The Commodity Futures Trading Commission (the “CFTC”) and the Securities and Exchange Commission (the “SEC”) have announced the adoption of new rules under the Commodity Exchange Act and the Investment Advisers Act of 1940 (the “Advisers Act”) requiring SEC-registered investment advisers to private funds (including private equity funds, hedge funds and liquidity funds) to periodically file Form PF with the SEC. The stated purpose of the new rules is to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) designed to assist the Financial Stability Oversight Counsel (the “FSOC”) in monitoring potential systemic risks to the United States financial system. As discussed below, the timing and types of information that an adviser is required to disclose on Form PF depends on whether such adviser manages private equity funds, hedge funds or liquidity funds and the size of those funds.
Who Must File?
Rule 204(b)-1 under the Advisers Act and Form PF require investment advisers with at least $150 million of assets under management attributable to private funds (as of the end of such adviser’s most recently completed fiscal year) that are registered or required to be registered with the SEC to file a Form PF with the SEC. A “private fund” is defined as an issuer that would be an investment company under the Investment Company Act of 1940 but for the exceptions contained in Section 3(c)(1) or (7) of that Act. The $150 million threshold differs from the rule as proposed (the “Proposed Rule”), which required all registered advisers to private funds (regardless of assets under management) to file Form PF. “Exempt reporting advisers” (generally, advisers to private funds with assets of less than $150 million in the United States, as described in Rule 203(m)-1 under the Advisers Act) are not required to file Form PF.
Form PF Requirements
The types of information required to be disclosed on Form PF and the frequency of filing depends on whether the investment adviser is (i) an adviser to private equity funds, hedge funds or liquidity funds and (ii) a “large private fund adviser.” As discussed below, private equity fund advisers generally have less burdensome reporting requirements than both hedge fund advisers and liquidity fund advisers. The SEC stated that distinctions among types of advisers and amounts of assets under management will allow the FSOC to monitor the private fund industry without placing an undue burden on private fund advisers that pose less systemic risks.
Types of Private Funds
Form PF defines a “private equity fund” as 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.
Form PF defines a “hedge fund” generally as any private fund (other than certain securitization vehicles) that (i) pays a performance fee or allocation calculated by taking into account unrealized gains, (ii) may borrow an amount in excess of one-half of its net asset value (including any committed capital) or may have gross notional exposure in excess of twice its net asset value (including any committed capital) or (iii) may sell securities or other assets short. For purposes of Form PF, reportable commodity pools are considered “hedge funds.”
Form PF defines a “liquidity fund” as 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.
Large Private Fund Advisers
Form PF defines a “large private fund adviser” as (i) an adviser with at least $2 billion in assets under management attributable to private equity funds as of the last day of the adviser’s most recently completed fiscal year, (ii) an adviser with at least $1.5 billion in assets under management attributable to hedge funds as of the last day of any month in the adviser’s fiscal quarter immediately preceding its most recently completed fiscal quarter or (iii) an adviser with at least $1 billion in assets under management attributable to liquidity funds and registered money market funds as of the last day of any month in the adviser’s fiscal quarter immediately preceding its most recently completed fiscal quarter. Any investment adviser that does not meet such thresholds is considered a “smaller private fund adviser” and is subject to reduced reporting requirements as described below. 
The thresholds for large private equity and hedge fund advisers were raised from $1 billion in the Proposed Rule and were designed to capture a relatively small group of advisers that represent a substantial portion of assets under management in their respective industries. The SEC also decreased the frequency for testing whether these thresholds were met to monthly for hedge funds and liquidity funds and annually for private equity funds (as opposed to daily for hedge funds and liquidity funds and quarterly for private equity funds as contained in the Proposed Rule).
What Information are All Private Fund Advisers Required to Report?
Each investment adviser that must file a Form PF is required to provide basic information in Section 1 of Form PF regarding itself and the private funds that it advises, including identifying information concerning the adviser and its private funds, information about each private fund’s gross and net assets, the fund’s performance, types of investors in the fund and information about the fund’s borrowing and liquidity. The SEC has included questions relating to a fund’s investments in other private funds and parallel managed accounts. Additionally, Section 1 requires hedge fund advisers to disclose information about strategy, credit risk and use of trading and clearing mechanisms.
What Information are Large Private Fund Advisers Required to Report?
Private Equity Funds. In addition to the basic information required by Section 1, the nature of the additional information required to be disclosed on Form PF by large private fund advisers depends on the type of funds an adviser manages. A large private equity fund adviser is required to complete Section 4 of Form PF for each private equity fund it advises. The information required pursuant to Section 4 includes certain information regarding guarantees by the adviser of portfolio company obligations and the debt-to-equity ratios of the fund’s controlled portfolio companies. Additional required information includes (i) an overview of controlled portfolio companies’ debt, (ii) the portion of that debt that is comprised of payment-in-kind or zero coupon securities and (iii) whether the fund or any controlled portfolio company has experienced an event of default on any debt during the reporting period. The amount and identity of lenders of any controlled portfolio company bridge financing must also be disclosed. Form PF also requires that large private equity fund advisers disclose whether a fund controls a portfolio company in the financial industry and provide additional detailed information about such investments (including percentage of ownership). Large private equity advisers will be required to disclose a breakdown of investments by industry and geography. The SEC noted that it has reduced the burden of certain disclosures by limiting reporting requirements to controlled portfolio companies. Furthermore, large private fund advisers have the option of reporting feeder fund and parallel fund structures either in the aggregate or separately.
