While there is a lot of buzz this week related to the Proposed Amendments to Form PF, we are mindful that final rules often look very different from the proposals. That being said, the proposed amendments would impact large hedge fund advisers, private equity advisers and large liquidity fund advisers. The amendments “are designed to enhance FSOC’s monitoring and assessment of systemic risk” and to “collect additional data for the [SEC]’s use in its regulatory programs.” The amendments would require immediate reporting of certain events for large hedge fund advisers and advisers to private equity funds. The amendments would reduce the reporting threshold for large private equity advisers and require additional reporting regarding fund strategies. The amendments would also revise reporting requirements for large liquidity fund advisers to be more in line with proposed reporting requirements for money market funds.
Last week the SEC also issued another Private Fund Risk Alert. At a high level, the Alert focuses on many of the same themes as prior alerts, including fees, conflicts of interest, disclosure and fiduciary duty. However, we find the detailed examples provided in this alert very helpful and encourage industry CCOs to review the specific examples discussed in the Alert and compare them to your own firm’s compliance program and ensure you are incorporating related testing that covers topics including but not limited to:
· P&P related to LPACs
· Following LPA provisions
· Detailed and Customized P&P related to all fee calculations and expense allocations
· Operating Consistent with Investor Disclosure and having adopted P&P
We also note that certain elements of the risk alert and the proposed new reporting requirements touch on common themes, with certain disclosures potentially serving as red flags for regulators to dig deeper. From this we conclude that the SEC’s focus here will not go away, regardless of the final changes to Form PF.