Enter to open, tab to navigate, enter to select
SEC and CFTC Propose Private Fund Systemic Risk Reporting Rules
Practical Law Legal Update 1-504-6035 (Approx. 3 pages)
SEC and CFTC Propose Private Fund Systemic Risk Reporting Rules
by PLC Corporate & Securities and PLC Finance
| Published on 26 Jan 2011 • USA (National/Federal) |
An update on the SEC and the CFTC issuing joint proposed rules to require certain investment advisers to report information to the SEC using a new reporting form (Form PF) and for certain commodity pool advisers and commodity trading advisers registered with both the SEC and CFTC to satisfy certain CFTC filing requirements.
On January 26, 2011, the SEC and CFTC issued joint proposed rules to implement Sections 404 and 406 of the Dodd-Frank Act. The proposed rules would require investment advisers registered with the SEC, who advise one or more private funds, to report information to the SEC using a new reporting form (Form PF). Form PF would be used by the Financial Stability Oversight Council to monitor risk to the US financial system.
Under the proposed rules, private fund advisers would be divided by size into the following two broad groups with different reporting requirements:
- Large private fund advisers. This includes any adviser with $1 billion or more in hedge fund, "liquidity fund" or private equity fund assets under management. These investment advisers would be required to file Form PF quarterly and include more detailed information than smaller investment advisers. The reporting focuses on the following types of private funds that the investment adviser manages:
- large hedge fund advisers would report on an aggregated basis information regarding exposures by asset class, geographical concentration and turnover. In addition, for each managed hedge fund having a net asset value of at least $500 million, these advisers would report certain information relating to that fund's investments, leverage, risk profile and liquidity;
- large liquidity fund advisers would provide information on the types of assets in each of their liquidity fund's portfolios, certain information relevant to the risk profiles of the funds and the extent to which a fund has a policy of complying with all or certain aspects of the Investment Company's Act's principal rule concerning registered money market funds (Rule 2a-7); and
- large private equity fund advisers would have to respond to questions focusing primarily on the extent of leverage incurred by their funds' portfolio companies, the use of bridge financing and their funds' investments in financial institutions.
- Smaller private fund advisers. This includes all other private advisers that are not considered large private fund advisers. These investment advisers would file Form PF annually and report only basic information regarding the private funds they advise. This would include information regarding leverage, credit providers, investor concentration and fund performance.
The proposed rules would also require commodity pool operators (CPO) and commodity trading advisers (CTA) registered with both the CFTC and SEC to file Form PF with the SEC. For more information on these proposed rules, see the SEC's press release, and CFTC's fact sheet and Q&A.
The SEC is seeking public comments on the proposed rules until 60 days after publication in the Federal Register. The CFTC is also separately proposing related changes to CPO and CTA compliance obligations under its regulations.
For more information on the Dodd-Frank Act provisions relating to US and non-US hedge funds and private equity funds, see Practice Note, Summary of the Dodd-Frank Act: Private Equity and Hedge Funds.
For information on SEC and CFTC rulemaking activities implementing those provisions, see Practice Note: Road Map to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: Private Equity and Hedge Funds.