COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 4

RIN 3038-AD03

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 275 and 279

Release No. IA-3308; File No. S7-05-11

RIN 3235-AK92

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool 

Operators and Commodity Trading Advisors on Form PF

AGENCIES: Commodity Futures Trading Commission and Securities and Exchange 

Commission.

ACTION: Joint final rules.

SUMMARY: The Commodity Futures Trading Commission (“CFTC”) and the 

Securities and Exchange Commission (“SEC”) (collectively, “we” or the 

“Commissions”) are adopting new rules under the Commodity Exchange Act and the 

Investment Advisers Act of 1940 to implement provisions of Title IV of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act. The new SEC rule requires

investment advisers registered with the SEC that advise one or more private funds and 

have at least $150 million in private fund assets under management to file Form PF with 

the SEC. The new 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, but only if those CPOs and CTAs are also 

registered with the SEC as investment advisers and are required to file Form PF under the 
2

Advisers Act. The new CFTC rule also allows such CPOs and CTAs to satisfy certain 

CFTC filing requirements with respect to commodity pools that are not private funds, 

should the CFTC adopt such requirements, by filing Form PF with the SEC. Advisers 

must file Form PF electronically, on a confidential basis. The information contained in 

Form PF is designed, among other things, to assist the Financial Stability Oversight 

Council in its assessment of systemic risk in the U.S. financial system. 

DATES: See section III of this Release.

FOR FURTHER INFORMATION CONTACT: CFTC: Amanda L. Olear, Special 

Counsel, Telephone: (202) 418-5283, E-mail: aolear@cftc.gov, or Kevin P. Walek, 

Assistant Director, Telephone: (202) 418-5463, E-mail: kwalek@cftc.gov, Division of 

Clearing and Intermediary Oversight, Commodity Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street, N.W., Washington, DC 20581; SEC: David P. Bartels, 

Senior Counsel, or Sarah G. ten Siethoff, Senior Special Counsel, at (202) 551-6787 or 

IArules@sec.gov, Office of Investment Adviser Regulation, Division of Investment 

Management, U.S. Securities and Exchange Commission, 100 F Street, NE, Washington, 

DC 20549-8549.

SUPPLEMENTARY INFORMATION: The CFTC is adopting rule 4.27 [17 CFR 

4.27] under the Commodity Exchange Act (“CEA”)1 and Form PF.

2

 

1 7 U.S.C. 1a.

The SEC is 

2 Form PF is a joint form between the SEC and the CFTC only with respect to sections 1 

and 2 of the Form. Sections 3 and 4 of the Form are adopted solely by the SEC.
3

adopting rule 204(b)-1 [17 CFR 275.204(b)-1] and Form PF [17 CFR 279.9] under the 

Investment Advisers Act of 1940 [15 U.S.C. 80b] (“Advisers Act”).3

TABLE OF CONTENTS

I. BACKGROUND .............................................................................................. 4

A. The Dodd-Frank Act and the Financial Stability Oversight Council ............... 4

B. International Coordination.............................................................................. 11

II. DISCUSSION................................................................................................. 14

A. Who Must File Form PF ................................................................................. 18

1. “Hedge Fund” Definition................................................................................ 22

2. “Liquidity Fund” Definition ........................................................................... 29

3. “Private Equity Fund” Definition ................................................................... 29

4. Large Private Fund Adviser Thresholds......................................................... 31

5. Aggregation of Assets under Management..................................................... 41

6. Reporting for Affiliated and Sub-advised Funds............................................ 48

7. Exempt Reporting Advisers............................................................................ 49

B. Frequency of Reporting .................................................................................. 50

1. Annual and Quarterly Reporting..................................................................... 50

2. Reporting Deadlines........................................................................................ 54

3. Initial Reports.................................................................................................. 58

4. Transition Filings, Final Filings and Temporary Hardship Exemptions........ 58

C. Information Required on Form PF.................................................................. 59

1. Section 1 of Form PF ...................................................................................... 63

2. Section 2 of Form PF ...................................................................................... 77

3. Section 3 of Form PF ...................................................................................... 97

4. Section 4 of Form PF ...................................................................................... 99

5. Aggregation of Master-Feeder Arrangements, Parallel Fund Structures and 

Parallel Managed Accounts.......................................................................... 109

D. Confidentiality of Form PF Data .................................................................. 112

E. Filing Fees and Format for Reporting........................................................... 115

III. EFFECTIVE AND COMPLIANCE DATES............................................... 117

IV. PAPERWORK REDUCTION ACT............................................................. 120

A. Burden Estimates for Annual Reporting by Smaller Private Fund Advisers 122

 

3 15 U.S.C. 80b. Unless otherwise noted, when we refer to the Advisers Act, or any 

paragraph of the Advisers Act, we are referring to 15 U.S.C. 80b of the United States 

Code, at which the Advisers Act is codified, and when we refer to Advisers Act rule 

204(b)-1, or any paragraph of this rule, we are referring to 17 CFR 275.204(b)-1 of the 

Code of Federal Regulations in which this rule will be published. In addition, when we 

refer to the “Investment Company Act,” or any paragraph of the Investment Company 

Act, we are referring to 15 U.S.C. 80a of the United States Code, at which the Investment 

Company Act of 1940 is codified.
4

B. Burden Estimates for Large Hedge Fund Advisers ...................................... 127

C. Burden Estimates for Large Liquidity Fund Advisers.................................. 130

D. Burden Estimates for Large Private Equity Advisers................................... 133

E. Burden Estimates for Transition Filings, Final Filings and Temporary 

Hardship Exemption Requests.................................................................................... 136

F. Aggregate Hour Burden Estimates ............................................................... 138

G. Cost Burden .................................................................................................. 138

V. ECONOMIC ANALYSIS ............................................................................ 142

A. Benefits......................................................................................................... 145

B. Costs.............................................................................................................. 158

C. CFTC Statutory Findings.............................................................................. 175

1. General Costs and Benefits........................................................................... 177

2. Section 15(a) Determination......................................................................... 178

VI. FINAL REGULATORY FLEXIBILITY ANALYSIS ................................ 181

A. Need for and Objectives of the New Rule .................................................... 181

B. Significant Issues Raised by Public Comment ............................................. 182

C. Small Entities Subject to the Rule ................................................................ 182

D. Projected Reporting, Recordkeeping and other Compliance Requirements. 184

E. Agency Action to Minimize Effect on Small Entities.................................. 184

VII. STATUTORY AUTHORITY ...................................................................... 186

TEXT OF FINAL RULES.............................................................................................. 187

I. BACKGROUND

A. The Dodd-Frank Act and the Financial Stability Oversight Council

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street 

Reform and Consumer Protection Act (“Dodd-Frank Act”).4

 One significant focus of 

this legislation is to “promote the financial stability of the United States” by, among other 

measures, establishing better monitoring of emerging risks using a system-wide 

perspective.5

 

4 Pub. L. No. 111-203, 124 Stat. 1376 (2010).

 To further this goal, the Act establishes the Financial Stability Oversight 

Council (“FSOC”) and directs it to monitor risks to the U.S. financial system. The Act 

5 S. REP. NO. 111-176, at 2-3 (2010) (“Senate Committee Report”).
5

also gives FSOC a number of tools to carry out this mission.

6

 For instance, FSOC may 

determine that a nonbank financial company will be subject to the supervision of the 

Board of Governors of the Federal Reserve System (“FRB”) if the company may pose 

risks to U.S. financial stability as a result of its activities or in the event of its material 

financial distress.

7

 In addition, FSOC may issue recommendations to primary financial 

regulators, like the SEC and CFTC, for more stringent regulation of financial activities 

that FSOC determines may create or increase systemic risk.

8

The Dodd-Frank Act anticipates that various regulatory agencies, including the 

Commissions, will support FSOC.

9

 To that end, the Dodd-Frank Act amended 

section 204(b) of the Advisers Act to require that the SEC establish reporting and 

recordkeeping requirements for advisers to private funds,

10

 

6 See Sections 113 and 120 of the Dodd-Frank Act. In a recent rulemaking release, FSOC 

explained that its response to any potential threat to financial stability will be based on an 

assessment of the circumstances. See Authority to Require Supervision and Regulation of 

Certain Nonbank Financial Companies, Financial Stability Oversight Counsel Release 

(Oct. 11, 2011) (“FSOC Second Notice”).

many of which must also

7 Section 113 of the Dodd-Frank Act. The Dodd-Frank Act also directs FSOC to 

recommend to the FRB heightened prudential standards for designated nonbank financial 

companies. Section 112(a)(2) of the Dodd-Frank Act.

8 Section 120 of the Dodd-Frank Act.

9 See, e.g., section 112(d)(1) of the Dodd-Frank Act, which authorizes FSOC to collect 

information from member agencies to support its functions. See also FSOC Second 

Notice, supra note 6 (explaining that information reported on Form PF will be important 

to FSOC’s policy-making in regard to the assessment of systemic risk among private 

fund advisers).

10 Section 202(a)(29) of the Advisers Act defines the term “private fund” as “an issuer that 

would be an investment company, as defined in section 3 of the Investment Company 

Act, but for section 3(c)(1) or 3(c)(7) of that Act.” Section 3(c)(1) of the Investment 

Company Act provides an exclusion from the definition of “investment company” for any 

“issuer whose outstanding securities (other than short-term paper) are beneficially owned 

by not more than one hundred persons and which is not making and does not presently 

propose to make a public offering of its securities.” Section 3(c)(7) of the Investment 
6

register for the first time as a consequence of the Dodd-Frank Act.11 These new 

requirements may include maintaining records and filing reports containing such 

information as the SEC deems necessary and appropriate in the public interest and for 

investor protection or for the assessment of systemic risk by FSOC.

12 The SEC and 

CFTC must jointly issue, after consultation with FSOC, rules establishing the form and 

content of any reports to be filed under this new authority.

13

On January 26, 2011, in a joint release, the CFTC and SEC proposed new rules 

and a new reporting form intended to implement this statutory mandate.

 

14

 

Company Act provides an exclusion from the definition of “investment company” for any 

“issuer, the outstanding securities of which are owned exclusively by persons who, at the 

time of acquisition of such securities, are qualified purchasers, and which is not making 

and does not at that time propose to make a public offering of such securities.” The term 

“qualified purchaser” is defined in section 2(a)(51) of the Investment Company Act.

 In the release, 

11 See sections 402, 403, 407 and 408 of the Dodd-Frank Act. The SEC recently adopted 

rule 203-1(e) providing a transition period for certain private advisers previously relying 

on the repealed exemption in section 203(b)(3) of the Advisers Act. The transition rule 

requires these advisers to register with the SEC by March 30, 2012. See Rules 

Implementing Amendments to the Investment Advisers Act of 1940, Investment Advisers 

Act Release No. IA-3221 (June 22, 2011), 76 FR 42,950 (July 19, 2011) (“Implementing 

Adopting Release”). See also Exemptions for Advisers to Venture Capital Funds, Private 

Fund Advisers With Less Than $150 Million in Assets Under Management, and Foreign 

Private Advisers, Investment Advisers Act Release No. IA-3222 (June 22, 2011), 76 FR 

39,646 (July 6, 2011) (“Exemptions Adopting Release”).

12 The Dodd-Frank Act does not identify specific information to be included in these 

reports, but section 204(b) of the Advisers Act does require that the records and reports 

required under that section cumulatively include a description of certain information 

about private funds, such as the amount of assets under management, use of leverage, 

counterparty credit risk exposure, and trading and investment positions for each private 

fund advised by the adviser. See Reporting by Investment Advisers to Private Funds and 

Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF, 

Investment Advisers Act Release No. 3145 (January 26, 2011), 76 FR 8,068 (February 

11, 2011) (“Proposing Release”) at n. 13 and accompanying text.

13 See section 211(e) of the Advisers Act.

14 As discussed below, Form PF is a joint form between the SEC and the CFTC only with 

respect to sections 1 and 2 of the Form.
7

the SEC proposed new Advisers Act rule 204(b)-1, which would require private fund 

advisers to file Form PF periodically with the SEC.15 In addition, the CFTC proposed 

new rule 4.27,

16 which would require private fund advisers that are also registered as 

CPOs or CTAs with the CFTC to satisfy certain proposed CFTC systemic risk reporting 

requirements, should the CFTC adopt such requirements, by filing Form PF.

17

 

15 Throughout this Release, we use the term “private fund adviser” to mean any investment 

adviser that (i) is registered or required to register with the SEC (including any 

investment adviser that is also registered or required to register with the CFTC as a CPO 

or CTA) and (ii) advises one or more private funds. Advisers solely to venture capital 

funds or advisers solely to private funds that in the aggregate have less than $150 million 

in assets under management in the United States that rely on the exemption from 

registration under, respectively, section 203(l) or 203(m) of the Advisers Act (“exempt 

reporting advisers”) are not required to file Form PF. See infra section II.A.7 of this 

Release.

 Today, 

we are adopting these proposed rules and Form PF with several changes from the 

proposal that are designed to respond to commenter concerns. Consistent with the 

proposal, advisers must report on Form PF certain information regarding the private 

16 Because the CFTC is not adopting the remainder of proposed CEA rule 4.27 at the same 

time as it is adopting this rule, the CFTC has modified the designation of CEA 

rule 4.27(d) to be the sole text of that section. See Commodity Pool Operators and 

Commodity Trading Advisors: Amendments to Compliance Obligations (Jan. 26, 2011), 

76 FR 7976 (Feb. 11, 2011) (“CFTC Proposing Release”). Additionally, the CFTC has 

made some revisions to the text of rule 4.27 to: (1) clarify that the filing of Form PF with 

the SEC will be considered substitute compliance with certain CFTC reporting 

obligations (i.e., for Schedules B and C of Form CPO-PQR and Schedule B of Form 

CTA-PR as proposed) should the CFTC determine to adopt such requirements and (2) to 

allow CPOs and CTAs who are otherwise required to file Form PF the option of 

submitting on Form PF data regarding commodity pools that are not private funds as 

substitute compliance with certain CFTC reporting obligations (i.e., for Schedules B and 

C of Form CPO-PQR and Schedule B of Form CTA-PR as proposed) should the CFTC 

determine to adopt such requirements.

17 For these private fund advisers, filing Form PF through the Form PF filing system would 

be a filing with both the SEC and CFTC. Irrespective of their filing a Form PF with the 

SEC, the CFTC has proposed that all private fund advisers that are also registered as 

CPOs and CTAs with the CFTC would be required to file Schedule A of Form CPO-PQR 

(for CPOs) or Schedule A of Form CTA-PR (for CTAs). See CFTC Proposing Release, 

supra note 16.
8

funds they manage, and this information is intended to complement information the SEC 

collects on Form ADV and information the CFTC separately has proposed to collect from 

CPOs and CTAs.

18

The SEC is adopting Advisers Act rule 204(b)-1 and Form PF to enable FSOC to 

obtain data that will facilitate monitoring of systemic risk in U.S. financial markets. Our 

understanding of the utility to FSOC of the data to be collected is based on our staffs’

consultations with staff representing the members of FSOC. The design of Form PF is 

not intended to reflect a determination as to where systemic risk exists but rather to 

provide empirical data to FSOC with which it may make a determination about the extent 

to which the activities of private funds or their advisers pose such risk. The information 

made available to FSOC will be collected for FSOC’s use by the Commissions in their 

role as the primary regulators of private fund advisers. The policy judgments implicit in 

the information required to be reported on Form PF reflect FSOC’s role as the primary 

user of the reported information for the purpose of monitoring systemic risk. The SEC 

would not necessarily have required the same scope of reporting if the information 

reported on Form PF were intended solely for the SEC’s use.

 Collectively, these reporting forms will provide FSOC and the 

Commissions with important information about the basic operations and strategies of 

private funds and help establish a baseline picture of potential systemic risk in the private 

fund industry.

 

18 See Proposing Release, supra note 12, at n. 16, comparing the purposes of Form ADV 

and Form PF. References in this Release to Form ADV or terms defined in Form ADV

or its glossary are to the form and glossary as amended in the Implementing Adopting 

Release, supra note 11.
9

We expect the information collected on Form PF and provided to FSOC will be 

an important part of FSOC’s systemic risk monitoring in the private fund industry.19 We 

note that, simultaneous with the consultations between our staffs and the staff 

representing FSOC’s members, FSOC has been building out its standards for assessing

systemic risk across different kinds of financial firms and has proposed guidance and

standards for determining which nonbank financial companies should be designated as 

subject to FRB supervision.20 In its most recent release on this subject, FSOC confirmed 

that the information reported on Form PF is important not only to conducting an

assessment of systemic risk among private fund advisers but also to determining how that 

assessment should be made.

21

 

19 See section 204(b) of the Advisers Act. Today, regulators have little reliable data 

regarding this rapidly growing sector and frequently have to rely on data from other 

sources, which when available may be incomplete. See, e.g., FSOC 2011 Annual Report, 

http://www.treasury.gov/initiatives/fsoc/Pages/annual-report.aspx (“FSOC 2011 Annual 

Report”) at 69. The SEC recently adopted amendments to Form ADV that will require 

the reporting of important information regarding private funds, but this includes little or 

no information regarding, for instance, performance, leverage or the riskiness of a fund’s 

financial activities. See Implementing Adopting Release, supra note 11. The data 

collected through Form PF will be more reliable than existing data regarding the industry 

and significantly extend the data available through the revised Form ADV.

