Earlier this year, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) adopted important amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, including those also registered with the CFTC as commodity pool operators or commodity trading advisers. These amendments are designed to enhance the ability of the Financial Stability Oversight Council (FSOC) to monitor and assess systemic risk and to bolster both the SEC’s oversight of private fund advisers and the agency’s investor protection efforts.

KEY CHANGES AND IMPLICATIONS

There are three major changes in the SEC and CFTC amendments:

 ENHANCED REPORTING

Large hedge fund advisers will need to report comprehensive information on investment exposures, borrowing and counterparty exposure, market factor effects, currency exposure, turnover, country and industry exposure, central clearing counterparty reporting, risk metrics, investment performance by strategy, portfolio liquidity, and financing and investor liquidity. These details will provide better insight into the operations and strategies of these funds and their advisers, as well as improve data quality and comparability.

MORE BASIC INFORMATION

The amendments will require additional basic information about advisers and the private funds they advise, including identifying information, assets under management, withdrawal and redemption rights, gross asset value and net asset value, inflows and outflows, base currency, borrowings and types of creditors, fair value hierarchy, beneficial ownership, and fund performance. These details will provide greater insight into private funds’ operations and strategies and will help identify trends, improve data quality and comparability, and reduce reporting errors. 

DETAILED HEDGE FUND REPORTING

The amendments mandate more detailed reporting on the investment strategies, counterparty exposures, and trading and clearing mechanisms employed by hedge funds. This includes the removal of duplicative questions to provide greater insight into hedge funds’ operations and strategies, and to help identify trends while improving data quality and comparability.

COMPLIANCE AND EFFECTIVE DATE

The new amendments will go into effect on March 12, 2025. The compliance date for the amendments is the same as the effective date.

Overall, these amendments to Form PF significantly enhance the transparency and regulatory oversight of private fund advisers, resulting in better monitoring of systemic risk, improved investor protection, and more accurate, comparable data for regulatory and industry analysis. However, they also place a larger regulatory burden on private funds.

If you are interested in learning more about the regulatory compliance services offered by Caroprese & Company, please contact Brandon Caroprese at +1 973 475 8090 or via e-mail at bcaroprese@caroprese.com.