Hedge Funds and Liquidity Funds. Section 2 of Form PF requires that large hedge fund advisers disclose aggregate information regarding their hedge funds, including information regarding exposures by asset class and geographical concentration and portfolio turnover. The Form further requires large hedge fund advisers to disclose information relating to exposures, borrowings, collateral practices, risk profiles, liquidity, trading and financing for each hedge fund with a net asset value of at least $500 million. Section 3 of Form PF requires that large liquidity fund advisers disclose information relating to each liquidity fund’s assets, risk profile and investor base.
When are Private Fund Advisers Required to File Form PF?
The Proposed Rule would have required large private fund advisers to file Form PF on a quarterly basis within 15 days after the end of each fiscal quarter. After the SEC received significant comments on this point, “smaller private fund advisers” (i.e., hedge fund, liquidity fund and private equity fund advisers that do not meet the thresholds to be considered “large private fund advisers”) as well as large private equity fund advisers must now file Form PF annually within 120 days after the end of each fiscal year. The SEC similarly extended the time period by which large hedge fund advisers must file their Form PF from within 15 days after the end of each fiscal quarter to within 60 days after the end of each fiscal quarter. Consistent with the Proposed Rule, large liquidity fund advisers are still required to file Form PF within 15 days after the end of each fiscal quarter.
No Certification Required
The SEC has eliminated the requirement contained in the Proposed Rule that an authorized individual of the investment adviser certify that the statements in Form PF are “true and correct.” Form PF as adopted only requires a signature confirming that Form PF is filed with proper authority.
The SEC recognizes the confidential nature of the information disclosed on Form PF and has stated that it does not intend to make such information public (although it may be used in enforcement actions). Nevertheless, the SEC may disclose the information gathered from Form PF to (i) the FSOC pursuant to requirements of Dodd-Frank, (ii) the CFTC and (iii) Federal departments and agencies or self-regulatory organizations for purposes within the scope of their jurisdiction. Any information disclosed by the SEC will be subject to applicable confidentiality provisions of Dodd-Frank and the Advisers Act and generally will not be subject to Freedom of Information Act requests. The SEC intends to implement certain controls to safeguard the confidentiality of Form PF information and will consider whether to delay the compliance date (as described below) in order to develop and deploy such controls.
Effective and Compliance Dates
Rule 204(b)-1 and Form PF become effective on March 31, 2012. The SEC has implemented a two-stage phase-in period for private fund advisers to comply with the Rule. The compliance date is June 15, 2012 for (i) private equity fund advisers with at least $5 billion in assets under management as of the last day of their first fiscal year to end on or after June 15, 2012, (ii) hedge fund advisers with at least $5 billion in assets under management as of the last day of the fiscal quarter most recently completed prior to June 15, 2012 and (iii) liquidity fund advisers with at least $5 billion in assets under management as of the last day of the fiscal quarter most recently completed prior to June 15, 2012. Such investment advisers must file Form PF (within the applicable 15, 60 or 120 period discussed above) following the end of their first fiscal quarter or fiscal year, as applicable, that ends on or after the June 15, 2012 compliance date. Any other private fund advisers must file Form PF within the applicable time period following the end of the first fiscal quarter or fiscal year, as applicable, after December 15, 2012. An adviser is not required to file Form PF with respect to any fiscal quarter or fiscal year prior to its Advisers Act registration being effective.
 The corresponding CFTC rule requires commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”) registered with the CFTC to satisfy certain CFTC filing requirements with respect to private funds (should the CFTC adopt such requirements) by filing Form PF with the SEC so long as the CPOs and CTAs are also registered with the SEC as investment advisers and are required to file Form PF under the Advisers Act.
 For purposes of determining whether an adviser meets the $150 million minimum reporting threshold or is a large private fund adviser, the adviser must aggregate (i) assets of managed accounts that pursue substantially the same investment objective and strategy and invest in substantially the same positions as the adviser’s private funds unless the value of those accounts exceeds the value of the private funds with which they are managed and (ii) assets of private funds advised by the adviser’s affiliates other than affiliates that are separately operated. An adviser may disregard assets invested in the equity of other private funds. If an adviser’s principal office and place of business is outside of the United States, it may exclude any private fund that, during the last fiscal year, was not a United States person, was not offered in the United States and was not beneficially owned by any United States person.
The Working Group will continue to monitor any developments and provide timely coverage at Weil’s Financial Regulatory Reform Center. If you are interested in discussing this or future rulemaking, please contact Working Group members David E. Wohl (212-310-8933 or firstname.lastname@example.org) or Kira F. Stanfield (212-310-8505 or email@example.com).