20 See, e.g., FSOC Second Notice, supra note 6; Authority to Require Supervision and 

Regulation of Certain Nonbank Financial Companies, Financial Stability Oversight 

Council Release (Jan. 18, 2011), 76 FR 4,555 (Jan. 26, 2011); Advance Notice of 

Proposed Rulemaking Regarding Authority to Require Supervision and Regulation of 

Certain Nonbank Financial Companies, Financial Stability Oversight Council Release 

(Oct. 1, 2010), 75 FR 61,653 (Oct. 6, 2010).

21 See FSOC Second Notice, supra note 6 (“[FSOC] recognizes that the quantitative 

thresholds it has identified for application during [the initial stage of review] may not 

provide an appropriate means to identify a subset of nonbank financial companies for 

further review in all cases across all financial industries and firms. While [FSOC] will 

apply [such] thresholds to all nonbank financial companies, including... asset 

management companies, private equity firms, and hedge funds, these companies may 

pose risks that are not well-measured by the quantitative thresholds approach.... Using 

[Form PF] and other data, [FSOC] will consider whether to establish an additional set of 
10

The Commissions received more than 35 letters responding to the proposal, with 

trade associations, investment advisers and law firms accounting for most of the 

comments. Commenters representing investors were generally supportive of the proposal 

but thought it should have required more of private fund advisers.22 Some of these 

supporters argued, in particular, for more detailed and more frequent reporting than we

proposed.23 In contrast, advisers and those writing on their behalf expressed concern 

regarding the scope, frequency and timing of the proposed reporting.24

 

metrics and thresholds tailored to evaluate hedge funds and private equity firms and their 

advisers.”).

 A number of 

these commenters generally supported the systemic risk monitoring goals of the DoddFrank Act or the broad framework of the proposal but argued that specific aspects of the 

22 See, e.g., comment letter of the American Federation of Labor and Congress of Industrial 

Organizations (Apr. 12, 2011) (“AFL-CIO Letter”); comment letter of the Council of 

Institutional Investors (Apr. 11, 2011) (“CII Letter”) (agreeing that “the SEC’s proposal 

will facilitate FSOC’s ability to promote the soundness of the U.S. financial system” but 

noting that the commenter’s own working group report favored real-time reporting of 

position-level information).

23 See AFL-CIO Letter (“We support the Proposed Rule, but believe it should be 

strengthened in a few key areas by requiring more frequent reporting, omitting the 

arbitrary distinction by investment strategy, and adding additional disclosure 

requirements necessary to protect investors and prevent systemic risks.”); comment letter 

of the Americans for Financial Reform (Apr. 12, 2011) (“AFR Letter”) (endorsing the 

AFL-CIO Letter).

24 See, e.g., comment letter of the Alternative Investment Management Association (Apr. 

12, 2011) (“AIMA General Letter”); comment letter of the Investment Adviser 

Association (Apr. 12, 2011) (“IAA Letter”); comment letter of the Managed Funds 

Association (Apr. 8, 2011) (“MFA Letter”); comment letter of the Private Equity Growth 

Capital Council (Apr. 12, 2011) (“PEGCC Letter”); comment letter of Seward & Kissel, 

LLP (Apr. 12, 2011) (“Seward Letter”); comment letter of the Securities Industry and 

Financial Markets Association, Asset Management Group (Apr. 12, 2011) (“SIFMA

Letter”).
11

proposal were impractical or burdensome.25

This rulemaking is intended primarily to support FSOC, consistent with the 

mandate to adopt private fund reporting requirements under the Dodd-Frank Act. 

Determinations made with respect to the Form PF reporting requirements have been 

made in furtherance of this goal and to comply with this legislative mandate.

 We respond to these comments in section II 

of this Release.

B. International Coordination

The Dodd-Frank Act states that FSOC shall coordinate with foreign financial 

regulators in assessing systemic risk.

26 In recognition of this, our proposal discussed the 

potential importance of international regulatory coordination in responding to future 

financial crises.27

 

25 See, e.g., comment letter of BlackRock Inc. (Apr. 12, 2011) (“BlackRock Letter”); IAA 

Letter (stating that they “fully support the Commission’s goal of enhancing transparency 

of private funds that may be deemed to present systemic risk to the U.S. financial 

markets” but arguing that the proposal is too broad in scope); MFA Letter (supporting 

“the approach proposed by the SEC and CFTC to collect information from registered 

private fund managers through periodic, confidential reports on Form PF” and stating that 

the collection of data from market participants, including investment advisers and the 

funds they manage, “is a critical component of effective systemic risk monitoring and 

regulation”).

 A number of groups have continued to advance international efforts

relating to the collection of systemic risk information. For example, recent reports from

the Financial Stability Board (“FSB”), International Monetary Fund (“IMF”) and Bank 

for International Settlements (“BIS”) emphasize the importance of identifying and 

26 See section 175(b) of the Dodd-Frank Act. See also Proposing Release, supra note 12, at 

nn. 19-22 and accompanying text.

27 See Proposing Release, supra note 12, at section I.B.
12

addressing gaps in the information available to systemic risk regulators.

28 One goal of 

this coordination is to collect comparable information regarding private funds, which will 

aid in the assessment of systemic risk on a global basis.29 Several commenters agreed 

that international coordination in connection with private fund reporting is important and 

encouraged us to take an approach consistent with international precedents.

30

To this end, our staffs have consulted with the United Kingdom’s Financial 

Services Authority (the “FSA”), the European Securities and Markets Authority 

(“ESMA”), the International Organization of Securities Commissions (“IOSCO”) and 

Hong Kong’s Securities and Futures Commission.

 

31

 

28 See, e.g., FSB, IMF and BIS, Macroprudential Policy Tools and Frameworks, Update to 

G20 Finance Ministers and Central Bank Governors (Feb. 14, 2011) (highlighting the 

need for “[d]esign and collection of better information and data to support systemic risk 

identification and modelling [sic]”); FSB, Shadow Banking: Scoping the Issues, A 

Background Note of the Financial Stability Board (Apr. 12, 2011) (“FSB Shadow 

Banking Report”) (“authorities should cast the net wide, looking at all non-bank credit 

intermediation to ensure that data gathering and surveillance cover all the activities 

within which shadow banking-related risks might arise”); FSB and IMF, The Financial 

Crisis and Information Gaps, Implementation Progress Report (June 2011) (“Report on 

Information Gaps”).

 The FSA was the first to develop 

significant experience with hedge fund reporting, conducting a voluntary, semi-annual 

survey beginning in October 2009 by sampling large hedge fund groups based in the 

29 See, e.g., Report on Information Gaps, supra note 28, at 5. The Commissions expect that 

they may share information reported on Form PF with various foreign financial regulators 

under information sharing agreements in which the foreign regulator agrees to keep the 

information confidential.

30 See, e.g., comment letter of the American Bar Association, Federal Regulation of 

Securities Committee and Private Equity and Venture Capital Committee (Apr. 11, 2011) 

(“ABA Committees Letter”); AIMA General Letter; comment letter of the Committee on 

Capital Markets Regulation (Apr. 12, 2011) (“CCMR Letter”).

31 These consultations began prior to issuance of the Form PF proposal and have continued 

during the development of the final rules and Form. See also Proposing Release, supra

note 12, at nn. 24-32 and accompanying text.
13

United Kingdom.32

Most recently, ESMA has proposed its own template for private fund reporting, 

which shares many common elements with the FSA Survey (as well as the IOSCO survey 

and Form PF).

 IOSCO, in turn, used the guidelines established in the FSA Survey, 

together with its own report on hedge fund oversight, in coordinating a survey of hedge 

funds conducted by IOSCO’s members (including the SEC and CFTC) as of the end of 

September 2010.

33 ESMA’s proposed template will serve as the basis for mandatory 

private fund reporting in Europe under the European Union’s Directive on alternative 

investment fund managers (“EU Directive”) and is expected eventually to supersede the 

FSA Survey in the United Kingdom. The proposed ESMA template is broader in scope 

than the FSA Survey, requiring information about a wide range of alternative investment 

funds, including private equity funds, venture capital funds and real estate funds.

34

 

32 See, e.g., Financial Services Authority, Assessing the Possible Sources of Systemic Risk 

from Hedge Funds: A Report on the Findings of the Hedge Fund Survey and the Hedge 

Fund as Counterparty Survey (July 2011), available at 

http://www.fsa.gov.uk/pubs/other/hedge_fund_report_july2011.pdf (“FSA Survey”). See 

also Proposing Release, supra note 

 

Form PF includes many of the types of information collected through the FSA Survey

and proposed to be collected in the ESMA template, and a number of the changes we are 

12, at nn. 27-30 and accompanying text.

33 See ESMA’s draft technical advice to the European Commission on possible 

implementing measures of the Alternative Investment Fund Managers Directive, 

ESMA/2011/209 (July 2011), available at http://www.esma.europa.eu/index.php?

page=consultation_details&id=185 (“ESMA Proposal”). See also Directive 2011/61/EU 

of the European Parliament and of the Council of 8 June 2011 on Alternative Investment 

Fund Managers and amending Directives 2003/41/EU and 2009/65/EC and Regulations 

(EC) No 1060/2009 and (EU) No 1095/2010 (published July 1, 2011, in the Official 

Journal of the European Union).

34 For additional discussion of international efforts relating to systemic risk monitoring in 

private equity funds, see Proposing Release, supra note 12, at nn. 33-35 and 

accompanying text.
14

making from the proposal further align Form PF with these international approaches to 

private fund reporting.

35

II. DISCUSSION

The SEC is adopting Form PF and rule 204(b)-1 under the Advisers Act with 

several changes from the proposal that are designed to respond to commenter concerns. 

Under the new rule, SEC-registered investment advisers must report systemic risk 

information to the SEC on Form PF if they advise one or more private funds.36 The final 

rule and changes from the proposal are discussed below.37

In addition, the CFTC is adopting rule 4.27 with minor revisions.

38 This new rule

provides that, for registered CPOs and CTAs that are also registered as investment

advisers with the SEC and are required to file Form PF, filing Form PF serves as 

substitute compliance for certain of the CFTC’s proposed systemic risk reporting 

requirements should the CFTC adopt such requirements.

39

 

35 See, e.g., infra notes

 The CFTC has revised the 

227, 231, 244-246, 258, 279, 283 and 297 and accompanying text.

36 See Advisers Act rule 204(b)-1.

37 As noted above, section 204(b) of the Advisers Act gives the SEC authority to establish 

both reporting and recordkeeping requirements for private fund advisers. See supra

note 12 and accompanying text. One commenter asked why the SEC proposed reporting 

requirements before proposing recordkeeping requirements for private fund advisers, 

expressing concern that advisers would need to know what records to maintain in order to 

report on Form PF. See comment letter of Congressman Darrell E. Issa, Chairman of the 

House Committee on Oversight and Government Reform (Sept. 20, 2011) (“Issa Letter”). 

Recordkeeping requirements serve a number of important purposes, such as ensuring that 

advisers maintain adequate documentation relevant to the disposition of their clients’ and 

investors’ assets and that SEC examiners are able to effectively inspect advisers’ 

operations. The SEC does not believe, however, that establishing recordkeeping 

requirements is a necessary prerequisite to establishing reporting requirements.

38 See supra note 16.

39 See CEA rule 4.27. For purposes of this rule, it is the CFTC’s position that any false or 

misleading statement of a material fact or material omission in the jointly adopted 
15

new rule to allow CPOs and CTAs who are otherwise required to file Form PF the option 

of submitting on Form PF data regarding commodity pools that are not private funds as 

substitute compliance with certain of the CFTC’s proposed systemic risk reporting 

requirements should the CFTC adopt such requirements.

40 The CFTC believes that the 

revisions to the CEA rule adopted in this Release provide additional clarity with respect 

to the filing obligations of dually registered CPOs and CTAs. Because commodity pools 

that are reported or required to be reported on Form PF are categorized as hedge funds for 

purposes of Form PF, as discussed below, CPOs and CTAs filing Form PF need to 

complete only the sections applicable to hedge fund advisers.

41

As discussed above and in the Proposing Release, we have designed Form PF, in 

consultation with staff representing FSOC’s members, to provide FSOC with information 

important to its understanding and monitoring of systemic risk in the private fund 

industry.

42

 

sections (sections 1 and 2) of Form PF that is filed by these CPOs and CTAs shall 

constitute a violation of section 6(c)(2) of the CEA.

 Based on our staffs’ consultations with staff representing FSOC’s members, 

we expect that FSOC will use the information collected on Form PF, together with 

market data from other sources, to assist in determining whether and how to deploy its 

regulatory tools. This may include, for instance, identifying private funds that merit 

further analysis or deciding whether to recommend to a primary financial regulator, like 

40 Id.

41 Form PF is a joint form between the SEC and the CFTC only with respect to sections 1 

and 2 of the Form. Accordingly, private fund advisers that are also CPOs or CTAs would 

be obligated to complete only section 1 and, if they meet the applicable threshold, 

section 2 of Form PF.

42 See Proposing Release, supra note 12, at section II.A and at n. 49.
16

the SEC or CFTC, more stringent regulation of the financial activities of the private fund 

industry.43

Although the Form we are adopting will provide information useful to FSOC’s

regulatory mission, the Form has not been designed to be FSOC’s exclusive source of 

information regarding the private fund industry.

44 FSOC’s recently proposed guidance 

regarding its process for designating nonbank financial companies that may pose risks to 

U.S. financial stability for FRB supervision helps to illustrate how FSOC may use the 

Form PF data along with other data sources.

45 This guidance would establish a threestage process for determinations, at least in non-emergency situations. In the first and 

second stages, FSOC would screen firms using progressively more granular analyses of 

publicly available data and data that, like Form PF, are collected by other regulators. In 

the third stage, FSOC would work with the Office of Financial Research (“OFR”) to

conduct an in-depth review of specific firms identified in the first two stages, and this 

would generally involve OFR collecting additional, targeted information directly from 

these firms.

46

 

43 See supra note 

 Similarly, in determining whether to exercise its other authorities for 

6. 

44 See Proposing Release, supra note 12, at n. 50 and accompanying text.

45 See FSOC Second Notice, supra note 6. See also section 113 of the Dodd-Frank Act for 

a discussion of the matters that FSOC must consider when determining whether a U.S. 

nonbank financial company will be supervised by the FRB and subject to prudential 

standards. 

46 See sections 153 and 154 of the Dodd-Frank Act. One commenter expressed support for 

our approach, agreeing that, “Form PF should be used to obtain enough information to 

make a preliminary assessment, which can be followed up with data requests and 

dialogue for those firms who may potentially pose systemic risks – Form PF should not 

be considered the ‘complete picture’ of the private fund industry.” AIMA General Letter.
17

addressing potential systemic risks, we expect that FSOC would likely utilize data from 

other sources in addition to Form PF.

Form PF is primarily intended to assist FSOC in its monitoring obligations under 

the Dodd-Frank Act, but the Commissions may use information collected on Form PF in 

their regulatory programs, including examinations, investigations and investor protection 

efforts relating to private fund advisers. In section VI.A of this Release, we discuss some 

of the ways in which the SEC could use proposed Form PF data for its regulatory 

activities and investor protection efforts.

As discussed in more detail below, the amount and type of information required 

on Form PF varies based on both the size of the adviser and the types of funds managed. 

For instance, Form PF requires more detailed information from advisers managing a large 

amount of hedge fund or liquidity fund assets than from advisers managing fewer assets 

or other types of funds. This scaled approach is intended to provide FSOC with a broad 

picture of the private fund industry while relieving smaller advisers from much of the 

detailed reporting.

47

 

47 In this Release, we refer to advisers that do not satisfy a Large Private Fund Adviser 

threshold as “smaller private fund advisers.” This is not intended to imply that these 

advisers are small, only that they fall under certain of the Form’s reporting thresholds. 

See section VI of this Release for a discussion of entities that are regarded as small for 

purposes of the Advisers Act.

 Based on our staffs’ consultations with staff representing FSOC’s 

members, we understand that obtaining this broad picture will help FSOC to 

contextualize its analysis and assess whether systemic risk may exist across the private 

fund industry and to identify areas where OFR may want to obtain additional 
18

information. This scaled approach is also designed to reflect the different implications

for systemic risk that may be presented by different investment strategies.

A. Who Must File Form PF

An investment adviser must file Form PF if it: (1) is registered or required to 

register with the SEC; (2) advises one or more private funds; and (3) had at least $150 

million in regulatory assets under management attributable to private funds as of the end 

of its most recently completed fiscal year.

48 A CPO or CTA that is also registered or 

required to register with the SEC as an investment adviser and satisfies the other 

conditions described above must file Form PF with respect to any commodity pool it 

manages that is a “private fund” and may file Form PF with respect to any commodity 

pool it manages that is not a “private fund.”49 By filing Form PF with respect to these 

commodity pools, a CPO will be deemed to have satisfied certain filing requirements for 

these pools under the CFTC’s regulatory regime should the CFTC adopt such 

requirements.

