New Form PF Current and Quarterly Event Reporting and Expanded Large Private Equity Fund Adviser Reporting Adopted By SEC

On May 3, 2023, the Securities and Exchange Commission (the SEC) adopted important amendments to Form PF, the systemic risk reporting form for private fund advisers registered with the SEC, that would require (i) new “quarterly event” reporting for all private equity fund advisers regarding certain events (including adviser-led secondary transactions), (ii) expanded reporting for “large private equity fund advisers,” and (iii) new “current” reporting for “large hedge fund advisers.”^[1]

• New Quarterly Event Reporting for All Private Equity Fund Advisers. All private equity fund advisers will be required to file an event report within 60 days of the end of the fiscal quarter in which certain trigger events occurred, including: (i) the removal of a general partner, (ii) certain termination events with respect to the fund or its investment period, and (iii) the occurrence of an adviser-led secondary transaction (defined as any transaction initiated by the adviser or any of its related persons that offers private fund investors the choice to: (a) sell all or a portion of their interests in the private fund; or (b) convert or exchange all or a portion of their interests in the private fund for interests in another vehicle advised by the adviser or any of its related persons).
• Expanded Reporting for Large Private Equity Fund Advisers. Large private equity fund advisers (>$2 billion in private equity assets under management^[2]) will be required to include expanded reporting in their annual filings, including (i) reporting on any general partner clawback, (ii) reporting on any limited partner clawback in excess of 10 percent of the fund’s capital commitments, (iii) more listed fund strategies, (iv) reporting on the use of fund-level borrowings (e.g., subscription facilities), (v) more granular information on events of default, (vi) more information on bridge financing (including identity of lender and amount), and (vii) an amended approach to geographical breakdown of investments.
• New Current Reporting for Large Hedge Fund Advisers. Large hedge fund advisers (>$1.5 billion in hedge fund assets under management) will be required to make new “current reports” with respect to “qualifying hedge funds” (>$500 million in net asset value) as soon as practicable (but no later than 72 hours) upon the occurrence of a trigger event, including: (i) certain extraordinary investment losses (20% or more of a fund’s “reporting fund aggregate calculated value” (“RFACV”)^[3] over a rolling 10 business day period), (ii) significant margin and default events (e.g., significant margin or collateral increases, notice of margin default, inability to meet a call for margin or collateral, or counterparty default), (iii) terminations or material restrictions of prime broker relationships, (iv) certain operations events with respect to the fund’s critical operations (i.e., operations necessary for (a) the investment, trading, valuation, reporting and risk management of the fund or (b) the operation of the fund in accordance with the federal securities laws and regulations), and (v) events associated with withdrawals and redemptions (e.g., withdrawal or redemptions 50% or more of net asset value, inability to satisfy redemptions, or suspension of redemptions).

The expanded reporting by large private equity fund advisers would go effective one year after the publication in the Federal Register. This would mean that for advisers with a fiscal year of December 31^st, that the first Form PF with the expanded reporting would be in April of 2025. Investment advisers would therefore need to have the data collection systems in place for 2024.

The quarterly event reporting for private equity advisers and current reporting for large hedge fund advisers would commence six months after the publication in the Federal Register. Given the uncertainty in the Federal Register publication deadline, this would mean that the current and quarterly event reporting would become effective in either the fourth quarter of 2023 or the first quarter of 2024.

These amendments relate to the proposal originally made in January 2022.^[4] There is an additional set of Form PF amendments that were proposed in August 2022 that are not included in these amendments.^[5] These outstanding proposed amendments would include (i) a number of technical changes and clarification applicable to all private funds (including increased separate reporting of component funds in master-feeder and parallel fund structures) and (ii) revisions to reporting by large hedge fund advisers on investment exposure, open and large positions, borrowing and counterparty exposure, and market factor effects. This second set of amendments is proposed in coordination with the Commodity Futures Trading Commission.

^[1] Amendments to Form PF to Require Event Reporting for Large Hedge Fund Advisers and Private Equity Fund Advisers and to Amend Reporting Requirements for Large Private Equity Fund Advisers, SEC Release No. IA-6297 (May 3, 2023).
^[2] The SEC did not adopt a proposed reduction in this threshold to $1.5 billion.
^[3] RFACV is defined as “every position in the reporting fund’s portfolio, including cash and cash equivalents, short positions, and any fund-level borrowing, with the most recent price or value applied to the position for purposes of managing the investment portfolio” and may be calculated using the adviser’s own methodologies and conventions of the adviser’s service providers, provided that these are consistent with information reported internally. The RFACV is a signed value calculated on a net basis.
^[4] Amendments to Form PF to Require Current Reporting and Amend Reporting Requirements for Large Private Equity Advisers and Large Liquidity Fund Advisers, SEC Release No. IA-5950 (Jan. 26, 2022). We previously addressed these proposal in our Client Alert: How the Proposed Amendments to Form PF Would Affect Private Fund Sponsors (Jan. 28, 2022), available at https://www.goodwinlaw.com/en/insights/publications/2022/01/01_28-how-the-proposed-amendments.
^[5] Amendments to Form PF to Amend Reporting Requirements for All Filers and Large Hedge Fund Advisers, SEC Release No. IA-6083 (Aug. 10, 2022).