United States

SEC and CFTC adopt Private Fund Adviser reporting requirements


In July 2010, President Obama signed into law The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Dodd-Frank Act made significant changes to the existing financial services legal framework, affecting nearly every aspect of the industry.

In addition to changing the SEC registration requirements of investment advisers, the Dodd-Frank Act empowered the SEC to create broad recordkeeping and reporting requirements for registered investment advisers to "private funds. Some of the records that must be maintained by such an investment adviser, made available for SEC inspection, and possibly subject to future SEC filing requirements, include:

  • The amount of assets under management and use of leverage, including off-balance-sheet leverage
  • Counterparty credit risk exposure
  • Trading and investment positions
  • Valuation policies and practices of the fund
  • Types of assets held
  • Side arrangements or side letters
  • Trading practices
  • Such other information as the SEC, in consultation with the Financial Stability Oversight Council (Council), determines that it is necessary and appropriate in the public interest and for the protection of investors or for the assessment of systemic risk to the US economy

In June 2011, the SEC adopted new rules that made advisers and registered investment advisers relying on the venture capital fund and smaller private fund adviser exemptions to file an amended Form ADV.

In October 2011, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) adopted final rules requiring registered investment advisers currently advising private funds to file a Form PF.

Form PF purpose

The primary reasons for the rule are:

  • To assist the Council in assessing systemic risk within the United States financial system.
  • To assist the SEC and CFTC in their regulatory programs, including examinations and investigations.

Basic definitions

The proposed rules define three types of private funds, as follows:

  • Hedge Funds – any private fund that (1) has a performance fee or allocation calculated by taking into account unrealized gains; (2) may utilize leverage; or (3) may sell securities or other assets short.
  • Liquidity Funds – any private fund that seeks to generate income by investing in a portfolio of short term obligations in order to maintain a stable net asset value per unit or minimize principal volatility for investors.
  • Private Equity Funds – any private fund that is not a hedge fund, liquidity fund, real estate fund, securitized asset fund or venture capital fund and does not provide investors with redemption rights in the ordinary course.
  • Regulatory Asset Under Management (RAUM) – RAUM includes the current market value (or fair value) of the securities portfolios for which continuous and regular supervisory or management services are provided plus, in the case of a private fund, the contractual amount of any uncalled commitment pursuant to which a investor is obligated to acquire an interest in, or make a capital contribution to, the private fund.

Form PF

Section 1: Section 1 of Form PF must be completed by all Private Fund Advisers. Section 1 requests the following information:

  • The adviser's name
  • The names of any related persons
  • Large trader identification number, if any
  • Regulatory and net assets under management
  • Regulatory and net assets under management by type of fund

In addition, Section 1 seeks information about the investment adviser's individual private funds, which includes:

  • The fund's gross and net assets
  • The aggregate notional value of its derivative positions
  • Any borrowing by classification of the creditor
  • The concentration of the investor base
  • Gross and net performance information, as reported to current and prospective investors
  • Assets and liabilities, with each asset broken down by its fair value hierarchy under GAAP
  • For each Hedge Fund (as defined above):
  • The investment strategies
  • The percentage of assets managed by computer-driven trading algorithms
  • The five trading counterparties to which the fund has the greatest exposure
  • Information regarding trading and clearing practices

Section 2: Section 2 only applies to Private Fund Advisers managing at least $1.5 billion in Hedge Fund assets as of the end of any month in the prior fiscal quarter. The information requested includes aggregate information for all the funds it advises, such as:

  • The market value of assets invested in different types of securities and commodities
  • The duration of fixed income portfolio holdings
  • The turnover rate of the adviser's aggregate portfolios
  • And the geographic breakdown of the investments

For individual funds with a net asset value greater than $500 million, the information requested would be the same as the information requested above, just reported separately by each fund. In addition, the information required to be disclosed includes:

  • Portfolio liquidity
  • The number of open positions
  • Information on each open position exceeding 5 percent of net asset value (NAV)
  • Information on the top five trading counterparties
  • Certain risk metrics information (VaR), if used regularly during the reporting period
  • Impact on the fund's portfolio from specified changes to certain identified effect of market factors
  • Monthly breakdown of each the fund's secured and unsecured borrowing and its derivatives exposures and information on the value of collateral and letters of credit supporting the secured borrowing and derivatives exposures and the types of creditors,
  • The breakdown of the fund's committed financing
  • Information on the fund's use of side-pockets and restrictions on investor withdrawals and redemptions
  • Breakdown of the percentage of the fund's NAV that is locked in for different periods of time

Section 3: Section 3 only applies to Private Fund Advisers managing at least $1 billion in Liquidity Fund assets as of the end of any month in the prior fiscal quarter. Some of the information these advisers are required to report are:

  • The pricing method used in computing its net asset value per share
  • How the adviser is in compliance with Rule 2a-7 of the Investment Company Act of 1940
  • Information on the secured or unsecured borrowing of the fund and if the fund has a committed liquidity facility
  • Product exposure by maturity
  • Information for each open position that represents 5 percent or more of the fund's NAV
  • Other information including the private fund's concentration of the investor base, gating and redemption policies, investor liquidity and the percentage of the fund purchased using securities lending collateral

Section 4: Section 4 only applies to Private Fund Advisers managing at least $2 billion in Private Equity Fund assets as of the last day the most recently completed fiscal year. These advisers are required to report:

  • The value of borrowings and guarantees of the fund and value as a percentage of unfunded commitments
  • The leverage of the controlled portfolio companies, the weighted average debt-to-equity ratio, and range of debt-to-equity ratio among the controlled portfolio companies
  • The breakdown of indebtedness of a controlled portfolio company by maturity
  • Whether the fund or any of the controlled portfolio companies has defaulted on any of its debt within the reporting period
  • Whether the fund is being provided with bridge financing, information about the institutions providing the financing
  • Investments in the financial institution industry by portfolio companies
  • Investment breakdown by industry and geography

When to file Form PF

The table below summarizes the reporting requirements:

  RAUM threshold for "large adviser" status Reporting frequency Reporting timeframe
Large hedge fund advisers


$1.5 billion Quarterly Within 60 days of the end of each fiscal quarter
Large liquidity fund advisers $1 billion Quarterly Within 60 days of the end of each fiscal quarter
Large private equity fund advisers $2 billion Annually Within 120 days of the end of each fiscal year
All other N/A Annually Within 120 days of the end of each fiscal year


Initial filing date

Advisers with at least $5 billion in RAUM attributable to hedge funds or liquidity funds as of the last day of the fiscal quarter most recently completed prior to June 15, 2012 must begin filing for periods on or after June 15, 2012. Most hedge fund advisers with greater than $5 billion in RAUM must make their initial Form PF filing by Aug. 29, 2012, and most liquidity fund managers with relevant assets under management in excess of $5 billion must begin filing on July 15, 2012.

All other advisers must file their first Form PF for the first period ending after Dec. 15, 2012. For most other filers (including all private equity fund advisers with a fiscal year ending Dec. 31), this means that their first Form PF will be due on April 30, 2013, using data as of Dec. 31, 2012.

Filing system

Filing system: In March 2012 the SEC released a draft Form PF XML Filing Guide to Private Fund Advisers in filing Form PF through the XML submission process.

The Private Fund Reporting Depository ("PRFD ) is a new electronic filing system that facilitates investment adviser reporting of private fund information via Form PF. FINRA is the developer and operator of the PFRD system, which has been developed according to the requirements of its sponsor, the SEC. It is expected the PFRD system will go live in June or July 2012.

Implementation challenges

Most of the information requested in the Form PF exists with the Private Fund Advisers; however, it's usually generated from different sources and exists in disparate files and databases. The scope and volume of data required by Form PF is massive as compared to Form ADV. The data required spans a period of time (i.e. quarterly or annual) and covers a wide range of areas such as monitoring risk, counterparty exposure, collateral and borrowing, investor makeup, liquidity, strategy, performance, asset class and geographic exposure.