50

We have modified the conditions under which an adviser must file Form PF by 

adding a minimum reporting threshold of $150 million in private fund assets under 

 

48 See Advisers Act rule 204(b)-1. This rule requires advisers to calculate the value of 

private fund assets under management pursuant to instructions in Form ADV, which 

provide a uniform method of calculating assets under management for regulatory 

purposes under the Advisers Act. See Implementing Adopting Release, supra note 11, at 

section II.A.3 (discussing the rationale underlying the new instructions for calculating 

assets under management for regulatory purposes).

49 See supra note 10 for the definition of “private fund.”

50 See CEA rule 4.27. In the Proposing Release, the CFTC stated that a CPO registered 

with the CFTC that is also registered as a private fund adviser with the SEC will be

deemed to have satisfied its filing requirements for Schedules B and C of Form CPOPQR by completing and filing the applicable portions of Form PF for each of its 

commodity pools that satisfy the definition of “private fund” in the Dodd-Frank Act.
19

management.51 Under the proposal, all private fund advisers registered with the SEC 

would have been required to file Form PF. The Dodd-Frank Act modified the Advisers

Act’s minimum registration requirements so that most advisers with less than $100 

million in assets under management must register with one or more states rather than the 

SEC.52 In addition, the Dodd-Frank Act created exemptions from SEC registration for 

advisers solely to venture capital funds and for advisers solely to private funds that in the 

aggregate have less than $150 million in assets under management in the United States.53

Commenters argued that this outcome was not justified from a systemic risk 

perspective and recommended a minimum reporting threshold for advisers based on the 

amount of private fund assets under management.

 

As a result, under our proposed approach, most advisers with under $100 million in assets 

under management, and many advisers with less than $150 million in private fund assets 

under management, would not have reported on Form PF because they would not be 

registered with the SEC. However, some registered advisers with relatively few private 

fund assets would have been required to report on Form PF while exempt advisers with 

less than $150 million in private fund assets under management would not have been 

required to file Form PF. 

54

 

51 See Advisers Act rule 204(b)-1.

One commenter proposed setting the 

52 See section 203A of the Advisers Act. See also Implementing Adopting Release, supra

note 11, at section II.A.

53 See sections 203(l) and 203(m) of the Advisers Act and rules 203(l)-1 and 203(m)-1 

under the Advisers Act. See also Exemptions Adopting Release, supra note 11.

54 See, e.g., IAA Letter; Seward Letter. Two commenters also supported a minimum 

reporting threshold based on the size of individual funds, suggesting an exclusion for 

funds “with net asset values of less than $250 million and that are less than 5% of a 

manager’s assets under management....” MFA Letter; see also BlackRock Letter. We do 
20

threshold at $150 million to match the new private fund adviser exemption under 

section 203(m) of the Advisers Act.55

Most private fund advisers that are required to file Form PF will only need to

complete section 1 of the Form. This section requires advisers to provide certain basic 

information regarding any private funds they advise in addition to information about their 

private fund assets under management and their funds’ performance and use of leverage. 

We describe the information to be collected under section 1 of Form PF in further detail 

in section II.C.1 of this Release.

 From the perspective of systemic risk monitoring, 

it does not appear at this time that the value of gathering this information from registered 

advisers with less than $150 million in private fund assets under management justifies the 

burden to these advisers.

As discussed below, however, certain larger private fund advisers must complete 

additional sections of Form PF, which require more detailed information.56

 

not believe that a threshold based on fund size would be appropriate because the 

aggregate amount of assets in smaller funds that an adviser controls may contribute 

significantly to the adviser’s total ability to affect financial markets and the $150 million 

minimum reporting threshold that we are adopting, based on the adviser’s private fund 

assets under management, will adequately differentiate between advisers with only 

smaller funds and those with significant fund assets.

 Specifically, 

55 See IAA Letter.

56 See Instruction 3 to Form PF. With this scaled approach, the reporting requirements we 

are adopting reflect the Dodd-Frank Act directive that, in formulating systemic risk 

reporting and recordkeeping for investment advisers to mid-sized private funds, the SEC

take into account the size, governance, and investment strategy of such funds to 

determine whether they pose systemic risk. See section 203(n) of the Advisers Act. The 

Dodd-Frank Act also provides that the SEC may establish different reporting 

requirements for different classes of fund advisers, based on the type or size of private 

fund being advised. See section 204(b) of the Advisers Act.
21

three types of “Large Private Fund Advisers” would be required to complete certain 

additional sections of Form PF:

• Any adviser having at least $1.5 billion in regulatory assets under 

management attributable to hedge funds as of the end of any month in the 

prior fiscal quarter;

57

• Any adviser managing a liquidity fund and having at least $1 billion in 

combined regulatory assets under management attributable to liquidity funds 

and registered money market funds as of the end of any month in the prior

fiscal quarter;

58

• Any adviser having at least $2 billion in regulatory assets under management 

attributable to private equity funds as of the last day of the adviser’s most 

recently completed fiscal year.

and

59

These large advisers must complete additional sections of Form PF, with large hedge 

fund advisers completing section 2 and large liquidity fund and private equity fund 

advisers completing sections 3 and 4, respectively.

60

 

57 See Instruction 3 to Form PF. To determine whether an adviser must file a quarterly 

report at the end of the second quarter, it must look to its hedge fund assets under 

management as of the end of each month in the first quarter. See infra text 

accompanying note 

 The information each of these 

112. We have modified the amount of this threshold from the 

proposal. For a discussion of this modification and the reasons for establishing the 

threshold at this amount, see below in section II.A.4.a of this Release (including notes 90-

92 and accompanying text).

58 See supra note 57. For a discussion of the reasons for establishing the threshold at this 

amount, see below in section II.A.4.a of this Release.

59 See Instruction 3 to Form PF. For a discussion of the reasons for establishing the 

threshold at this amount, see below in section II.A.4.a of this Release.

60 As adopted, Form PF requires advisers to determine whether they meet the large adviser 

thresholds less frequently than was proposed (quarterly rather than daily for hedge fund 
22

sections requires is tailored to the type of fund, focusing on relevant areas of financial 

activity that have the potential to raise systemic concerns. We discuss these areas of 

financial activity as they relate to hedge funds, liquidity funds and private equity funds in 

greater detail in the Proposing Release and below.

61

1. “Hedge Fund” Definition

Registered advisers managing hedge funds must submit information on Form PF 

regarding the financing and activities of these funds in section 1 of the Form, and large 

hedge fund advisers are required to provide additional information in section 2 of the 

Form.62

 

and liquidity fund advisers and annually rather than quarterly for private equity advisers). 

We discuss this change in section II.A.4 of this Release.

 Form PF defines “hedge fund” generally to include any private fund having any 

one of three common characteristics of a hedge fund: (a) a performance fee that takes into 

account market value (instead of only realized gains); (b) high leverage; or (c) short 

61 See sections II.A.1, II.A.2 and II.A.3 of the Proposing Release, supra note 12, and 

sections II.C.2, II.C.3 and II.C.4 of this Release.

62 Several commenters debated whether the hedge fund industry generally, or any hedge 

fund in particular, could pose systemic risk. See, e.g., AFL-CIO Letter and CII Letter, 

identifying hedge fund activities that could have systemic consequences; and AIMA 

General Letter and MFA Letter, arguing that no hedge fund operating today is likely to be 

systemically significant. Even among skeptical commenters, however, there was 

recognition that “there is no concrete data to draw conclusions either way, and that the 

exercise [of reporting] will be useful to allow the FSOC to make evidence-based 

conclusions.” AIMA General Letter; see also MFA Letter. As discussed in the 

Proposing Release, we believe that Congress expected hedge fund advisers would be 

required to report under Title IV of the Dodd-Frank Act and that information regarding 

certain activities of hedge funds may be important to FSOC’s monitoring of systemic 

risk. See Proposing Release, supra note 11, at nn. 54-61 and accompanying text.
23

selling.63

A number of commenters addressed the “hedge fund” definition. Some of these 

suggested that we eliminate the distinctions among fund types and instead require all 

advisers to complete the entire Form so that advisers could not use the definitions to

avoid reporting requirements.

Solely for purposes of Form PF, a commodity pool that is reported or required 

to be reported on Form PF is treated as a hedge fund.

64 Others, however, urged us to narrow the definition so 

that fewer funds would be classified as hedge funds.65 Form PF generally requires more 

information regarding hedge funds than other types of funds, and in most cases, an 

adviser must conclude that a fund is not a hedge fund in order to classify it as one of the 

six other types of private fund defined in Form PF.

66 As a result, narrowing the “hedge 

fund” definition in Form PF could have a significant effect on reporting. Commenters 

persuaded us, however, that certain revisions to the proposed definition would result in a 

more accurate grouping of funds, thereby improving the quality of the data collected and, 

at the same time, reducing the reporting burdens on some advisers.

67

 

63 See Glossary of Terms to Form PF. We are defining the term “hedge fund” in Form PF 

solely for purposes of determining what information an adviser is required to report on 

the Form. This definition does not apply with respect to any other form or regulation of 

either Commission unless otherwise specified. The SEC has recently adopted this same 

definition in amendments to Form ADV. See Implementing Adopting Release, supra

note 11, at nn. 248-255 and accompanying text. The CFTC has not adopted any 

definition of “hedge fund” beyond that adopted solely for purposes of Form PF.

64 See, e.g., AFL-CIO Letter.

65 See, e.g., ABA Committees Letter; AIMA General Letter; IAA Letter; PEGCC Letter; 

SIFMA Letter; comment letter of TCW Group, Inc. (Apr. 12, 2011) (“TCW Letter”).

66 See Glossary of Terms to Form PF. Altogether, the seven types of private fund defined in 

Form PF are: (1) hedge fund; (2) liquidity fund; (3) private equity fund; (4) real estate 

fund; (5) securitized asset fund; (6) venture capital fund; and (7) other private fund.

67 The “hedge fund” definition, as well as the six other private fund definitions used in 

Form PF, are also included in the SEC’s recent revisions to Form ADV. See
24

First, we have expressly excluded from the “hedge fund” definition in Form PF 

vehicles established for the purpose of issuing asset backed securities (“securitized asset 

funds”).

68 One commenter noted that these funds could have been categorized as hedge 

funds under our proposal, which was not the intended result.

69

Second, we have modified clause (a) of the “hedge fund” definition in Form PF, 

which classifies a fund as a hedge fund if it uses performance fees or allocations that are 

calculated by taking into account unrealized gains. One commenter pointed out that even 

 Although the issuance of 

asset backed securities may have systemic risk implications, the questions on Form PF 

regarding hedge funds would not yield relevant data regarding securitized asset funds. 

As a result, including responses regarding securitized asset funds in the hedge fund data 

could distort the information FSOC obtains from questions directed at hedge funds.

 

Implementing Adopting Release, supra note 11, at section II.C.1. Although the SEC

received no comments on these same definitions in the context of that rulemaking, the 

SEC believes that having consistent definitions in the two forms is important. As a 

result, the SEC considered in the context of that rulemaking the comments received on 

these definitions in Form PF and determined, when adopting revisions to Form ADV, to 

make several changes in that form. The changes we are making to these definitions as 

used in Form PF conform the two sets of definitions so that both forms use identical 

terms (with the exception that, for purposes of Form PF, all commodity pools about 

which an adviser is reporting are treated as hedge funds, while in Form ADV, only 

commodity pools that are private funds are treated as hedge funds). See Implementing 

Adopting Release, supra note 11, at nn 248-255. The CFTC has not adopted any 

definition of “hedge fund” beyond that adopted solely for purposes of Form PF.

68 Specifically, the “hedge fund” definition in Form PF now refers to any private fund 

having one of the listed characteristics and excludes securitized asset funds. Under the 

proposal, a fund that satisfied the “hedge fund” definition would have been categorized as 

a hedge fund even if it otherwise would have satisfied the “securitized asset fund” 

definition. As adopted, Form PF defines “securitized asset fund” as any private fund 

“whose primary purpose is to issue asset backed securities and whose investors are 

primarily debt-holders.” We have also modified this definition from the proposal so that 

it is no longer defined by reference to the “hedge fund” definition. See Glossary of 

Terms to Form PF.

69 See TCW Letter.
25

funds that do not allow for the payment of such fees or allocations, such as private equity 

funds, may be required to accrue or allocate these amounts in their financial statements to 

comply with applicable accounting principles.70 It was not intended for funds that accrue 

or allocate these fees or allocations solely for financial reporting purposes to be classified 

as hedge funds, so we have clarified that clause (a) relates only to fees or allocations that 

may be paid to an investment adviser (or its related persons).71

Third, we have addressed another commenter’s concern that clause (a) could 

inadvertently capture certain private equity funds because, although these funds typically 

calculate currently payable performance fees and allocations based on realized amounts, 

they will sometimes reduce these fees and allocations by taking into account “unrealized 

losses net of unrealized gains in the portfolio.”72

 

70 See TCW Letter.

 Funds should not be classified as hedge 

funds for purposes of Form PF based solely on this practice, and we have clarified that 

clause (a) would not include performance fees or allocations the calculation of which 

71 Some commenters objected to clause (a) of the “hedge fund” definition more generally, 

arguing that it is too broad because some traditional/long only funds use performance 

fees or allocations calculated by taking into account unrealized gains. See, e.g., AIMA 

General Letter; TCW Letter. However, based on our staffs’ discussions with staff 

representing FSOC’s members, we believe that funds using these types of fees are often 

active in markets that FSOC may desire to monitor for concentration risks. In addition, 

Form PF is intended to provide FSOC with a broad picture of the private fund industry so 

that it has context against which to assess systemic risk. An important part of this is 

gathering information about funds with similar characteristics, such as performance fees 

based on unrealized gains, so that industry-wide comparisons can be made. The 

inclusion of any particular fund in a reporting group, whether as a result of the private 

fund definitions or the reporting thresholds, does not represent a conclusion that the fund 

engages in activities that pose systemic risk.

72 See PEGCC Letter.
26

may take into account unrealized gains solely for the purpose of reducing such fees or 

allocations to reflect net unrealized losses.

Finally, several commenters asserted that clause (c) of the “hedge fund” 

definition, which looks to whether a fund may engage in short selling, should include an 

exception for a de minimis amount of short selling or exclude short selling intended to 

hedge the fund’s exposures.73 However, short selling appears to be, for purposes of 

Form PF, a potentially important distinguishing feature of hedge funds, many of which 

may, as the name suggests, use short selling to hedge or manage risk of various types. 

On the other hand, we also understand that many funds pursuing traditional investment 

strategies use short positions to hedge foreign exchange risk and to manage the duration 

of interest rate exposure, and we are persuaded that including funds within the definition 

of “hedge fund” in Form PF solely because they use these particular techniques would 

dilute the meaningfulness of the category. Therefore, we have modified clause (c) to 

provide an exception for short selling that hedges currency exposure or manages 

duration.74

Commenters arguing that, instead of a definition, the Commissions should take an 

approach similar to that used in the FSA Survey, which outlined common hedge fund 

characteristics and allowed an adviser “to make its own good faith judgment as to 

 

73 See IAA Letter; PEGCC Letter; SIFMA Letter; TCW Letter.

74 We have also made a change to clause (c) to clarify that this clause includes traditional 

short sales and any transaction resulting in a short exposure to a security or other asset 

(such as using a derivative instrument to take a short position). The purpose of this 

definition is to categorize funds that engage in certain types of market activity, and 

therefore, whether the definition applies should not depend on the form in which the fund 

engages in that activity. 
27

whether a particular fund is a hedge fund,” were not persuasive.75

Two other commenters suggested instead that we eliminate all of the private fund 

definitions and require that every private fund adviser complete the entire Form.

 Such an approach 

could effectively defer to the adviser the determination of whether to report on Form PF 

information about hedge funds – an approach that might be appropriate for a voluntary 

survey, like the FSA’s, but one that would significantly compromise the value of data 

collected for FSOC and thus would fail to achieve the purpose of this rulemaking. 

76 These 

commenters were concerned that any distinction among funds tied to the amount or type 

of information required would encourage advisers to change strategies in order to avoid 

reporting. Although we are sensitive to these concerns, we believe that distinguishing 

fund types is important for two reasons. First, by distinguishing among types of funds, 

we are able to limit the information collection burdens on advisers to funds for which the 

information is most relevant.

77

Several commenters also expressed concern that clauses (b) and (c) of the “hedge 

fund” definition in Form PF are too broad because many funds have the capacity to 

 Second, separating reported data by fund strategy allows 

extraneous information to be excluded, which we believe will improve its utility to FSOC

and the Commissions.

 

75 ABA Committees Letter. See also AIMA General Letter; IAA Letter; Seward Letter.

76 See AFL-CIO Letter; AFR Letter.

77 For instance, one commenter, in agreeing that Form PF appropriately differentiates 

“between the reporting requirements for hedge funds and private equity funds,” pointed 

out that section 2 of the Form, which would be completed by large hedge fund advisers, 

contains many questions that “are not relevant to private equity funds.” This commenter 

also explained that requiring response to “questions that are not directly related to” the 

operations of private equity advisers would impose burdens on both FSOC and the 

advisers. See comment letter of Lone Star U.S. Acquisitions (Apr. 12, 2011) (“Lone Star

Letter”).
28

borrow or incur derivative exposures in excess of the specified amounts or to engage in 

short selling but do not in fact engage, or intend to engage, in these practices.78

Finally, some commenters recommended that a fund should not be classified as a 

“hedge fund” for purposes of Form PF unless it satisfies at least two of the prongs of the 

“hedge fund” definition (rather than any one prong).

