One of the many elements of the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) is the adoption of rules requiring investment advisers to submit information about the private funds they manage. This is a significant development because it means that certain detailed information regarding the operations of private funds will be provided to financial industry regulators for the first time.
The filings will be submitted on the newly adopted Form PF. Beginning on June 15, 2012, Form PF filings must be submitted to the Securities and Exchange Commission and, to the extent applicable, the Commodity Futures Trading Commission (the CFTC). Form PF and the related rule under the Investment Advisers Act of 1940 (the Advisers Act), Rule 204(b)-1, were adopted unanimously by the SEC on October 26, 2011. This article provides an overview of who must file Form PF, the form’s required content and the process of submitting the filing.
The creation of Form PF and Rule 204(b)-1 were ordered by the Dodd-Frank Act, which became law on July 21, 2010. The information required in Form PF is intended to provide the SEC, CFTC and the Financial Stability Oversight Council (the FSOC), which was created by the Dodd-Frank Act, to monitor stability and risk in the U.S. financial system, with data about the basic operations and strategies of private funds. The goal is to provide regulators with a more comprehensive picture of potential systemic risk in the private fund industry. Sections of Form PF constitute a joint filing with both the SEC and the CFTC. Thus, SEC-registered private fund advisers who are also registered with the CFTC must report on Form PF to comply with certain CFTC requirements.
Filings on Form PF will be submitted electronically on a confidential, non-public basis. However, the SEC may use information obtained from Form PF filings in enforcement proceedings and may also share information with self-regulatory organizations or other federal departments or agencies, in addition to sharing it with the CFTC and the FSOC. The SEC, CFTC, FSOC and any other organizations with which the information from Form PF filings is shared are obligated to maintain the information received in a confidential manner, and agencies are expressly exempt under the Freedom of Information Act from being compelled to disclose information provided in a Form PF filing.
SEC-registered investment advisers with $150 million or more of private fund assets under management, many of which were recently required to register with the SEC for the first time, will be required to submit filings on Form PF. Form PF is structured so that large private fund advisers must provide more extensive and more detailed information than smaller private fund advisers. The content, timing and frequency of reporting on Form PF will also vary depending upon the type of private fund an adviser manages. The different treatment of large versus smaller investment advisers was designed to avoid imposing a large burden on smaller investment advisers with fewer resources while still providing the FSOC with comprehensive information on the entire private fund industry. The SEC anticipates that the majority of private fund advisers will be classified as smaller private fund advisers, although the few private fund advisers who are classified as large private fund advisers represent a significant amount of the assets under management in the private fund industry.
There are two different deadlines for compliance with the Form PF filing requirements, which are determined based on the size of the investment adviser. Investment advisers with $5 billion or more in private fund assets must begin filing Form PF at the end of their next fiscal year or fiscal quarter on or after June 15, 2012. Investment advisers with less than $5 billion but more than $150 million in private fund assets under management must begin filing Form PF upon the end of their next fiscal year or fiscal quarter on or after December 15, 2012.
Large Private Fund Advisers
Large private fund advisers are classified as:
Private fund advisers who do not fall within any of the three categories described above are considered smaller private fund advisers. Advisers of hedge funds and liquidity funds must assess whether their relevant assets under management meet the large private fund adviser threshold at the end of any month in the prior fiscal quarter. Private equity fund advisers must evaluate whether their relevant assets under management meet the large private fund adviser threshold as of the last day of the adviser’s most recent fiscal year.
The SEC has specified that some non-private fund assets under management and private fund assets managed by certain related entities must be considered in an adviser’s evaluation of whether it meets the $150 million minimum for reporting on Form PF or whether it will be classified as a large private fund adviser for purposes of Form PF.
Large private fund advisers who manage hedge funds are required to file Form PF within 60 days of the end of each fiscal quarter. Among other information, Form PF obligates large hedge fund advisers to provide data related to exposures and turnover by asset class and geographical concentration. For hedge funds with a net asset value of $500 million or more, Form PF further requires that advisers report certain information relating to each such fund’s exposures, use of leverage, risks and liquidity. Form PF does not require large advisers that manage hedge funds to report position-level information.
Large private fund advisers who manage liquidity funds are required to file Form PF within 15 days of the end of each fiscal quarter. Among other information, Form PF obligates large liquidity fund advisers to provide data related to the types of assets in a liquidity fund’s portfolio and their related risk profiles, as well as the extent to which each liquidity fund complies with Rule 2a-7 under the Investment Company Act of 1940, which relates to registered money market funds.
Large private fund advisers who manage private equity funds are required to file Form PF on an annual basis within 120 days of the end of the fiscal year. Among other information, Form PF obligates large private equity advisers to provide information related to each private equity fund’s use of leverage and bridge financing and investments in financial institutions.
Small Private Fund Advisers
Small private fund advisers must file Form PF once a year, by 120 days after the end of the fiscal year. Small private fund advisers are only required to report limited information regarding the private funds they manage, such as fund size and performance, use of leverage, liquidity and data related to fund investors. Small private fund advisers who manage hedge funds must also report information about their funds’ strategies; use of trading and clearing mechanisms; and exposure to counterparty credit risk.
The SEC has stated that the information gathered on Form PF is intended to supplement the information provided by advisers on Form ADV. Most private fund advisers will only need to complete section one of the Form, which pertains to all filers. Each of sections two through four of Form PF apply only to a specific type of large private fund adviser. Form PF provides a general instruction section in the form of a number of questions and answers relating to the requirements and mechanics of submitting a filing on Form PF. In addition, Form PF provides a lengthy glossary of terms, which includes applicable cross-references to the Form as well as other sources. Nonetheless, the requirements related to filings on Form PF have elicited apprehension in the private fund industry on account of the extensive amount of new information to be provided.
 Sections 1 and 2 of Form PF are a joint filing of the SEC and the CFTC. Subsequent sections of Form PF have only been adopted by the SEC.
 See Rule 4.27 under the Commodity Exchange Act, 7 U.S.C. 1a.
 See Rules Implementing Amendments to the Investment Advisers Act of 1940, Advisers Act Release No. 3221 (June 22, 2011), 76 FR 42,950 (July 19, 2011). See also Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers With Less Than $150 Million in Assets Under Management, and Foreign Private Advisers, Advisers Act Release No. 3222 (June 22, 2011), 76 FR 39,646 (July 6, 2011).
 Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF, Advisers Act Release No. 3308 (Oct. 31, 2011), 76 Fed. Reg. 71,128, 71,164 (Nov. 16, 2011) (joint final rules).
 See supra note 4 at 71,138.
 Id. at 71,129.
 For example, Section 2 of Form PF contains questions that must be completed only by large hedge fund advisers, Section 3 contains questions that must be completed only by large liquidity fund advisers and Section 4 contains questions that must be completed only by large private equity fund advisers.
Taylor Brody is an Associate at the law firm of Stradley Ronon Stevens & Young, LLP. She focuses her practice on counseling investment companies and investment advisers in connection with various regulatory, compliance and transactional issues. Ms. Brody assists investment management clients in all aspects of legal representation including researching issues arising under the federal securities laws in connection with the organization and registration of investment companies; drafting and reviewing registration statements and proxy solicitation materials; preparing regulatory filings; and drafting corporate policies and compliance procedures.