SEC Proposes Amendments to Enhance Private Fund Reporting

The SEC proposed amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. The proposed amendments are designed to enhance regulators’ ability to assess systemic risk as well as to bolster the Commission’s regulatory oversight of private fund advisers and its investor protection efforts in light of the growth of the private fund industry, the SEC said.  The proposed amendments would require current reporting for large hedge fund advisers and advisers to private equity funds. These advisers would file reports within one business day of events that indicate significant stress at a fund that could harm investors or signal risk in the broader financial system. The proposed amendments would provide regulators with more timely information to analyze and assess risks to investors and the markets more broadly. The proposal also would decrease the reporting threshold for large private equity advisers from $2 billion to $1.5 billion in private equity fund assets under management. Lowering the threshold would result in reporting on Form PF that continues to provide robust data on a sizable portion of the private equity industry. Finally, the proposal would require more information regarding large private equity funds and large liquidity funds to enhance the information used for risk assessment and the Commission’s regulatory programs. The SEC also published a Risk Alert with its observations from recent examinations of advisers to private funds. A client memo from law firm Simpson Thacher observed that the Risk Alert takes a “skeptical view of the adequacy of many of the core functions of private fund advisers, including fee calculations, consultations with limited partner advisory committees and similar bodies, due diligence, and marketing practices.” The client memo argues that together with the proposed amendments to Form PF, as well as SEC Chairman Gensler’s public remarks on private funds, the Risk Alert “underscores the SEC’s seemingly increasing appetite for greater, more intrusive, and prescriptive oversight of the private fund industry.”