 These 

commenters generally argued that clauses (b) and (c) should focus on actual or 

contemplated use of these practices rather than potential use. Changes to the “hedge 

fund” definition in response to these comments have not been made because clauses (b) 

and (c) properly focus on a fund’s ability to engage in these practices. Even a fund for 

which leverage or short selling is an important part of its strategy may not engage in that 

practice during every reporting period. Thus, the suggested approach could result in 

incomplete data sets for hedge funds, a class of funds that may be systemically 

significant. However, a private fund would not be a “hedge fund” for purposes of 

Form PF solely because its organizational documents fail to prohibit the fund from 

borrowing or incurring derivative exposures in excess of the specified amounts or from 

engaging in short selling so long as the fund in fact does not engage in these practices 

(other than, in the case of clause (c), short selling for the purpose of hedging currency 

exposure or managing duration) and a reasonable investor would understand, based on 

the fund’s offering documents, that the fund will not engage in these practices.

79

 

78 See, e.g., AIMA General Letter; IAA Letter; PEGCC Letter; SIFMA Letter; TCW Letter.

 The definition is designed to 

identify funds that are an appropriate subject for the higher level of reporting to which 

79 See, e.g., Lone Star Letter; PEGCC Letter; TCW Letter. 
29

hedge funds will be subject under Form PF, and, based on our staffs’ consultations with 

staff representing FSOC’s members, we believe that any one of the identified 

characteristics is sufficient to appropriately distinguish a fund for this purpose. We have 

not, therefore, made the change these commenters suggested. The changes to the “hedge

fund” definition discussed above are intended to more accurately group private funds for 

purposes of Form PF and, thereby, improve the quality of information reported.

2. “Liquidity Fund” Definition

Registered advisers managing liquidity funds must submit information on 

Form PF regarding the financing and activities of these funds in section 1 of the Form, 

and large liquidity fund advisers are required to provide additional information in 

section 3 of the Form.

80 For purposes of Form PF, a “liquidity fund” is 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.

81

3. “Private Equity Fund” Definition

 Commenters did not address the “liquidity fund” definition, which the SEC 

is adopting as proposed.

Registered advisers managing private equity funds must submit information on 

Form PF regarding the financing and activities of these funds in section 1 of the Form, 

 

80 Form PF is a joint form between the SEC and the CFTC only with respect to sections 1 

and 2 of the Form. Section 3 of the Form, which requires more specific reporting 

regarding liquidity funds, is only required by the SEC.

81 See Glossary of Terms to Form PF. As discussed in the Proposing Release, liquidity 

funds can resemble registered money market funds, certain features of which may make 

them susceptible to runs and thus create the potential for systemic risk. See Proposing 

Release, supra note 12, at section II.A.2.
30

and large private equity advisers are required to provide additional information in 

section 4 of the Form.82 Consistent with the proposal, Form PF defines “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.

83 Two commenters advocated for a definition 

of “private equity fund” that would not depend on whether a fund is a hedge fund.84 This 

approach could, however, create gaps between the definitions and encourage advisers to 

structure around the reporting requirements.85 The changes we have made to the “hedge 

fund” definition substantially address the concerns of these commenters.86

 

82 Form PF is a joint form between the SEC and the CFTC only with respect to sections 1 

and 2 of the Form. Section 4 of the Form, which requires more specific reporting 

regarding private equity funds, is only required by the SEC.

 Therefore, we 

83 See Glossary of Terms to Form PF. The definitions of “real estate fund” and “venture 

capital fund” are being adopted as proposed, and changes to the definition of “securitized 

asset fund” are discussed above. See supra note 69. These definitions are primarily 

intended to exclude these types of funds from our definition of “private equity fund” to 

improve the quality of data reported on Form PF relating to private equity funds.

84 See PEGCC Letter (proposing an alternative that largely inverts the proposed “hedge 

fund” definition but would allow for short selling and soften other distinctions); SIFMA 

Letter (suggesting an alternative that would define a “private equity fund” as a private 

fund having “a large number of sophisticated, third-party institutional and high net worth 

investors” and satisfying ten additional criteria, including that “the fund and its 

investment activities are not subject to regulatory restrictions or limitations.”).

85 Some commenters were concerned that creating any distinctions among funds would 

encourage advisers to change strategies in order to avoid reporting. See supra note 76

and accompanying text. The SEC believes, based on its staff’s consultations with staff 

representing FSOC’s members, that this risk is best addressed by tightly integrating the 

definitions.

86 See supra notes 64-79 and accompanying text for a discussion of comments on the 

“hedge fund” definition and the changes we are making from the proposal. Some of 

these comments reflected concern that the breadth of the “hedge fund” definition would 

cause it to capture some private equity funds. Commenters arguing for an independent 

“private equity fund” definition expressed similar concerns. As discussed above, certain 
31

believe that the proposed approach to defining “private equity fund” continues to be 

appropriate for the purposes of Form PF.

4. Large Private Fund Adviser Thresholds

a. Amounts

As noted above, we are adopting a threshold of $1.5 billion in hedge fund assets 

under management for large hedge fund adviser reporting, $1 billion in combined 

liquidity fund and registered money market fund assets under management for large 

liquidity fund adviser reporting, and $2 billion in private equity fund assets under 

management for large private equity fund adviser reporting.

87 These thresholds are 

designed so that the group of Large Private Fund Advisers filing Form PF will be

relatively small in number but represent a substantial portion of the assets of their

respective industries. For example, we estimate that approximately 230 U.S.-based 

advisers each managing at least $1.5 billion in hedge fund assets represent over 80

percent of the U.S. hedge fund industry based on assets under management.88

 

of the changes we are making to the “hedge fund” definition are designed to address 

these concerns.

 Similarly, 

87 As proposed, we are requiring that an adviser determine whether it meets a threshold and 

qualifies as a large hedge fund adviser, large liquidity fund adviser or large private equity 

adviser based solely on the assets under management attributable to the particular types 

of fund. Two commenters suggested that we instead require advisers to aggregate all of 

their assets under management, regardless of strategy, for purposes of the thresholds. See

AFL-CIO Letter; AFR Letter. These commenters cautioned that our approach could 

allow advisers with substantial private fund assets under management to nevertheless 

avoid classification as a Large Private Fund Advisers. We are sensitive to these 

commenters’ concerns, but we continue to believe that the hedge fund, liquidity fund and 

private equity fund business models are sufficiently distinct that for FSOC’s purposes 

they are most appropriately analyzed on a separate basis.

88 See Billion Dollar Club, HEDGEFUND INTELLIGENCE (“HFI”) (Oct. 3, 2011). We 

estimate that, in addition to the 230 U.S.-based hedge fund advisers that will exceed the 

threshold, approximately 23 non-U.S. private fund advisers will also be classified as large 
32

SEC staff estimates that the approximately 155 U.S.-based advisers each managing over 

$2 billion in private equity fund assets represent approximately 75 percent of the U.S. 

private equity fund industry based on committed capital.89

The threshold we are adopting for large hedge fund advisers reflects an increase 

from the $1 billion threshold that we proposed. We do not expect, however, that this 

increase will substantially change the group of advisers that were estimated in the

proposal would be classified as large hedge fund advisers. Rather, the change is intended 

simply to adjust for a difference in how assets under management are measured in Form 

PF compared to how they are measured in the commercial databases that we consulted in 

 

hedge fund advisers, for a total of approximately 250 large hedge fund advisers. We 

have based this estimate of non-U.S. advisers on IARD data as of October 1, 2011, 

showing that, among currently registered private fund advisers, fewer than 10% are nonU.S. advisers. (We are not aware of any reason that recent changes in the exemptions 

available under the Advisers Act would affect the relative representation of U.S. and nonU.S. advisers.) One commenter suggested that estimates based on HFI data should be 

grossed up because the database is under-inclusive. See comment letter of the Alternative 

Investment Management Association (Jul. 26, 2011) (“AIMA AUM Letter”). Although 

we acknowledge that this database is likely somewhat under-inclusive, we believe that 

the amount of assets under management not represented in the database is relatively small 

because the aggregate amount of assets reported to the database is consistent with other 

data sources estimating the total size of the hedge fund industry. In addition, we believe 

the uncounted assets are likely skewed toward the smaller advisers in the industry 

because the identity and size of the industry’s largest advisers are relatively consistent 

across sources. As a result, although this database may under-represent the total amount 

of hedge fund industry assets under management, the count of large hedge fund advisers 

is likely to be relatively accurate. The changes to the “hedge fund” definition discussed 

above will likely result in fewer funds being classified as hedge funds than under the 

proposed definition. However, these changes are intended to more accurately group 

private funds for purposes of Form PF and should more closely align the definition to the 

estimates discussed above.

89 Preqin. The Preqin data relating to private equity fund committed capital is available in 

File No. S7-05-11. We estimate that, in addition to the 155 U.S.-based private equity 

advisers that will exceed the threshold, approximately 16 non-U.S. private fund advisers 

will also be classified as large private equity advisers, for an approximate total of 170

large private equity advisers. See supra note 88 for a discussion of the basis for this 

estimate.
33

proposing the $1 billion threshold amount. Form PF uses the definition of “regulatory 

assets under management” that the SEC recently adopted in connection with amendments 

to its Form ADV. This definition measures assets under management gross of 

outstanding indebtedness and other accrued but unpaid liabilities. One commenter 

pointed out, however, that the assets under management that advisers report to the 

currently available third-party databases are generally calculated on a net basis.90 In 

other words, without adjustment, our proposed threshold of $1 billion in gross assets 

would have captured advisers with less than $1 billion in net assets, expanding the group 

of advisers classified as large hedge fund advisers beyond what we intended.

91

 

90 See AIMA AUM Letter.

We 

believe this revised threshold strikes an appropriate balance between obtaining 

91 We are not aware of any existing source with data regarding the gross assets under 

management of U.S. hedge fund managers. Therefore, based on our staffs’ consultations 

with staff representing FSOC’s members, we have established this threshold by 

multiplying the proposed threshold by an industry average leverage ratio of 1.5 times net 

assets. The commenter suggested that industry leverage ranges between 1.5 and 3 times 

net assets but noted that leverage ratios over the preceding 12 months had dropped to 1.1 

times investment capital. See AIMA AUM Letter; see also MFA Letter (citing leverage 

ratios from 3.0 to as low as 1.16); Andrew Ang, et al., Hedge Fund Leverage, NATIONAL 

BUREAU OF ECONOMIC RESEARCH (Feb. 2011). We have used a leverage ratio at the 

lower end of this range because, without data regarding the industry’s gross assets, it 

cannot confidently be estimated that a higher threshold would capture a portion of the 

industry sufficient to allow FSOC to effectively perform systemic risk assessments. 

Also, although the definition of “regulatory assets under management” is measured gross 

of certain liabilities, it does not capture all forms of leverage that may be included in the 

sources cited in the AIMA AUM Letter, such as off-balance sheet leverage. As a result, 

the leverage implied by “regulatory assets under management” may be lower than the 

leverage estimated based on these sources. The AIMA AUM Letter also suggested that 

the average leverage ratio used should be asset-weighted because advisers with over $1 

billion in net assets under management tend to use greater amounts of leverage. 

However, these larger advisers would exceed the threshold even if measured on a net 

basis. The adjustment to the threshold to account for leverage is most relevant for the 

middle group of advisers, not the large advisers, and the leverage ratio we have used is 

consistent with the leverage ratio this commenter estimates for advisers with $200 million 

to $1 billion in net assets under management.
34

information regarding a significant portion of the hedge fund industry while minimizing 

the burden imposed on smaller advisers.92

An adviser managing liquidity funds must combine liquidity fund and registered 

money market fund assets for purposes of determining whether it meets the threshold for 

more extensive reporting regarding its liquidity funds. Liquidity funds and registered 

money market funds often pursue similar strategies, invest in the same securities and 

present similar risks. An adviser is, however, only required to report information about 

unregistered liquidity funds on Form PF. This information will supplement data the SEC 

collects about registered money market funds on its Form N-MFP and provide FSOC a 

more complete picture of large liquidity pools and their management. The SEC expects

this approach to the reporting threshold to capture approximately 80 of the most 

significant managers of liquidity funds.93 Commenters supported this approach, which 

we are adopting as proposed.94

Based on our staffs’ consultations with staff representing FSOC’s members, we 

believe that requiring basic information from all registered advisers over the minimum 

reporting threshold but more extensive and detailed information only from advisers 

meeting the higher thresholds is important to enabling FSOC to obtain a broad picture of 

 

92 Similar adjustments to the thresholds applicable to liquidity fund advisers and private 

equity fund advisers have not been made because we understand these strategies typically 

involve little leverage at the fund level. See infra note 306 and accompanying text.

93 See also Proposing Release, supra note 12, at n. 89. The estimate of the number of large 

liquidity fund advisers is based on the number of advisers with at least $1 billion in 

registered money market fund assets under management, as reported on Form N-MFP as 

of October 1, 2011.

94 See AFL-CIO Letter; AFR Letter.
35

the private fund industry. We understand that obtaining this broad picture will help 

FSOC to contextualize its analysis and assess whether systemic risk may exist across the 

private fund industry and to identify areas where OFR may want to obtain additional 

information. At the same time, requiring that only these Large Private Fund Advisers 

complete additional reporting requirements under Form PF will provide systemic risk 

information for a substantial majority of private fund assets while minimizing burdens on 

smaller private fund advisers that are less likely to pose systemic risk concerns.

Although thresholds set at a higher amount could still yield information regarding 

much or a majority of the private fund industry’s assets under management, such 

thresholds would potentially impede FSOC’s ability to obtain a representative picture of 

the private fund industry. The activities of private fund advisers may differ significantly 

depending on size because, for instance, some strategies may be practical only at certain

scales.95

 

95 For example, one commenter cited evidence suggesting that the use of leverage varies 

significantly with fund size, though they did not state whether this variation continues 

among advisers with over $1 billion in net assets under management. See AIMA AUM 

Letter. See also Ibbotson, Roger G., Peng Chen, and Kevin X. Zhu, 2011, The ABCs of 

Hedge Funds: Alphas, Betas, and Costs, FINANCIAL ANALYSTS JOURNAL 67 (1) 

(“Ibbotson, et al.”) at 17-18 (discussing possible explanations for observed differences in 

returns for larger and smaller hedge funds).

 As a result, obtaining information regarding, for instance, 50 percent or 60

percent of the industry’s assets under management may not be sufficient to confidently 

draw conclusions regarding the remaining portion of the industry. However, because 

relatively few advisers manage most of the industry’s assets under management, a 

substantial reduction in the potential burdens of reporting can be achieved without 

sacrificing the ability to obtain a more representative picture. For example, setting the 
36

threshold to cover, for instance, 80 percent of industry assets under management rather 

than 100 percent would relieve thousands of advisers from more detailed reporting while 

still obtaining a reasonably representative picture.

96

Commenters expressed support for a tiered reporting system based on size.

 There are, however, limits to the 

range within which this tradeoff can be effectively made. For example, setting the 

thresholds to cover, for instance, 60 percent of industry assets under management rather 

than 80 percent would relieve a relatively small segment of advisers from more detailed 

reporting but might not result in a picture broad enough to be representative. 

Accordingly, the thresholds have been established to balance FSOC’s need for a broad, 

representative set of data regarding the private fund industry with the desire to limit the

potential burdens of private fund systemic risk reporting.

97

However, most commenters thought the proposed threshold of $1 billion was either too 

high or too low.98 Commenters arguing for a lower threshold expressed concern that, at 

$1 billion, regulators would receive insufficient information to monitor certain types of 

market behavior with potentially systemic consequences.99

 

96 In the PRA analysis below, the SEC estimates that the large adviser thresholds will result 

in approximately 500 advisers reporting additional information in section 2, 3 or 4 of 

Form PF while approximately 3,070 advisers will report information only in section 1 

and another 700 will not report on Form PF at all because of the minimum reporting 

threshold. See infra section IV.A of this Release.

 In contrast, a number of 

97 See, e.g., comment letter of Coalition of Private Investment Companies (Mar. 31, 2011) 

(“CPIC Letter”) and MFA Letter.

98 Compare AFL-CIO Letter and AFR Letter (supporting a lower threshold) to AIMA 

General Letter; IAA Letter; MFA Letter; PEGCC Letter; SIFMA Letter (supporting a 

higher threshold). See also comment letter of George Merkl (Feb. 22, 2011) (“Merkl 

February Letter”) (supporting the proposed thresholds).

