Large hedge fund advisers will be required to disclose more information on their investment strategies, investment exposure, operations, and more as part of a rule change jointly adopted by the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
On Thursday, the agencies each announced approved amendments to Form PF designed to enhance their oversight of the private fund industry. The rule changes seek to address “gaps” identified by the agencies and the Financial Stability Oversight Council (FSOC) regarding information received from private fund advisers in current disclosures.
“These amendments to Form PF will enhance the commissions’ and FSOC’s understanding of the private fund industry, as well the potential systemic risk posed by the industry and its individual participants,” said SEC Chair Gary Gensler in a press release.
The changes, proposed by the agencies in August 2022, are targeted at hedge funds with a net asset value of $500 million or more. Those required to file Form PF, which was established in 2011 by the Dodd-Frank Act, include SEC-registered investment advisers to large hedge funds, as well as entities registered to the CFTC as commodity pool operators or commodity trading advisers.
The approved amendments will mandate enhanced private fund reporting regarding investment exposures, borrowing and counterparty exposure, market factor effects, currency exposure, turnover, country and industry exposure, central clearing counterparty reporting, risk metrics, investment performance by strategy, portfolio liquidity, and financing and investor liquidity. The rule will also seek additional information on advisers and the private funds they advise, including beneficial ownership, per an SEC fact sheet.
The rule will take effect one year after publication in the Federal Register, with compliance required at that same date.
In addition to the rule changes, the SEC and CFTC agreed to a memorandum of understanding (MOU) related to the sharing of Form PF data between the commissions.
SEC Commissioner Mark Uyeda and CFTC Commissioner Caroline Pham issued a joint statement dissenting from the MOU, noting data on non-CFTC registrants is unnecessary for the agency to receive, increased cybersecurity risks, and concerns around the handling of confidential Form PF data. Uyeda and Pham also did not support the Form PF final rule, as did SEC Commissioner Hester Peirce.
“These revisions stem from the commission’s unbridled curiosity rather than from a legitimate regulatory objective,” said Peirce in her dissenting statement.