SEC Adopts Significant Amendments to Form PF

On May 3, 2023, the Securities and Exchange Commission (SEC) adopted certain amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, with the goal of enhancing the SEC’s oversight and investor protection efforts. As discussed in greater detail below, the amendments require (i) all private equity fund advisers to file reports after every quarter in which certain triggering events occur, (ii) large private equity fund advisers to provide additional annual reporting with respect to certain fund activities and (iii) large hedge fund advisers to file current reports with respect to certain triggering events that signal distress at the fund.

Reporting Requirements for All Private Equity Fund Advisers

New Section 6 of Form PF will require all private equity fund advisers to file an event report within 60 days after the end of each fiscal quarter in which any of the following triggering events occurred:

• Execution of an adviser-led secondary transaction^[1]
• Investor election to remove a fund’s general partner or to terminate a fund’s investment period or the fund itself

Each event report must include details with respect to each triggering event that occurred during such quarter.

Reporting Requirements for Large Private Equity Fund Advisers^[2]

Section 4 of Form PF will now include new questions requesting the following information:

• The implementation of (i) any general partner clawback or (ii) any limited partner clawback(s)^[3] in excess of an aggregate amount equal to 10% of a fund’s aggregate capital commitments
• The percentage of the adviser’s deployed capital with respect to specific investment strategies
• To the extent there is fund-level borrowing, (i) information on each borrowing or other cash financing available to the fund, (ii) the total dollar amount available and (iii) the average amount borrowed over the reporting period
• Greater detail on the nature of reported events of default
• Additional identifying counterparty information with respect to institutions providing bridge financing to the adviser’s controlled portfolio companies
• With respect to the geographical breakdown of the fund’s investments, the fund’s greatest country exposures based on a percentage of net asset value  

Reporting Requirements for Large Hedge Fund Advisers^[4]

The adopted amendments also establish a new Section 5 of Form PF that will require large hedge fund advisers to file current reports within 72 hours upon the occurrence of one or more trigger events at a qualifying hedge fund.^[5] Such trigger events include: 

• Any loss equal to or greater than 20% of the fund’s value over a rolling 10-business-day period; the fund’s value for these purposes will be based on the fund’s “reporting fund aggregate calculated value” (RFACV)^[6]
• Any significant increases in margin (20% based on average daily RFACV) during any rolling 10-business-day period, any inability to meet a margin call, any margin default and any default of a counterparty
• Terminations of or material restrictions in the fund’s relationship with a prime broker
• A “significant disruption or degradation” of the fund’s “critical operations,” whether as a result of an event at the fund, the adviser or other service provider to the fund
• Cumulative withdrawal or redemption requests totaling 50% or more of the fund’s most recent net asset value (after netting against subscriptions or other contributions from investors received and contractually committed), any inability to satisfy withdrawal or redemption requests and any suspension of withdrawals or redemptions for more than five consecutive business days  

Effective and Compliance Dates

The compliance dates for the amendments will be staggered as follows: (i) six months after publication in the Federal Register for amendments relating to the new quarterly and current event reporting requirements for all private equity fund advisers and large hedge fund advisers and (ii) 12 months after publication in the Federal Register for amendments relating to the enhanced reporting requirements for large private equity fund advisers.

The full text of the adopting release may be found here.

^[1] _{An “adviser-led secondary transaction” is defined in the adopting release as “any transaction initiated by the adviser or any of its related persons that offers private fund investors the choice to: (1) sell all or a portion of their interests in the private fund; or (2) convert or exchange all or a portion of their interests in the private fund for interests in another vehicle advised by the adviser or any of its related persons.”}

^[2] _{A “large private equity fund adviser” is any investment adviser having at least $2 billion in regulatory assets under management attributable to private equity funds as of the last day of the adviser’s most recently completed fiscal year.}

^[3] _{A “limited partner clawback” is defined in the adopting release as “an obligation of a fund’s investors to return all or any portion of a distribution made by the fund to satisfy a liability, obligation, or expense of the fund pursuant to the fund’s governing agreements.”}

^[4] _{A “large hedge fund adviser” is any investment adviser having at least $1.5 billion in regulatory assets under management attributable to hedge funds as of the end of any month in the prior fiscal quarter.}

^[5] _{A “qualifying hedge fund” is defined in Form PF as “any hedge fund that has a net asset value (individually or in combination with any feeder funds, parallel funds and/or dependent parallel managed accounts) of at least $500 million as of the last day of any month in the fiscal quarter immediately preceding your most recently completed fiscal quarter.”}

^[6] _{“RFACV” is defined in the adopting release as “every position in the reporting fund’s portfolio, including cash and cash equivalents, short positions, and any fund-level borrowing, with the most recent price or value applied to the position for purposes of managing the investment portfolio” and may be calculated using the adviser’s own methodologies and the conventions of the adviser’s service providers, provided that these are consistent with information reported internally.}