99 See AFL-CIO Letter (arguing that the proposal would not allow regulators to monitor 

“herding” behavior, which it defines as the tendency for market participants to trade 
37

commenters argued that even an adviser with $1 billion in assets under management 

could not pose systemic risk.100 Several of these commenters supported an increase to $5 

billion, which they argued would still capture over half the hedge fund industry while 

ensuring that advisers have sufficient operational capabilities to complete the Form.101

We have carefully considered these comments in light of the information we 

understand FSOC desires and its intended use by FSOC. Based on this, the SEC has 

determined to adopt the proposed threshold for large liquidity fund advisers and to 

increase the threshold for large private equity fund advisers to $2 billion. We are 

adopting the threshold for large hedge fund advisers with the corrective change discussed 

 

together on one side of the market; also suggesting that, at a minimum, advisers with 

between $150 million and $1 billion in assets under management “should be required to 

complete all applicable sections of Form PF on a semi-annual basis.”); AFR Letter.

100 See, e.g., AIMA General Letter (also questioning whether the SEC and FSOC have the 

capacity to analyze the data from all the advisers above the proposed threshold); IAA

Letter; MFA Letter; comment letter of Olympus Partners (Apr. 1, 2011) (“Olympus

Letter”); PEGCC Letter (preferring that there be no large adviser category for private 

equity fund advisers because, in their view, these advisers pose little systemic risk); 

Seward Letter; SIFMA Letter; comment letter of the United States Chamber of 

Commerce, Center for Capital Markets Competitiveness (Apr. 12, 2011) (“USCC

Letter”).

101 See, e.g., AIMA General Letter (asserting that a $5 billion threshold “still captures 

around 50-60% of the US hedge fund industry assets or just over 75 large hedge fund 

managers.”); MFA Letter (“Based on estimates, 77 hedge fund managers representing 

approximately 50-60% of hedge fund industry assets would exceed this [$5 billion]

threshold.”); Seward Letter; USCC Letter (citing figures similar to those provided in the 

AIMA General Letter and the MFA Letter in support of a $5 billion threshold). Other

commenters asserted that the thresholds should take into account measures of leverage or 

derivatives exposures rather than just assets under management. See, e.g., ABA 

Committees Letter; AIMA General Letter. As discussed above, measuring these 

thresholds using “regulatory assets under management,” as defined in Form ADV, 

implies adjustment for some forms of leverage. Two commenters suggested that, instead 

of assets under management, the adviser’s proprietary assets are the most appropriate 

measure of assets at risk. See PEGCC Letter; USCC Letter. However, private fund 

advisers exercise significant discretion over the assets they manage, which makes assets 

under management a more accurate measure of an adviser’s ability to affect the U.S. 

financial system.
38

above. Although we understand commenters’ concerns that the proposed thresholds are 

too high and will not permit regulators to detect certain group behaviors among smaller 

private fund advisers, we believe at this time that the amount of additional information 

that would be required for this purpose would impose a significant burden on these 

smaller advisers and not significantly expand FSOC’s ability to understand the industry.

On the other hand, in light of the information we understand FSOC desires and its 

intended use by FSOC, we are also not persuaded that a larger increase in the thresholds

would be appropriate. Commenters supporting an increase may be correct that an adviser 

just exceeding these thresholds could not be large enough to pose systemic risk. 

However, the thresholds are not intended to establish a cutoff separating the risky from 

the safe but rather to provide FSOC with sufficient context for the assessment of systemic 

risk while minimizing the burden imposed on smaller advisers.

102 We understand based 

on our staffs’ consultation with staff representing FSOC’s members that, in order to 

assess potential systemic risk posed by the activities of certain funds, FSOC would 

benefit from access to data about funds that, on an individual basis, may not be a source 

of systemic risk. As discussed above, the increase that some commenters supported 

would result in coverage of a substantially smaller part of the industry, potentially 

impeding FSOC’s ability to obtain a broad picture of the private fund industry.103

 

102 See supra text accompanying notes 94-96. As noted above, the FSOC Second Notice 

highlights that even establishing guidelines for evaluating private fund advisers may 

require the context that Form PF will provide. See supra note 21.

103 In particular, the activities of private fund advisers may differ significantly depending on 

size and that the portion of industry assets represented by advisers with over $5 billion in 

private fund assets under management may look substantially different from the portion 
39

The SEC is, however, persuaded that an increase in the threshold for large private 

equity advisers that is smaller than some commenters advocated can be made without 

sacrificing the ability to obtain a broad picture of the private equity industry. SEC staff 

estimates that an increase in this threshold to $2 billion from the proposed $1 billion will 

reduce the portion of U.S. private equity industry assets covered by the more detailed 

reporting in section 4 of the Form from approximately 85 percent to approximately 75

percent.104 At the same time, it reduces the number of U.S.-based advisers SEC staff 

estimates will be categorized as large private equity advisers from approximately 270 to 

approximately 155.105

b. Frequency of Testing

 This will significantly mitigate the number of advisers subject to 

the more detailed reporting while still covering a substantial majority of industry assets. 

As a result of this change, section 4 of Form PF will cover a smaller portion of U.S. 

private equity industry assets than section 2 covers of U.S. hedge fund industry assets. 

However, the SEC believes this result is appropriate because private equity funds tend to 

pursue a narrower range of strategies than hedge funds, reducing concerns regarding the

level of representativeness.

The proposal would have required hedge fund and liquidity fund advisers to 

measure whether they had crossed these thresholds on a daily basis and private equity 

advisers to measure them on a quarterly basis. The proposed approach was based on our 

 

of industry assets represented by advisers with between, for instance, $1 billion and $5 

billion.

104 See supra note 89.

105 See supra note 89.
40

understanding that, as a matter of ordinary business practice, advisers are aware of hedge 

fund and liquidity fund assets under management on a daily basis, but are likely to be 

aware of private equity fund assets under management only on a quarterly basis.

However, several commenters argued that advisers would have difficulty 

monitoring on a daily basis the value of private funds holding complex or illiquid 

investments.106 One commenter also noted that, in any given quarter, an adviser could 

experience significant spikes in the value of its assets under management.107 These 

commenters suggested a variety of alternatives, such as testing at the end of the prior 

reporting period,108 using an average over the period (possibly based on values at the end 

of each month in the quarter),109 or testing at the end of each month.110 We are persuaded 

that requiring daily testing of complex or illiquid investments could impose a substantial

burden on some advisers, and we have, accordingly, modified the Form so that advisers 

need only test whether their hedge fund or liquidity fund assets meet the relevant 

threshold as of the end of each month.

111 In addition, as some commenters suggested, the 

test will look back one quarter so that these advisers know at the start of each reporting 

period whether they will be required to complete the more detailed reporting required of 

large hedge fund advisers and large liquidity fund advisers.112

 

106 See, e.g., ABA Committees Letter; BlackRock Letter; MFA Letter; Seward Letter.

 We did not adopt an 

107 See ABA Committees Letter.

108 See BlackRock Letter; MFA Letter.

109 See ABA Committees Letter; AIMA General Letter; IAA Letter.

110 See Seward Letter.

111 See Instruction 3 to Form PF.

112 Id. See also supra note 108.
41

approach using an average because it would add unnecessary complexity and potentially 

allow an adviser whose assets under management have grown significantly during a 

quarter to delay more detailed reporting for an additional quarter.

Commenters also objected to the proposed quarterly testing with respect to private 

equity advisers, suggesting that even such infrequent testing may be difficult for some 

advisers.113 As we discuss in further detail below, large private equity fund advisers will 

be required to report information regarding their private equity funds only on an annual

(rather than quarterly) basis, with the result that quarterly testing of the threshold is 

unnecessary.

114 Accordingly, advisers need only test whether their private equity fund 

assets meet the relevant threshold at the end of each fiscal year.115

5. Aggregation of Assets under Management

For purposes of determining whether an adviser meets the $150 million minimum 

reporting threshold or is a Large Private Fund Adviser for purposes of Form PF, the 

adviser must aggregate together:

• assets of managed accounts advised by the firm that pursue substantially the 

same investment objective and strategy and invest in substantially the same 

positions as private funds advised by the firm (“parallel managed accounts”)

 

113 See Merkl February Letter (noting that some private equity funds do not provide first and 

third quarter financial statements to investors); PEGCC Letter (suggesting annual testing 

and asserting that the less volatile nature of private equity investments would not justify 

the cost of quarterly valuation).

114 See section II.B of this Release.

115 See Instruction 3 to Form PF.
42

unless the value of those accounts exceeds the value of the private funds with 

which they are managed;

116

• assets of private funds advised by any of the adviser’s “related persons” other 

than related persons that are separately operated.

and

117

These aggregation requirements are designed to prevent an adviser from avoiding 

Form PF reporting requirements by re-structuring how it provides advice.

We have modified these aggregation requirements from the proposal. As 

adopted, an adviser may exclude parallel managed accounts if the value of those accounts 

is greater than the value of the private funds with which they are managed.

118 This 

change recognizes that, as some commenters noted, an adviser managing a relatively 

small amount of private fund assets could end up crossing a reporting threshold simply 

because it has a significant separate account business using a similar strategy.

119

 

116 See Instructions 1, 3, 5, and 6 to Form PF; and Glossary of Terms to Form PF. See also 

definitions of “dependent parallel management account,” “hedge fund assets under 

management,” “liquidity fund assets under management,” and “private equity fund assets 

under management” in the Glossary of Terms to Form PF.

 We 

believe this approach is consistent with section 204(b) of the Advisers Act, the focus of 

117 See Instructions 3 and 5 to Form PF. “Related person” is defined generally as: (1) all of 

the adviser’s officers, partners, or directors (or any person performing similar functions); 

(2) all persons directly or indirectly controlling, controlled by, or under common control 

with the adviser; and (3) all of the adviser’s employees (other than employees performing 

only clerical, administrative, support or similar functions). For purposes of Form PF, a 

related person is “separately operated” if the advisers is not required to complete section

7.A. of Schedule D to Form ADV with respect to that related person. See Glossary of 

Terms to Form PF and Glossary of Terms to Form ADV. In addition, an adviser may, 

but is not required to, file one consolidated Form PF for itself and its related persons. See 

infra section II.A.6 of this Release.

118 See supra note 116.

119 See IAA Letter; TCW Letter.
43

which is private fund reporting.

120 We remain concerned, however, that advisers 

focusing on private funds may increasingly structure investments as separate accounts to 

avoid Form PF reporting requirements, which could diminish the utility to FSOC of the 

information collected on Form PF.

121 Accordingly, an adviser must still include the 

value of parallel managed accounts in determining whether it meets a reporting threshold 

if the value of those accounts is less than the value of the private funds managed using 

substantially the same strategy.

122

 

120 An adviser managing primarily separate accounts would, of course, still be subject to the 

applicable Form PF reporting requirements if its private fund assets, taken alone, would 

cause it to exceed one or more reporting thresholds.

121 Commenters disagreed over whether such evasion was likely. One commenter supported 

the proposed aggregation rules, agreeing that they “will prevent [an adviser from splitting 

itself] into smaller components to avoid reporting requirements that are triggered by the 

amount of assets that are managed by an investment adviser.” Merkl February Letter. 

Another commenter, however, was skeptical that advisers would re-structure to avoid 

reporting because clients typically determine the structure of their investments. See IAA

Letter. Although clients may in many cases dictate the form of investment, we believe 

that advisers are not without influence in such structuring decisions and may prefer to 

avoid reporting on Form PF. (We note that advisers, as fiduciaries, may not subordinate 

clients’ interests to their own such as by altering the structure of investments in a way 

that is not in the client’s best interest in an attempt to remain under the reporting 

thresholds.)

122 See supra note 116. Some commenters also encouraged us to narrow the definition of 

“parallel managed account” so that fewer accounts or fewer types of accounts would be 

covered. See, e.g., AIMA General Letter; IAA Letter (suggesting that we replace 

“substantially the same” with the “same”); comment letter of the Investment Company 

Institute (Apr. 12, 2011); TCW Letter (suggesting we exclude registered investment 

companies, undertakings for collective investment in transferable securities (UCITS) and 

SICAVs). We have, however, determined to adopt this definition as proposed because 

we believe that it appropriately reflects the total amount of assets that an adviser is 

managing using a particular strategy. In addition, the changes we are making with 

respect to how these account assets are treated for purposes of the reporting thresholds, as 

well as changes discussed below that allow advisers not to aggregate these account assets 

with their private funds for reporting purposes, substantially address the concerns of these 

commenters. See infra note 335 and accompanying text. 
44

We have also modified these aggregation requirements from the proposal so that

advisers may exclude the assets under management of related persons that are separately 

operated.123 There was general support for the proposed aggregation of related 

persons.

124 However, commenters argued that “[r]equiring aggregation of funds 

managed by ‘any related person’ is not possible for many large institutions such as a 

large firm which operates under separate business units with independent asset 

management functions and decision making by affiliated entities.”125

We are persuaded that advisers may have difficulty gathering the information 

necessary to aggregate the assets of related persons whose operations are genuinely 

independent of their own and that, with an appropriate standard of separateness, the risk 

of evasion is substantially mitigated. Having considered several existing SEC standards 

of separateness, we believe that the most appropriate for this purpose is the standard the 

SEC recently adopted in Item 7.A of Form ADV for determining whether an adviser must 

complete section 7.A of Schedule D to that form with respect to a related person.

 

126

 

123 See supra note 

 

Although the Item 7.A standard was adopted for a somewhat different regulatory 

117. See also Proposing Release, supra note 12, for the proposed version 

of Instructions 3, 5 and 6 to Form PF.

124 See, e.g., Merkl February Letter.

125 TCW Letter. See also IAA Letter.

126 One commenter suggested that we use the standard under section 13 of the Securities 

Exchange Act of 1934 (“Exchange Act”) or look to whether the related persons “share 

information about investment decisions on a real time basis.” TCW Letter. We are 

concerned that using the standard under sections 13(d) and 13(g) of the Exchange Act 

would impose additional burdens on advisers as compared to the Item 7.A standard 

because advisers will not necessarily have considered the former in the ordinary course of 

business, and we believe the alternative proposed by this commenter would make it too 

easy to conclude that a related person is separately operated.
45

purpose, we believe it suits this role as well. In addition, every adviser filing Form PF

will have already considered this standard with respect to its related persons, which 

means that applying the standard in the context of Form PF will impose little or no

incremental burden on advisers. Accordingly, for purposes of determining whether an 

adviser meets one or more of the reporting thresholds, the adviser need only aggregate its 

private fund assets with those of its related persons for which it is required to complete 

section 7.A of Schedule D to Form ADV.

127

For purposes of both the reporting thresholds and responding to questions on 

Form PF, an adviser may exclude any assets invested in the equity of other private 

funds.

128 In addition, if any of the adviser’s private funds invests substantially all of its 

assets in the equity of other private funds and, aside from those investments, holds only 

cash, cash equivalents and instruments intended to hedge currency risk, the adviser may 

complete only section 1b with respect to that fund and otherwise disregard that fund.129

 

127 See supra note 

 

117. The relevant instruction to Item 7.A of Form ADV reads as follows: 

“You do not need to complete Section 7.A. of Schedule D for any related person if:

(1) you have no business dealings with the related person in connection with advisory 

services you provide to your clients; (2) you do not conduct shared operations with the

related person; (3) you do not refer clients or business to the related person, and the 

related person does not refer prospective clients or business to you; (4) you do not share 

supervised persons or premises with the related person; and (5) you have no reason to 

believe that your relationship with the related person otherwise creates a conflict of 

interest with your clients.”

128 See Instruction 7 to Form PF. The adviser must, however, treat these assets consistently 

for purposes of Form PF. For example, an adviser may not count these assets when 

determining whether the fund’s borrowing may exceed half its net asset value and then 

disregard these assets for purposes of the reporting thresholds. Although this instruction 

allows an adviser to disregard these investments in other private funds, it would not allow 

an adviser to disregard any liabilities of the private fund, even if incurred in connection 

with an investment in other private funds.

129 See Instruction 7 to Form PF. Solely for purposes of this instruction, an adviser is also 

permitted to treat as a private fund any non-U.S. fund that would be a private fund had it
46

These instructions are intended to avoid duplicative reporting, which reduces the burden 

of reporting for advisers and improves the quality of the data reported.

Based on our staffs’ consultation with staff representing FSOC’s members, we 

have expanded from the proposal the scope of assets that may be disregarded under this 

instruction. The proposed instruction would have allowed advisers to disregard only fund 

of funds that invest exclusively in other private funds.

130 Commenters expressed concern 

that the proposed instruction would prove too narrow to accommodate many funds of 

funds, noting that these funds often hold cash or some amount of direct investments.131 

These commenters generally sought a broader exclusion for funds of funds, suggesting 

alternatives that would allow these funds to hold essentially unlimited dollar amounts of 

direct investments while not reporting on Form PF.

132

 

used U.S. jurisdictional means in offering its securities. A non-U.S. fund that has never 

used U.S. jurisdictional means in the offering of the securities it issues would not be a 

private fund. See infra note 

 In light of the purpose for which 

134; Exemptions Adopting Release, supra note 11, at n.294

and accompanying text.

130 See the Proposing Release, supra note 12, for the proposed version of Instruction 7 to 

Form PF. We have also added a new Instruction 8, which clarifies that, except as 

provided in Instruction 7, all investments in other funds should be included for all 

purposes under Form PF but that advisers are not required to “look through” the other 

funds to the underlying assets (unless the other fund’s purpose is to act as a holding 

company for the private fund’s investments).