Compilation of data to successfully submit Form PF will be a large undertaking. Even though the SEC does not require certification from Private Fund Advisers, it will be holding the information contained within Form PF to a high standard and most likely will be subject to audit during their examination of the Private Fund Advisers.

The SEC states that the Estimated Average Burden Hours Per Response is 52.88 hours, which is a little more than one week. Private Fund Advisers should familiarize themselves with Form PF and the information needed to complete the form, implement procedures and programs necessary to accurately generate the information, and consolidate all the information into one database.


The final Form PF incorporates a number of revisions intended to ease the reporting burden on advisers. The SEC staff considered the comments received during the proposal period and made changes to the proposed rules including increasing the threshold of large advisers, increasing the time period for the filing and eliminating the certification under penalty of perjury. However, it still requires advisers to report an unprecedented amount of information about the private funds they advise and will be a significant undertaking for many advisers.

CFTC amends CPO and CTA registration and reporting requirements

In February 2012, the CFTC issued final rules rescinding CFTC Rule 4.13(a)(4)3 exemption from Commodity Pool Operators (CPO) registration; amending the Rule 4.13(a)(3)4 de minimis exemption from CPO registration; and adopting Rule 4.27 requiring CPOs and Commodity Trading Advisers (CTAs) to periodically report certain information to the CFTC on Forms CPO-PQR and CTA-PR.6, among other rules.

Adoption of CFTC Rule 4.27

CFTC Rule 4.27 requires CPOs and CTAs registered with the CFTC to file information with the CFTC on new Forms CPO-PQR and CTA-PR, respectively. For entities registered with both the CFTC and the SEC, the new forms will serve as a supplement to Form PF.


The new Form CPO-PQR is comprised of three schedules:

Schedule A - Asks for basic information about the reporting CPO and more specific information about each of the CPO's pools, including questions about each pool's key relationships and investment positions. It is to be completed by all CPOs registered with the CFTC including CPOs that are also registered with the SEC as an investment adviser.

Schedule B - Solicits data about each pool operated by mid-size (more than $150 million assets under management) and large (more than $1.5 billion assets under management) CPOs, such as:

  • Investment strategies
  • Borrowings and types of creditors
  • Counterparty credit exposure
  • Trading and clearance mechanisms
  • The value of aggregated derivative positions,
  • A schedule of investments

Schedule C - Requests information about the pools operated by large CPOs on an aggregated and pool-by-pool basis, such as:

  • Geographical breakdown of pools' investments
  • Turnover rate of the aggregate portfolio of pools
  • Large pool counterparty credit exposure
  • Large pool risk metrics
  • Large pool participant information

Large pools include any pool that has a net asset value individually, or in combination with any parallel pool structure, of at least $500 million as of the close of business on any day during the reporting period.

CPOs also registered with the SEC that only operate only pools that are private funds may satisfy this requirement with the filing of Form PF.

CPOs also registered with the SEC that operate pools that do not meet the definition of a private fund and did not elect to file Form PF must file Schedule B and C for each pool that is not a private fund.

The compliance dates for Form CPO-PQR reporting is reflected below:

CPOs assets under management

Schedules First compliance dates
$5 billion or greater as of June 30, 2012


A, B and C Nov. 29, 2012
$1.5 billion or greater A. B and C 60 days after end of CPO’s first calendar quarter ending after Dec. 14, 2012
$150 million or greater, but less than $1.5 billion A,B 90 days after calendar year end of 2012
Less than $150 Million A, B 90 days after calendar year end of 2012



The new Form CTA-PR asks for information on the total number of trading programs offered by the CTA, the total assets directed by the CTA, the names of the pools advised by the CTA, among other information the CFTC considers to be demographic.

All CTAs are required to file new Form CTA-PR annually within 45 days of the end of the fiscal year. The first compliance date is Feb. 14, 2013.

By Gireesh Chugh, partner, RSM US LLP, 212.372.1086.