SEC and CFTC Propose to Reduce Private Fund Reporting Obligations

The SEC and the CFTC jointly proposed amendments to Form PF ("Reporting Form for Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors") that would significantly reduce reporting obligations for private fund advisers, raise filing and reporting thresholds, and eliminate a number of specific reporting requirements.

In the proposed rules, the agencies explained that Form PF is the confidential reporting form used by certain SEC-registered investment advisers to private funds, including those also registered with the CFTC as a commodity pool operator ("CPO") or commodity trading advisor ("CTA"). The agencies stated that the proposed amendments were designed to reduce burdens while ensuring Form PF continues to collect information necessary for investor protection and systemic risk assessment by the Financial Stability Oversight Council ("FSOC").

The agencies proposed to raise the filing threshold for all Form PF filers from $150 million in private fund assets under management to $1 billion. They estimated that this change would eliminate filing obligations for nearly half of current filers, while Form PF would continue to capture approximately 94 percent of private fund gross asset value.

The agencies also proposed to raise the reporting threshold for large hedge fund advisers from $1.5 billion in hedge fund assets under management to $10 billion. The Commissions estimated this would reduce the number of advisers required to report as large hedge fund advisers by approximately 65 percent, while Form PF would continue to capture over 80 percent of hedge fund gross asset value.

Under the proposal, the following requirements would be modified:

• advisers could use their own methods to estimate indirect exposures rather than following prescribed rules for looking through fund-of-fund structures;
• advisers no longer would need to report the value of positions held at the end of a reporting period, only what was traded during it;
• advisers no longer would need to report adjusted exposure using their own internal methodology, only the standard method;
• monthly reporting on concentrated exposures would be eliminated, replaced by a brief description only when an extraordinary loss is reported;
• the detailed all-counterparty exposure table would be replaced by a simpler reporting structure covering only significant borrowing relationships;
• the reporting trigger would be narrowed to actual operational breakdowns, excluding regulatory compliance disruptions; and
• only a full suspension of redemptions lasting more than five business days would be required to be reported, not individual instances of inability to pay.

Additionally, the following requirements would be eliminated:

• feeder funds that invest almost entirely in a single master fund no longer need to be reported separately;
• volatility reporting would be eliminated entirely;
• monthly portfolio turnover reporting by asset class would be eliminated entirely;
• reporting on the re-use of posted collateral would be eliminated entirely;
• the requirement to report margin defaults within 72 hours would be eliminated entirely; and
• all quarterly event reporting for private equity fund advisers would be eliminated entirely.

The Commissions separately requested comment on whether to modify the information advisers must report about private credit funds.