131 See, e.g., ABA Committees Letter; comment letter of Akina Limited (Feb. 25, 2011) 

(“Akina Letter”); MFA Letter; PEGCC Letter; comment letter of Sidley Austin, LLP 

(submitted to the CFTC) (Apr. 12, 2011) (“Sidley Letter”); SIFMA Letter.

132 Id. Some commenters also suggested that advisers should not report even the limited 

information required in section 1b with respect to funds of funds. See, e.g., ABA 

Committees Letter; Sidley Letter; SIFMA Letter. However, as one commenter pointed 

out, these funds may be employing leverage at the fund of funds level, which would not 

be reported if these funds did not complete this section. See Merkl February Letter. In 

addition, information collected in section 1b will provide regulators with information 

regarding the extent of these funds’ investments in other private funds, and certain of the 

information collected in this section may be important to our investor protection mission. 

See infra notes 133 and 197.
47

information is collected on Form PF, we are not convinced that an adviser should not 

have to report on a fund’s direct investments simply because it primarily holds

investments in other private funds. However, we are persuaded that our proposed 

exception for funds of funds was too narrow in that it did not allow for a de minimis

amount of cash, cash equivalents and currency hedges. These limited non-private fund 

holdings appear unlikely, on their own, to raise systemic concerns. We are also 

persuaded that, even where a fund is not necessarily a “fund of funds” but holds 

investments in other private funds, reporting on those investments is unnecessary because 

information regarding the other private funds will, in most cases, be reported separately 

on Form PF, and we have modified the instructions accordingly.

133

If an adviser’s principal office and place of business is outside the United States, 

the adviser may exclude any private fund that, during the adviser’s 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.134

 

133 See Instruction 7 to Form PF. We have, however, added a new question 10 to Form PF, 

which requires the adviser to disclose the amount that each private fund has invested in 

other private funds. This will allow regulators to understand the extent to which these 

investments occur and are otherwise being disregarded on Form PF. See infra note 

 This approach is designed to reduce the 

197.

134 See Instruction 1 to Form PF. This portion of Instruction 1 is only necessary for those 

funds that fall within the definition of “private fund.” A non-U.S. fund that has never 

used U.S. jurisdictional means in the offering of the securities it issues would not be a 

private fund. See Exemptions Adopting Release, supra note 11, at n.294 and 

accompanying text. We have modified this instruction from the proposal to more closely 

follow the requirements of Regulation S; the instruction now looks to whether the 

offering was made “in the United States” rather than “to... any United States person.” 

See also Glossary of Terms to Form PF. “United States person” is defined for purposes 

of Form PF by reference to the definition in rule 203(m)-1, which tracks the definition of 

a “U.S. person” under Regulation S but contains a special rule for discretionary accounts 

maintained for the benefit of United States persons. See Exemptions Adopting Release, 

supra note 11, at section II.B.4.
48

duplication of reporting requirements that foreign regulators may impose and to allow an 

adviser to report with respect to only those private funds that are more likely to implicate 

U.S. regulatory interests.

6. Reporting for Affiliated and Sub-advised Funds

An adviser may, but is not required to, report the private fund assets that it 

manages and the private fund assets that its related persons manage on a single 

Form PF.

135

With respect to sub-advised funds, to prevent duplicative reporting, only one 

adviser should report information on Form PF with respect to that fund.

 This is intended to provide private fund advisers with reporting flexibility 

and convenience, allowing affiliated entities that share reporting and risk management 

systems to report jointly while also permitting affiliated entities that operate separately to 

report separately. Commenters did not address this aspect of the proposal, which we are 

adopting as proposed.

136 For reporting 

efficiency and to prevent duplicative reporting, if the adviser that completes information 

in section 7.B.1. of Schedule D to Form ADV with respect to any private fund is also 

required to file Form PF, the same adviser is responsible for reporting on Form PF with 

respect to that fund.137

 

135 See Instruction 2 to Form PF. See supra note 

 However, if the adviser that completes information on Schedule

117 for the definition of “related person.”

136 Each adviser that meets the criteria for reporting on Form PF has an independent 

obligation to file the Form with respect to every fund it advises. See Advisers Act 

rule 204(b)-1(a); Instructions 1 and 3 to Form PF. However, when one adviser files 

Form PF with respect to a fund for a given reporting period, the other advisers are 

relieved of their obligation to file for that fund.

137 See Instruction 4 to Form PF. We have modified this instruction from the proposal to 

clarify who would report in the case that the adviser completing section 7.B.1 of 

Schedule D to Form ADV with respect to a particular private fund is an exempt reporting 
49

D to Form ADV with respect to the private fund is not required to file Form PF (such as 

in the case of an exempt reporting adviser), then another adviser must report on that fund 

on Form PF.

138

7. Exempt Reporting Advisers

 If none of the advisers to a fund is required to file Form PF because they 

are all exempt reporting advisers or do not exceed the minimum reporting threshold, 

Instruction 4 to Form PF would not require any adviser to file the Form with respect to 

that fund. Commenters did not address this aspect of the proposal.

Only private fund advisers registered with the SEC (including those that are also 

registered with the CFTC as CPOs or CTAs) must file Form PF.

139 As noted above, the 

Dodd-Frank Act created exemptions from SEC registration under the Advisers Act for 

advisers solely to venture capital funds and for advisers solely to private funds that in the 

aggregate have less than $150 million in assets under management in the United 

States.140 We believe that Congress’ determination to exempt these advisers from SEC 

registration indicates Congress’ belief that regular reporting of detailed systemic risk 

information may not be necessary because they are sufficiently unlikely to pose this kind 

of risk.141

 

adviser or does not meet the new minimum reporting threshold of $150 million in private 

fund assets under management.

 After consultation with staff representing FSOC’s members and in light of the 

138 See Instruction 4 to Form PF. See supra note 48 and accompanying text.

139 See Advisers Act rule 204(b)-1.

140 See supra note 53 and accompanying text.

141 See Senate Committee Report, supra note 5, at 74 (“The Committee believes that venture 

capital funds...do not present the same risks as the large private funds whose advisers are 

required to register with the SEC under this title. Their activities are not interconnected 

with the global financial system, and they generally rely on equity funding, so that losses 
50

basic information that the SEC obtains from exempt reporting advisers on Form ADV, 

the SEC did not propose to extend Form PF reporting to these advisers.142 Commenters 

that addressed this aspect of the proposal agreed that exempt reporting advisers should 

not be required to file Form PF, and we have adopted this approach as proposed.143

B. Frequency of Reporting

1. Annual and Quarterly Reporting

Most private fund advisers, including large private equity advisers and smaller 

private fund advisers, are required to complete and file Form PF only once per fiscal 

year.

144 Large hedge fund advisers and large liquidity fund advisers, on the other hand,

must update information relating to their hedge funds or liquidity funds, respectively, 

each fiscal quarter.

145

 

that may occur do not ripple throughout world markets but are borne by fund investors 

alone.”). See also Exemptions Adopting Release, supra note 

 Periodic reporting will permit FSOC to monitor periodically 

certain key information relevant to assessing systemic risk posed by these private funds 

on both an individual and aggregate basis. More frequent, quarterly reporting for large 

11.

142 See Implementing Adopting Release, supra note 11, for a discussion of the information 

exempt reporting advisers are required to provide on Form ADV.

143 See AIMA General Letter; Lone Star Letter. To the extent an exempt reporting adviser is 

registered with the CFTC as a CPO or CTA, the CFTC has proposed that the adviser

would be obligated to file either Form CPO-PQR or CTA-PR, respectively.

144 See Instruction 9 to Form PF.

145 Even these advisers, however, need only update information regarding other types of 

funds they manage on an annual basis. For example, a large hedge fund adviser that also 

manages a small amount of liquidity fund and private equity fund assets must update 

information relating to its hedge funds each quarter but only needs to update information 

relating to its liquidity funds and private equity funds when it submits its fourth quarter 

filing. An adviser that is both a large hedge fund adviser and a large liquidity fund 

adviser must file quarterly updates regarding both its liquidity funds and hedge funds. 

See Instruction 9 to Form PF.
51

hedge fund and large liquidity fund advisers is necessary in order to provide FSOC with 

timely data to identify emerging trends in systemic risk.

146

The filing requirements we are adopting differ from the proposal in two principal 

respects. First, the proposal would have required large private equity advisers to report 

on a quarterly, rather than annual, basis. Second, under the proposal, once an adviser 

became subject to quarterly reporting, it would have been required to update information 

with respect to all of its private funds each quarter (not just for the type of private fund

that caused it to exceed the large adviser threshold).

147

 

146 See Proposing Release, supra note 12, at section II.C. We also noted in the Proposing 

Release that we understood hedge fund advisers already collect and calculate on a 

quarterly basis much of the information that Form PF requires relating to hedge funds. 

One commenter argued that this is only true with respect to the information required in 

sections 1a and 1b of Form PF. See comment letter of Fidelity Investments (Apr. 12, 

2011) (“Fidelity Letter”); see also MFA Letter. We have taken these comments into 

account in determining to extend the reporting deadlines for hedge fund advisers, as 

discussed below in section II.B.2 of this Release. We note, however, that another 

commenter also stated that “Form PF for the most part... [requests] information that is 

part of, or should be part of, the existing risk management processes at the responding 

institutions,” and as such “this information will either be something the adviser produces 

already, or arguably should.” Comment letter of MSCI Inc. (submitted to the CFTC) 

(Apr. 11, 2011) (“MSCI Letter”). Commenters did not address the ability of liquidity 

funds to prepare and submit quarterly filings, and we continue to believe, as discussed in 

the Proposing Release, that most liquidity fund advisers collect on a monthly basis much 

of the information that we are requiring in section 3 of Form PF and that quarterly 

reporting should, as a result, be relatively efficient for these advisers.

147 The proposal also would have required reporting based on calendar quarters rather than 

the adviser’s fiscal quarters. We have made this change because some advisers with 

quarterly updating obligations will now only need to update information about certain 

funds on an annual basis. The annual reporting is intended to align with typical end of 

fiscal year reporting activities, and requiring advisers to file separate annual and fourth 

quarter reports would impose additional burdens. We believe this change will, in 

practice, have little effect on the reporting (based on IARD data as of October 1, 2011, 

only about 2% of all registered advisers report a fiscal year ending in a month other than 

March, June, September or December, though the total may be slightly higher because 

IARD does not distinguish among, for instance, mid-month and end-of-month fiscal year 

ends).
52

A number of commenters responded to our proposal regarding the frequency of 

reporting. One agreed that quarterly reporting would be appropriate, and two others 

argued that advisers should report even more frequently because market conditions and 

portfolios can change rapidly.148 On the other hand, a number of commenters disagreed 

with the proposal, suggesting instead that Large Private Fund Advisers should report no 

more than semi-annually.149 These commenters argued that semi-annual reporting would 

reduce the burden to advisers while also giving regulators more time to analyze the data, 

and several compared Form PF to the FSA Survey, which has been conducted on a 

voluntary, semi-annual basis.150 Another commenter stated that the generally illiquid 

portfolios of private equity funds fluctuate little in value throughout the year, in its view, 

making quarterly reporting unnecessary.

151

After consultation with staff representing FSOC’s members, we continue to 

believe that quarterly reporting is important to provide FSOC with meaningfully current 

information with respect to the hedge fund and liquidity fund industries and to allow 

FSOC to identify rapidly emerging trends among these types of funds.152

 

148 See CPIC Letter (supporting the proposal with respect to large private funds advisers); 

AFL-CIO Letter and AFR Letter (arguing for more frequent reporting).

 Although some 

commenters suggested that the speed with which markets and portfolios change may 

warrant even more frequent reporting, we believe at this time that the additional benefit 

149 See, e.g., ABA Committees Letter; BlackRock Letter; Fidelity Letter; comment letter of 

Kleinberg, Kaplan, Wolff & Cohen, P.C. (submitted to the SEC) (Apr. 12, 2011) 

(“Kleinberg General Letter”); MFA Letter; SIFMA Letter; USCC Letter.

150 See, e.g., ABA Committees Letter; Kleinberg General Letter.

151 See PEGCC Letter.

152 Moreover, we believe that quarterly reporting helps to discourage “window-dressing” 

around the reporting dates. See infra notes 285-292 and accompanying text.
53

to FSOC from reporting more often than once a quarter would not justify the additional 

burdens imposed on advisers.

153 On the other hand, we are also not convinced that less 

frequent (e.g., semi-annual) reporting would provide sufficient, or sufficiently timely, 

information to enable FSOC to identify and respond to rapidly emerging trends. In 

addition, we believe that international approaches to private fund reporting may be 

shifting in favor of quarterly, rather than semi-annual, reporting.154

With respect to large private equity advisers, however, the SEC is persuaded that 

the generally illiquid nature of private equity fund portfolios means that trends emerge 

more slowly in that sector.155 As a result, the proposal has been modified so that large 

private equity advisers are required to report information regarding private equity funds 

on an annual basis only.156

Fewer commenters addressed the frequency of reporting for smaller advisers. 

One commenter agreed that annual reporting would be appropriate for these advisers,157

and several others argued that smaller advisers should report more frequently, proposing 

at least semi-annual filings.158

 

153 See supra note 

 Again, although we acknowledge the potential value of 

more frequent reporting from smaller private fund advisers, we are concerned about the 

148. We also note that FSOC has the authority to direct OFR to gather 

additional data where systemic risk concerns merit the reporting. See, e.g., sections 153 

and 154 of the Dodd-Frank Act.

154 ESMA’s proposed reporting template would impose quarterly reporting requirements on 

private fund advisers. See ESMA Proposal, supra note 33.

155 See supra note 151.

156 See Instruction 9 to Form PF.

157 See AIMA General Letter.

158 See AFL-CIO Letter; AFR Letter. See also MFA Letter (arguing that all advisers, large 

and small, should report on a semi-annual basis).
54

burden this would impose. At this time, we are not convinced that more frequent 

reporting from smaller private fund advisers would, from a systemic risk monitoring 

perspective, be justified by the value of the additional data.

As noted above, the requirements we are adopting also differ from the proposal in 

that even those advisers who must report on a quarterly basis are only required to do so 

with respect to the type of fund that caused them to exceed the reporting threshold. We 

are adopting this approach in part because these other funds will include private equity 

funds, venture capital funds and real estate funds, all of which are likely to have generally 

illiquid portfolios and for which we believe annual reporting is appropriate, as explained

above. This approach also reflects the different implications for systemic risk that may 

be presented by different investment strategies.

2. Reporting Deadlines

Large private equity advisers and smaller private fund advisers have 120 days 

from the end of their fiscal years to file Form PF.

159 In contrast, large hedge fund 

advisers have 60 days from the end of each fiscal quarter, and large liquidity fund 

advisers have 15 days.160

 

159 See Instruction 9 to Form PF; Advisers Act rule 204(b)-1(a).

 The deadlines we are adopting for large hedge fund advisers, 

large private equity advisers and smaller advisers are longer than the deadlines we 

160 See Instruction 9 to Form PF. As discussed above, a large hedge fund adviser (or large 

liquidity fund adviser) that also manages other types of funds must file quarterly updates

with respect to its hedge funds (or liquidity funds, as applicable) but only needs to update 

information regarding its other funds when it files its fourth quarter update. Such an 

adviser may comply with its filing obligations by initially filing a fourth quarter update 

that includes only information about its hedge funds (or liquidity funds, as applicable) 

within 60 days (or 15 days, as applicable) and then amending its filing within 120 days 

after the end of the quarter to include information about its other funds.
55

proposed. In particular, we have extended the deadline for large hedge fund advisers 

from 15 days to 60 days, the deadline for large private equity fund advisers from 15 days 

to 120 days and the deadline for smaller private fund advisers from 90 days to 120 

days.161

The proposed deadline of 15 days for large hedge fund and private equity fund 

advisers attracted significant opposition. Commenters offered a number of reasons to 

extend the deadline, including that: (1) 15 days is not enough time to prepare and submit 

a report with reliably accurate data, particularly where the adviser must value illiquid 

fund assets;

 

162 (2) other SEC reporting requirements allow more time;163 (3) the FSA 

Survey has allowed more time (approximately 30 to 45 days in the most recent surveys) 

and required less detail;164 (4) the same personnel will be closing the books at the end of 

the quarter and completing Form PF;

165

 

161 We noted in the Proposing Release that the proposed 90 day deadline would allow these 

advisers to file amendments at the same time as they file their Form ADV annual 

updating amendment, which may make certain aspects of the reporting more efficient, 

such as reporting assets under management. Proposing Release, supra note 

and (5) the more current the information 

12, at section 

II.C. We believe these efficiencies will still be realized because the reporting continues 

to be “as of” the same date as the annual reports on Form ADV and an adviser may still 

file on or after the date on which it files Form ADV.

162 See, e.g., ABA Committees Letter; AIMA General Letter; BlackRock Letter; IAA Letter; 

MFA Letter; USCC Letter.

163 See, e.g., ABA Committees Letter (noting that Forms N-SAR and N-Q, used by 

registered investment companies, allow 60 days); AIMA General Letter (pointing to 

Form 13F (allowing 45 days), Form 10-K (allowing at least 60 days), and Form 10-Q 

(allowing at least 40 days)); Fidelity Letter; Kleinberg General Letter; MFA Letter 

(pointing to the 120 days allowed for audited financial statements under the Advisers Act 

custody rule); TCW Letter.

