Risk Reporting on Form PF Required by Certain Private Fund Advisers in 2012

By Final Rule under the Investment Advisers Act of 1940 dated October 31, 2011, the SEC will require advisers to hedge funds and other private funds to report systemic risk data for use by the Financial Stability Oversight Council (“FSOC”) in monitoring risks to the U.S. financial system.  The rule, which implements Sections 404 and 406 of the Dodd-Frank Act, requires SEC-registered investment advisers with at least $150 million in private fund assets under management to periodically file a new reporting form electronically on a confidential basis (Form PF).

For hedge funds, private equity funds and liquidity funds, the information required on Form PF is tiered so that more detailed information is required from larger private fund advisers.  The rule requires heightened reporting from advisers managing at least $1.5 billion in hedge fund assets.  Although this threshold applies only to about 230 U.S.-based hedge fund advisers, those advisers manage more than 80% of the industry’s assets under management.

There will be a two-stage phase-in period for compliance with Form PF filing requirements.  Most private fund advisers will be required to begin filing Form PF following the end of their first fiscal year or fiscal quarter, as applicable, to end on or after Dec. 15, 2012.  Those with $5 billion or more in private fund assets must begin filing Form PF following the end of their first fiscal year or fiscal quarter, as applicable, to end on or after June 15, 2012. 

Form PF is a joint effort of the SEC and the Commodity Futures Trading Commission.  Staff consulted with the U.K.’s Financial Services Authority and other members of the International Organization of Securities Commissions.  The resulting Form PF is similar in many respects to the European Securities and Markets Authority’s proposed private fund reporting template and surveys of large hedge fund advisers conducted by foreign financial regulators.