On January 26, 2022 the U.S. Securities and Exchange Commission (“SEC”) adopted proposed amendments to Form PF that would dramatically expand both the frequency and amount of reporting by private fund advisers and hedge fund advisers (the “Proposal”). The Proposal is purportedly intended as part of an effort to bolster the Financial Stability Oversight Counsel’s (“FSOC”) ability to monitor systemic risk. However the breadth of the new reporting requirements goes well beyond this stated objective and captures smaller investment advisers and routine investment activity that appear purely to foster the SEC’s more general objectives – data collection to support examinations, investigations and investor protection efforts relating to exempt reporting advisers. Indeed, many of the new reporting requirements align to recent risk alerts and statements about proposed rulemaking from the staff and SEC Chair Gensler. If adopted, these amendments will facilitate more aggressive action by the Enforcement Division as well as the Division of Examinations.
Most notably, the Proposal would introduce a “current reporting” requirement that would require registered investment advisers to report certain events within one business day of occurrence. For private equity fund advisers, those events would include: general partner or limited partner clawbacks, adviser-led secondary transactions, removal of a fund’s general partner, termination of a fund’s investment period and termination of a fund. Current reporting events for large hedge fund advisers would include substantial declines in a fund’s net asset value or unencumbered cash, certain margin events, material changes in prime broker relationships and significant impairments of fund operations.
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