164 See, e.g., AIMA General Letter; IAA Letter.

165 See, e.g., Kleinberg General Letter.
56

reported, the greater the consequences should it become public.166 These commenters 

suggested alternatives that ranged from 45 to 120 days.167 We understand from the 

comments, however, that the proposed reporting deadlines would be more problematic

for some types of advisers than for others. For instance, commenters focusing on private 

equity advisers generally suggested longer deadlines than commenters focusing on hedge 

fund advisers, and the valuation of illiquid portfolios is likely to be a more common 

problem for private equity advisers.168

We are persuaded that longer deadlines are appropriate for large hedge fund 

advisers and large private equity fund advisers and that, with respect to large private 

equity fund advisers in particular, the work required to value the generally illiquid 

portfolios of private equity funds favors a substantially longer reporting deadline than 

 Also, although a number of commenters 

addressed hedge fund advisers and private equity advisers, none commented specifically 

on whether liquidity fund advisers could meet the proposed deadline.

 

166 See, e.g., AIMA General Letter; Kleinberg General Letter. Some commenters also 

pointed to the Form’s proposed signature page, which would have required advisers to 

certify that the information provided is “true and correct,” arguing that this standard 

would be difficult to satisfy in 15 days. See, e.g., AIMA General Letter. As discussed 

below, we are not adopting the proposed certification requirement. See infra notes 183-

185 and accompanying text.

167 See, e.g., AIMA General Letter (45 days); Akina Letter (120 days for private equity fund 

data); BlackRock Letter (120 days); CPIC Letter (45 days, at least initially); Fidelity 

Letter (preferably 90 days, but no less than 45 days); IAA Letter (90 days); Kleinberg 

General Letter (60 days); Lone Star Letter (60 days for private equity fund data); Merkl 

February Letter (four months for private equity fund data); MFA Letter (120 days); 

PEGCC Letter (at least 90 days for private equity fund data); Seward Letter (120 days); 

SIFMA Letter (120 days); TCW Letter (60 days); USCC Letter (120 days).

168 Id.
57

was proposed.169 A few commenters favored a deadline for large hedge fund advisers 

longer than the one we are adopting, but several commenters indicated that a deadline 

shorter than the one we are adopting would be adequate.170

Fewer commenters addressed the proposed reporting deadline of 90 days for 

smaller advisers. One commenter supported the proposal,

 We believe that our revised 

approach strikes an appropriate balance between the need to provide FSOC with timely 

data and the ability of these advisers to prepare and submit Form PF. We also believe it 

will reduce the burden of reporting for these advisers.

171 but several argued that 

smaller advisers should have more than 90 days to prepare and submit their filings.172 

Several commenters noted that the Advisers Act custody rule allows advisers up to 120 

days to distribute audited financial statements to investors when relying on the annual 

audit provision under that rule.173

 

169 We note that many of the questions in section 4, which large private equity fund advisers 

must file, relate to information that should be available on the financial statements of 

their portfolio companies. By extending the deadline to 120 days for these advisers, we 

anticipate that the burden of reporting will be reduced because, in many cases, they will 

now be able to delay reporting until after receiving financial statements from their 

portfolio companies. 

We believe that our revised deadline of 120 days will 

enable these advisers to benefit from the availability of financial statements and also help 

to avoid crowding advisers’ calendars with end of year reporting obligations while at the 

same time providing FSOC with reasonably timely data. 

170 See supra note 167.

171 See AIMA General Letter.

172 See, e.g., BlackRock Letter (120 days); MFA Letter (120 days); PEGCC Letter (150 days 

for private equity fund data).

173 See, e.g., BlackRock Letter; MFA Letter; USCC Letter. See also Advisers Act rule 

206(4)-2(b)(4).
58

3. Initial Reports

Newly registering private fund advisers are subject to the same Form PF reporting 

deadlines as currently registered advisers.

174 Advisers are not, however, required to file 

Form PF with respect to any period that ended prior to the effective date of their

registrations. Accordingly, a smaller private fund adviser that registers during its 2013 

fiscal year must file Form PF within 120 days following the end of its 2013 fiscal year. It 

would not, however, need to file Form PF for its 2012 fiscal year. Similarly, a large

hedge fund adviser that registers during its third fiscal quarter must file Form PF within 

60 days following the end of that quarter but need not file for the preceding fiscal 

quarter.175

We have extended the deadlines for initial filings from the 15 days that we 

proposed. One commenter argued that the proposed deadline would be too short and 

suggested 90 days instead.176

4. Transition Filings, Final Filings and Temporary Hardship 

Exemptions

 We believe the revised initial filing deadlines are more 

consistent with the deadlines for updating Form PF discussed above in section II.B.2 of 

this Release.

An adviser must file Form PF to report that it is transitioning to only filing 

Form PF annually with the Commissions or to report that it no longer meets the 

 

174 See Advisers Act rule 204(b)-1(a); supra section II.B.2 of this Release.

175 Whether an adviser is a large hedge fund or large liquidity fund adviser would be 

determined as of the date specified in Form PF, not the date of registration. When filing 

an initial Form PF, a large hedge fund or large liquidity fund adviser that also manages 

other types of private fund may rely on the instructions in the Form allowing it to delay 

updating information regarding these other fund types when filing an update.

176 See AIMA General Letter.
59

requirements for filing Form PF no later than the last day on which the adviser’s next 

Form PF update would be timely.

177 This allows us to determine promptly whether an 

adviser’s discontinuance in reporting is due to it no longer meeting the form’s reporting 

thresholds as opposed to a lack of attention to its filing obligations. Advisers may also

avail themselves of a temporary hardship exemption in a similar manner as with other 

SEC filings if they are unable to file Form PF electronically in a timely manner due to 

unanticipated technical difficulties.178

C. Information Required on Form PF

 No commenters addressed the proposed transition 

filings, final filings or temporary hardship exemption, and we are adopting them as 

proposed.

The questions contained in Form PF reflect relevant requirements and 

considerations under the Dodd-Frank Act, consultations with staff representing FSOC’s

members, and the Commissions’ experience in regulating those private fund advisers that 

are already registered with the Commissions. As discussed above, with respect to hedge 

fund advisers in particular, the information collected on Form PF is also broadly based on 

the guidelines initially developed in the FSA Survey and the IOSCO report on hedge fund 

oversight, and many of the more detailed items are similar to questions proposed to be 

 

177 See Instruction 9 to Form PF.

178 See Advisers Act rule 204(b)-1(f); Instruction 14 to Form PF. The adviser would 

complete and file on paper Item A of section 1a and section 5 of Form PF, checking the 

box in section 1a indicating that it is requesting a temporary hardship exemption. The 

adviser must file any request for a temporary hardship exemption no later than one 

business day after the electronic Form PF filing was due. The adviser must then submit 

the filing that is the subject of the Form PF paper filing in electronic format with the 

Form PF filing system no later than seven business days after the filing was due.
60

included in ESMA’s reporting template.

179

Commenters’ reactions to the scope of Form PF varied, with some proposing 

further enhancements and others arguing that the proposed reporting is excessive. 

Commenters arguing for expanded reporting recommended additional questions about 

counterparty exposures and short selling or suggested having all advisers complete the 

entire form.

 Form PF has been designed to collect 

information to assist FSOC in monitoring and assessing systemic risks that private funds

may pose, as discussed in section II.A above. 

180 In contrast, critics of the proposal argued that information required on 

Form PF would be unduly burdensome to provide or is available to regulators from other 

sources.181 A few commenters who objected to other aspects of the proposal

recommended adding several questions that were originally proposed on Form ADV.

182

As discussed in greater detail below, Form PF, as adopted, addresses the concerns 

of many commenters with changes from the proposal that we believe will significantly 

reduce the burden of reporting and clarify how commenters are expected to respond. At 

 

Although this would expand the Form, these commenters believed that these questions, 

which relate to valuation, beneficial ownership and the identity of service providers, 

would require competitively sensitive or proprietary information and would be more 

appropriately reported confidentially on Form PF.

 

179 See supra section I.B of this Release.

180 See, e.g., AFL-CIO Letter; AFR Letter; Merkl February Letter; MSCI Letter; comment 

letter of Plexus Consulting Group (Feb. 28, 2011). See also supra note 76 and 

accompanying text.

181 See, e.g., AIMA General Letter; IAA Letter; Olympus Letter; PEGCC Letter. See infra

note 309 and accompanying text.

182 See IAA Letter; MFA Letter; Seward Letter.
61

the same time, the final Form preserves much of the information that the proposal would 

require. Our revised approach is intended to respond to industry concerns while still 

providing FSOC the information it needs to monitor systemic risk across the private fund 

industry.

Two of the changes we are making, in particular, illustrate this revised approach. 

The first is the removal of the proposed certification language. This would have required 

an authorized individual to affirm “under penalty of perjury” that the statements made in 

Form PF are “true and correct.”183 This certification was borrowed from the SEC’s 

existing Advisers Act reporting form, Form ADV. However, a number of commenters 

expressed concern that such a standard would be inappropriate for Form PF because the 

Form requires advisers to provide estimates and exercise significant judgment in 

preparing responses.

184

 

183 See Question 2 and Instruction 11 to Form PF. If the adviser is also registered with the 

CFTC as CPO or CTA, the signature page also requires the signatory to acknowledge that 

misstatements or omissions of material fact on Form PF constitute a violation of the 

CEA. This acknowledgement is included simply to remove any doubt created by the 

filing of the Form through the SEC rather than directly with the CFTC, which is merely a 

matter of convenience for advisers.

 In consideration of the nature of the information required on 

Form PF, we are persuaded that a certification is unnecessary and that a signature 

184 See, e.g., ABA Committees Letter; AIMA General Letter; Kleinberg General Letter; 

MFA Letter; PEGCC Letter. Some of these commenters also saw the certification 

standard and the reporting deadlines as related issues, arguing that the more quickly 

advisers are required to report, the less confidence they will have in their estimates. See, 

e.g., BlackRock Letter; Fidelity Letter; PEGCC Letter; SIFMA Letter; USCC Letter. As 

discussed above in section II.B.2 of this Release, we have also extended the proposed 

filing deadlines. Several commenters compared Form PF to other SEC forms and 

suggested that we either require just a signature without a certification or that we use a 

less stringent standard, such as good faith. See MFA Letter (pointing to the certification 

in the SEC’s Schedule 13G). See also ABA Committees Letter (comparing Form PF to 

other SEC forms, including Form N-SAR, Form N-Q, Schedule 13D and Schedule 13G); 

AIMA General Letter (pointing to Schedule 13G); BlackRock Letter; Kleinberg General

Letter.
62

confirming that the Form is filed with proper authority is sufficient.

185

The second change is to increase the ability of advisers to rely on their internal 

methodologies when reporting on Form PF.

186 A number of commenters encouraged this 

approach, recommending “that the instructions to the Form be modified to confirm that

advisers be able to rely on the same internal reporting procedures and practices when 

reporting on the Form that they would use when reporting to advisory clients, unless 

directly contradicted by the instructions.”187

 

185 We note, however, that even absent the certification, a willful misstatement or omission 

of a material fact in any report filed with the SEC under the Advisers Act is unlawful. 

See section 207 of the Advisers Act. We have also added an instruction to the Form that 

clarifies when an adviser is required to amend its filing to correct an error. In particular, 

Instruction 16 to Form PF explains that an adviser is not required to update information 

that it believes in good faith properly responded to Form PF on the date of filing even if 

that information is subsequently revised for purposes of the adviser’s recordkeeping, risk 

management or investor reporting (such as estimates that are refined after completion of a 

subsequent audit). The instruction also explains that large hedge fund advisers and large 

liquidity fund advisers that comply with their fourth quarter filing obligations by 

submitting an initial filing followed by an amendment in accordance with Instruction 8 to 

Form PF will not be viewed as affirming responses regarding one fund solely by 

providing updated information regarding another fund at a later date.

 The revised approach strikes an appropriate 

balance between easing the burden on advisers by allowing them to rely on their existing 

practices and ensuring that FSOC receives comparable data across the industry. This

186 See Instruction 15 to Form PF. As noted in the instruction, we would expect reporting on 

Form PF to be consistent with information the adviser uses for internal and investor 

reporting purposes. Methodologies also must be consistently applied, and to the extent 

we have indicated how an adviser should respond to a question, the answer should be 

consistent with our instructions. In addition to this general instruction, we have increased 

the ability of advisers to rely on their own methodologies with a number of specific 

changes throughout the Form, including permitting advisers to report performance using 

their existing practices, allowing flexibility in reporting interest rate sensitivities and 

changing the frequency and substance of reporting for large private equity advisers. See, 

e.g., infra notes 202, 241-242, 247-248 and 258-260 and accompanying text and 

section II.C.4.

187 BlackRock Letter. See also IAA Letter; MFA Letter; PEGCC Letter; SIFMA Letter; 

TCW Letter.
63

change is intended, together with the removal of the certification, to clarify that Form PF

does not require the time or expense involved in, for instance, an audit of the information 

included on Form PF, and we anticipate that these changes will reduce the burden that 

many advisers incur in completing the Form.

188

The information that Form PF requires and the changes made from the proposal

are discussed in detail below.

1. Section 1 of Form PF

Each adviser required to file Form PF must complete all or part of section 1. This 

section of the Form is divided into three parts: section 1a requires information regarding 

the adviser’s identity and assets under management, section 1b requires limited 

information regarding the size, leverage and performance of all private funds subject to 

the reporting requirements, and section 1c requires additional basic information regarding 

hedge funds. We are adopting Form PF with several changes to the information that 

advisers are required to report in section 1. These changes, which are discussed in detail 

below, are intended to respond to industry concerns while still providing FSOC the 

information it needs to monitor systemic risk across the private fund industry. In general, 

we expect that these changes will reduce the burden of responding to the Form and more 

closely align the Form with ESMA’s proposed reporting template.

a. Section 1a of Form PF

Item A of section 1a seeks identifying information about the adviser, such as its 

name and the name of any of its related persons whose information is also reported on the 

 

188 If audited information is available at the time an adviser files Form PF, we would of 

course expect responses to Form PF to be consistent with that audited information.
64

adviser’s Form PF. The adviser will also be required to provide its large trader 

identification number, if any.189 The addition of the large trader identification number

will enhance the value of Form PF information by allowing it to be quickly and 

accurately linked to other information that may be available to the SEC while imposing 

little additional burden. Section 1a also requires basic aggregate information about the 

private funds managed by the adviser, such as the portion of gross (i.e., regulatory) and 

net assets under management attributable to certain types of private funds.190 This 

identifying information will assist us and FSOC in monitoring the amount of assets 

managed by private fund advisers and the general distribution of those assets among 

various types of private funds.191

 

189 See Question 1 on Form PF. 

 This information also provides data about the size of 

the adviser, the nature of the adviser’s activities and the extent to which assets are 

managed rather than owned, which are factors that FSOC must consider in making a 

190 See Question 3 on Form PF. This question requires the adviser to report the portion of its 

assets under management that are attributable to hedge funds, liquidity funds, private 

equity funds, real estate funds, securitized asset funds, venture capital funds, other private 

funds, and funds and accounts other than private funds. We have modified the 

instructions to Question 3 to improve their consistency and to respond to a commenter’s 

request for clarification regarding the meaning of “funds and accounts other than private 

funds.” See MFA Letter. We have also determined not to adopt a proposed question that 

would have required advisers to report their aggregate gross and net regulatory assets 

under management because this information can be derived from the data reported in 

Question 3. See the Proposing Release, supra note 12, for the proposed Question 3 on 

Form PF.

191 Question 4 in section 1a of Form PF also permits an adviser to explain any assumptions it 

made in responding to Form PF. This question is optional. One commenter expressed 

support for “providing space for managers to describe any assumptions they make in 

responding to a question,” and we are adopting this question substantially as proposed. 

See MFA Letter.
65

determination to designate a nonbank financial company for FRB supervision under the 

Dodd-Frank Act.192

b. Section 1b of Form PF

Section 1b of Form PF elicits certain identifying and other basic information 

about each private fund the adviser manages. The adviser generally must complete a 

separate section 1b for each private fund.193 This section of the Form requires reporting 

of each private fund’s gross and net assets and the aggregate notional value of its 

derivative positions.

194 It also requires basic information about the fund’s borrowings, 

including a breakdown showing whether the creditor is based in the United States and 

whether it is a financial institution.

195

 

192 See section 113(a) of the Dodd-Frank Act; FSOC Second Notice, supra note 

 Advisers must also report the percentage of the 

6.

193 However, if the adviser elects to report on an aggregated basis regarding the funds 

comprising a master-feeder arrangement or a parallel fund structure, it would only file a 

single section 1b for the master fund in the master-feeder arrangement or for the largest 

fund in the parallel fund structure. We have modified the approach to aggregation of 

master-feeder arrangements and parallel fund structures to allow advisers more flexibility 

in determining how to report. See Instruction 5 to Form PF. This change is discussed in 

greater detail below in section II.C.5 of this Release.

