critics argue that private equity carries a relatively low threat of systemic risk and does not require the potentially large costs associated with implementing risk. additional monitoring policies and procedures. Nonetheless, the proposed changes would narrow the gap between private equity-backed and publicly traded corporate bonds.

Due to the intensity of the proposed changes and the response they have received, some experts predict that the rules could be relaxed before coming into force, if implemented. However, Gensler indicated the SEC’s intention to propose further increases to private fund disclosure requirements.

Go forward

Proposed changes will be subject to a 30-day comment period from the publication of the proposal in the Federal Register. To submit comments, use the SEC Internet Submission Form or email [email protected] with “File Number S7-01-22” in the subject line.

Download the PDF of the notice

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