From 2012, Private Fund Managers have not just had to fill in Form ADV with the SEC, when registering with the Securities and Exchange Commission they are also required to fill in Form PF. Only firms likely to create risk within the financial industry will need to fill in this form. In other words, those with over £150 million in assets – as well as smaller firms – are required to fill in the form once a year. For those institutions, the amount of information they have to provide (as a fraction of what the larger companies provide) includes size, liquidity, investor types and fund performance.
Form PF has been heavily streamlined since the Proposing Release, and has largely been aligned with foreign reporting requirements, leading many to believe that it will remain an arduous ongoing task for reporting advisors. Advisors who are not registered with the SEC will be exempt from filling in the form, regardless of the size of their holdings. Commodity Pool Operators (CPO) or Commodity Trading Advisors (CPA) will also need to fill in the form for those commodity pools that they manage and which are considered “private funds”. They can also file Form PF for any other managed commodity pools that might not be deemed as “private funds”.
Required Information
There is substantial information required from each reporting advisor. As a minimum, advisors will probably need to alter their compliance procedures but may also need to recode their record keeping systems. Form PF generally permits advisors to use their existing systems to provide information, a major difference compared to what was proposed in January 2011. Due to the in-depth nature of the information required, advisors will need to carefully review Form PF and all of the associated instructions and definitions. There is also a need to provide certain information on a monthly basis regardless of the quarterly or annual submission of the Form PF.
One interesting change to Form PF, is that advisors will no longer be required, to formally certify that all information submitted is “true and correct” under penalty of perjury. SEC selected FINRA to accept Form PF filings. This means that there will be more use of the IARD filing system. This could move FINRA closer to becoming the SRO for investment advisors.
Confidentiality of Information
Information on Form PF is not subject to freedom of information acts and is non-public, but the SEC may use the information in enforcement actions and it may be accessed by various federal departments and agencies (including FSOC and the CFTC). The SEC has been working on safeguards for the protection of confidentiality of information. Despite reassurances, the requirement for information to be available to these departments and agencies increases the risk of information being leaked to the public.
Implications for Advisors
Advisors were warned to begin reviewing Form PF as soon as possible so that they could review their structures and determine their status and subsequent reporting requirements. Foreign SEC-registered advisors with minimal U.S. based assets may be able to avoid filling in Form PF by reorganising their U.S. assets into a fund which is isolated and offered only to U.S. investors. This would require the fund size being below $150 million. If it is not, there may still be a reduced burden on the information required by Form PF. Advisors who qualify as “family offices”, under section 202(a)(11)(G) and are therefore, excluded from the definition of “investment advisor” will also be avoid the obligation to complete Form PF. This could also encourage restructuring by certain advisors.
More information: http://www.sec.gov/divisions/investment/pfrd/pfrdfaq.shtml, http://www.lseg.com/markets-products-and-services/post-trade-services/unavista/regulation/form-private-fund-pf-overview