194 See Questions 8, 9 and 13 on Form PF. With respect to Question 13 and similar 

questions regarding the value of derivatives, the Form requires the adviser to report the 

gross notional value of its funds’ derivative positions, except that options must be 

reported using their delta adjusted notional value. See Instruction 15 to Form PF. In 

contrast, Questions 8 and 9, and similar questions that refer to gross asset value or net 

asset value, require valuations based on the instruction in Form ADV for calculating 

regulatory assets under management. See definitions of “gross asset value” and “net asset 

value” in the Glossary to Form PF.

195 See Question 12 on Form PF. One commenter suggested that the amount of borrowings 

should be netted where a private fund is both a lender to and a creditor of a counterparty. 

See MFA Letter. The commenter’s approach would, however, obscure the total amount 

of leverage the fund has incurred, and we have clarified that such amounts should not be 

netted. Also, in response to this commenter, we have modified the instructions to clarify 

that collateral should not be netted against borrowings. We have also modified this 

question, and other questions on the Form requiring a breakdown of creditor types, to 

split the non-financial institution category into U.S. and non-U.S. creditors. This change 
66

fund’s equity held by the five largest equity holders, which provides information about 

the concentration of the fund’s investor base.

196 Two new questions, which we have 

added in connection with other changes to the Form, also require the value of the fund’s 

investments in other private funds and of the parallel managed accounts managed 

alongside the fund.197

 

is intended to increase the usefulness of this data for the FRB’s flow of funds report, 

which is an important tool for evaluating trends in and risks to the U.S. financial system. 

See infra note 475.

We proposed that advisers completing section 1b also report the identity of, and amount 

owed to, each creditor to which the fund owed an amount equal to or greater than 5 

percent of the fund’s net asset value as of the reporting date. See the Proposing Release, 

supra note 12, for the proposed Question 10 on Form PF. This question has been moved 

to section 2b of the Form so that only large hedge fund advisers must provide this 

information. This change is intended to respond to commenter concerns that completing 

this question will be burdensome but also preserve information regarding 

interconnectedness that may be important to FSOC’s monitoring of systemic risk among 

large hedge funds. See, e.g., PEGCC Letter.

196 See Question 15 on Form PF. For purposes of this question and Question 16 on Form PF, 

beneficial owners are persons who would be counted as beneficial owners under 

section 3(c)(1) of the Investment Company Act or who would be included in determining 

whether the owners of the fund are qualified purchasers under section 3(c)(7) of that Act. 

(15 U.S.C. 80a-3(c)(1) or (7)). The proposal would have required that advisers report the 

number of beneficial owners of the fund. However, we are not adopting this question 

because, as a result of our revised approach to reporting on parallel managed accounts, 

this information will largely duplicate information collected on Form ADV, and we do 

not believe that receiving updated responses on a quarterly basis from large hedge fund 

advisers and large liquidity fund advisers is necessary with respect to this information. 

See infra section II.C.5 of this Release. See also the Proposing Release, supra note 12, 

for the proposed Question 12(a) on Form PF; Question 13 of section 7.B.1. of Schedule D 

to Form ADV.

197 See Questions 10 and 11 on Form PF. Question 10, which asks for the value of the 

fund’s investments in other private funds, has been added because our expanded 

Instruction 7 otherwise allows these investments to be disregarded on Form PF and it is 

important that FSOC have a basic measure of the extent of assets not otherwise reflected 

on the Form. This will also serve as a measure of interconnectedness among private 

funds. See supra notes 128 and 131 and accompanying text for a discussion of 

Instruction 7. Question 11, relating to the value of parallel managed accounts, has been 

added for similar reasons. See infra section II.C.5 of this Release for a discussion of our 

revised approach to reporting on parallel managed accounts.
67

Section 1b also requires that advisers report in response to Question 17 the 

performance of each fund, both on a gross basis and net of management fees and 

incentive fees and allocations. Advisers must provide performance information that is 

consistent with the performance results they report to investors (or use internally, if not 

reported to investors). Advisers are required, at a minimum, to report annual 

performance results for the fund’s most recently completed fiscal year but only need to 

report monthly and quarterly performance information if that information is already being

calculated for the fund.

Question 17 has been modified from the proposal in response to commenter 

concerns regarding the burden of providing performance results in the form proposed.

198 

In particular, it omits the requirement to report the change in net asset value, allows

advisers to report performance gross and net of management fees and incentive fees and

allocations (rather than gross and net of incentive fees and allocations only) and makes

reporting of monthly and quarterly performance mandatory only for those funds for 

which advisers are already calculating performance results with that frequency. 

Commenters were concerned primarily that the proposed instructions to this question 

would require advisers to calculate performance in a manner different from that used for 

investor reporting purposes or more frequently than is their current practice.199

 

198 See infra notes

 A 

number of commenters explained that funds with illiquid portfolios, such as private 

equity funds, typically do not calculate performance on a monthly (and in many cases, 

199 and 200.

199 See, e.g., ABA Committees Letter; MFA Letter (recommending that “the Form be revised 

to request (i) gross performance and (ii) performance net of all fees” and suggesting that 

advisers be permitted to report what they report to private fund investors).
68

even quarterly) basis and that calculating performance more frequently would impose a 

significant burden on these advisers.200 As discussed above, we are persuaded that trends 

emerge more slowly in private funds having illiquid portfolios, meaning that

developments in these funds may be tracked using information reported on a less frequent 

basis.

201 We believe that the revised approach, which allows advisers to rely on their

existing procedures for calculating and reporting fund performance, significantly reduces 

the burden of responding to this question but will nonetheless yield valuable information 

for FSOC.

202

We have also added to section 1b two questions that the SEC originally proposed 

as part of the expanded private fund reporting in Form ADV.

203 The first, Question 14,

requires that advisers report the assets and liabilities of each fund broken down using

categories that are based on the fair value hierarchy established under U.S. generally 

accepted accounting principles (“GAAP”).

204

 

200 See, e.g., ABA Committees Letter; IAA Letter; Merkl February Letter; MFA Letter; 

PEGCC Letter; SIFMA Letter; TCW Letter.

 The second, Question 16, requires that 

201 See supra text accompanying note 156.

202 See Question 17 on Form PF. See also Proposing Release, supra note 12, at text 

accompanying n. 115 for a discussion of potential uses for this data.

203 See Questions 14 and 16 on Form PF.

204 Advisers must report this information annually (or on their fourth quarter updates, in the 

case of large hedge fund and large liquidity fund advisers). This question will provide 

information indicating the illiquidity and complexity of a fund’s portfolio and the extent 

to which the fund’s value is determined using metrics other than market mechanisms. In 

a recent rulemaking release, FSOC identified this fair value categorization as the type of 

information that may be important for assessing liquidity risk and maturity mismatch, one 

factor in determining whether a nonbank financial company may pose systemic risk. See

FSOC Second Notice, supra note 6. See also Rules Implementing Amendments to the 

Investment Advisers Act of 1940, Investment Advisers Act Release No. 3110 (Nov. 19, 

2010), 75 FR 77052 (Dec. 10, 2010) (“Implementing Proposing Release”) for the 

proposed version of Form ADV, Part 1A, section 7.B.(1)A. of Schedule D, question 12. 
69

advisers provide the approximate percentage of each fund beneficially owned by certain 

types of investors.205 As discussed in the Implementing Adopting Release, the SEC 

determined not to adopt these questions on Form ADV in response to commenter 

concerns that they would result in the public disclosure of competitively sensitive or 

proprietary information.206 We have added these questions to Form PF (with the 

modifications discussed below) because, as the SEC explained in the Implementing 

Adopting Release, this information may be important to FSOC’s systemic risk 

monitoring activities and to our investor protection mission.

207

Commenters responding to these questions as proposed on Form ADV argued that 

they would be difficult or burdensome to complete. With respect to Question 14, 

commenters argued that some private funds – especially non-U.S. funds – do not use 

generally accepted accounting principles (whether U.S. or international) or obtain audited 

financial statements, making the requirement to report a breakdown of fair values

 

See also FASB ASC 820-10-50-2b.

We have modified this question from the proposal to expressly include definitions for 

Levels 1, 2 and 3 of the hierarchy. This change is intended to minimize ambiguity for 

advisers that do not utilize GAAP or another international accounting standard that 

requires the contemplated breakdown of assets and liabilities. Advisers that already 

prepare this breakdown for financial reporting purposes should respond to this question 

using the fair value hierarchy established under the applicable accounting standard.

205 See the Implementing Proposing Release for the proposed version of Form ADV, Part 

1A, section 7.B.(1)A. of Schedule D, question 17.

206 See Implementing Adopting Release, supra note 11, at nn. 246-247. Information filed on 

Form ADV is made available to the public through the Investment Adviser Public 

Disclosure (IAPD) website. In contrast, information filed on Form PF will generally 

remain confidential. See infra section II.D of this Release.

207 Id. Several commenters responding to the Proposing Release also encouraged us to move 

these questions from Form ADV to Form PF. See IAA; MFA Letter; Seward Letter.
70

potentially costly.208 We understand, however, that the group of funds not using some 

form of generally accepted accounting standard is relatively small and that most private 

funds already utilize GAAP or other international accounting standards that require the 

contemplated breakdown of assets and liabilities.

209

 

208 Comment letter of the American Bar Association, Federal Regulation of Securities 

Committee and Private Equity and Venture Capital Committee (Jan. 31, 2011) 

(commenting on the Implementing Proposing Release, supra note 

 In addition, funds are not required to 

adopt GAAP for these purposes, and Question 14 does not require that the valuations

within the breakdown of assets and liabilities be audited, or even determined in 

accordance with GAAP. For instance, an adviser could rely on the procedure for 

204) (“ABA

Committees Implementing Proposal Letter”); comment letter of the Alternative 

Investment Management Association (Jan. 24, 2011) (commenting on the Implementing 

Proposing Release, supra note 204) (“AIMA Implementing Proposal Letter”); comment 

letter of Dechert LLP (Jan. 24, 2011) (commenting on the Implementing Proposing 

Release, supra note 204); comment letter of the Investment Adviser Association (Jan. 24, 

2011) (commenting on the Implementing Proposing Release, supra note 204) (“IAA 

General Implementing Proposal Letter”); comment letter of Katten, Muchin, Rosenman, 

LLP (Jan. 24, 2011) (commenting on the Implementing Proposing Release, supra note 

204); comment letter of George Merkl (Jan. 25, 2011) (commenting on the Implementing 

Proposing Release, supra note 204); comment letter of the National Venture Capital 

Association (Jan. 24, 2011) (commenting on the Implementing Proposing Release, supra

note 204). Some of these commenters further contended that investors would bear any 

new audit costs or that advisers would not necessarily have audited numbers within 90 

days after fiscal year end, when Form ADV is due. See, e.g., ABA Committees

Implementing Proposal Letter; AIMA Implementing Proposal Letter; IAA General

Implementing Proposal Letter.

209 See, e.g., Implementing Proposing Release, supra note 204, at n. 56. Indeed, even in the 

context of this rulemaking, the Managed Funds Association suggested that we use a 

GAAP standard to measure advisers’ assets, asserting that “GAAP information is 

regularly reported across the industry and is a data point that most managers track in the 

ordinary course....” MFA Letter. Others advisers may use international accounting 

standards requiring substantially similar information. In the Implementing Adopting 

Release, the SEC estimated that only about 3% of registered advisers have at least one 

private fund client that may not be audited. See Implementing Adopting Release, supra

note 11, at nn. 634-636 and accompanying text.
71

calculating fair value that is specified in a private fund’s governing documents.210 As a 

result, we are not convinced that the aggregate burden attributable to this reporting is 

unreasonable or even as significant as some commenters contend. The question has, 

however, been modified from the proposal to require a breakdown only by category and 

not by class.

211 For advisers that do not already prepare this breakdown for financial 

reporting purposes, this revised approach will significantly reduce the work required to 

respond to this question.

212 Such advisers may, nevertheless, incur additional costs to 

complete this question, and we are sensitive to these costs. We believe, however, that 

this question will provide valuable information for FSOC’s systemic risk monitoring 

activities and our investor protection mission and that the associated burden is 

warranted.

213

 

210 The fair valuation process need not be the result of a particular mandated procedure and 

the procedure need not involve the use of a third-party pricing service, appraiser or 

similar outside expert. The fund’s governing documents may provide, for example, that 

the fund’s general partner determines the fair value of the fund’s assets. We would, 

however, expect that an adviser that calculates fair value in accordance with GAAP or 

another basis of accounting for financial reporting purposes will also use that same basis 

for purposes of determining the fair value of its assets and liabilities for this purpose.

This question has been modified from the proposal to include a column titled “costbased” for those assets and liabilities valued on the fund’s financial statements using a 

measurement attribute other than fair value. This change recognizes that, even among 

advisers that already prepare a similar fair value breakdown for financial reporting 

purposes in accordance with GAAP, some assets and liabilities are not accounted for at 

fair value and, therefore, would not be included in the fair value hierarchy disclosures.

211 In other words, although an adviser will need to provide the fund’s aggregate assets and 

liabilities categorized as Level 1, 2 or 3, it will not need to indicate the types of assets and 

liabilities in each of those categories.

212 In addition, for advisers that already prepare this breakdown for financial reporting 

purposes, this revised approach will reduce the amount of information that needs to be reentered on Form PF. 

213 See supra note 204 for a discussion of potential uses for this data.
72

Commenters also expressed concern regarding the burden of reporting the types 

of beneficial owners investing in each fund, as required in Question 16.

214 One of these 

commenters noted, for instance, that many advisers either do not have this information or 

keep this information on a basis different from that set out in the Form.215 We believe, 

however, that many advisers to private funds are already collecting some of this

beneficial ownership data as part of their processes for analyzing compliance with 

exemptions under the Investment Company Act and the Securities Act of 1933.

216

 

214 Comment letter of Debevoise & Plimpton, LLP (Jan. 24, 2011) (commenting on the 

Implementing Proposing Release, supra note 

 To the 

extent this information is not currently collected, we do not anticipate that adding this to 

the information advisers already routinely collect from fund investors will impose a 

significant burden. We acknowledge, however, that advisers managing funds with 

securities outstanding prior to the adoption of Form PF would have to take additional 

steps in order to obtain this information because the investor diligence process will 

already have been completed. As a result, with respect to beneficial interests outstanding 

prior to March 31, 2012, that have not been transferred on or after that date, advisers may 

respond to Question 16 using good faith estimates based on data available to them

without making additional inquiries of investors.

204) (“Debevoise Implementing Proposal 

Letter”); IAA General Implementing Proposal Letter; comment letter of Shearman & 

Sterling, LLP (Jan. 24, 2011) (commenting on the Implementing Proposing Release, 

supra note 204) (“Shearman Implementing Proposal Letter”). These commenters argued 

that advisers may have difficulty obtaining the required information for certain types of 

funds, particularly for funds established before the adoption of the reporting requirement.

215 See IAA General Implementing Proposal Letter (stating that the reporting would require 

“significant system enhancements”).

216 15 U.S.C. 77a.
73

Question 16 has also been modified by adding a row for non-U.S. investors about 

which the adviser does not have and cannot reasonably obtain beneficial ownership 

information.

217 This change acknowledges that obtaining beneficial ownership 

information about certain non-U.S. investors may be difficult for some advisers and 

ameliorates that burden by allowing advisers to report only the size of the ownership 

interest about which data is not available. We have also modified from the proposal 

some of the other categories in this question based on our consultations with staff 

representing FSOC’s members. In particular, we have split out categories regarding 

individuals and pension plans to obtain a slightly more granular breakdown and added a 

category for sovereign wealth funds and foreign official institutions. We intend these 

changes to increase the usefulness of this data for the FRB’s flow of funds report, a tool 

that is used for evaluating trends in and risks to the U.S. financial system.

218

The information that section 1b requires is designed to allow FSOC to monitor

certain systemic trends for the broader private fund industry, such as how certain kinds of 

private funds perform and exhibit correlated performance behavior under different 

economic and market conditions and whether certain funds are taking significant risks 

that may have systemic implications. It is also intended to allow FSOC to monitor 

borrowing practices across the private fund industry, which may have interconnected 

 

217 An adviser may only report in this category beneficial ownership interests that are held 

through a chain involving one or more third-party intermediaries. If the beneficial owner 

has, for instance, simply interposed a wholly-owned holding company or trust as the legal 

owner, the interest would need to be reported in one of the other categories of beneficial 

owner.

218 See infra note 475. See also Flow of Funds Accounts of the United States, available at

http://www.federalreserve.gov/releases/z1/.
74

impacts on banks and thus the broader financial system. Question 14, which requires that 

advisers report the assets and liabilities of each fund broken down using categories that 

are based on the fair value hierarchy established under GAAP, will provide information 

indicating the illiquidity and complexity of a fund’s portfolio and the extent to which the 

fund’s value is determined using metrics other than market mechanisms. In a recent 

rulemaking release, FSOC identified this fair value categorization as the type of 

information that may be important for assessing liquidity risk and maturity mismatch, one 

factor in determining whether a nonbank financial company may pose systemic risk.219 

Finally, as noted above, certain of the information that section 1b requires is designed for 

use in the FRB’s flow of funds report, a tool that is used for evaluating trends in and risks 

to the U.S. financial system.

220

c. Section 1c of Form PF

Section 1c is the final part of section 1 and requires advisers to report information

regarding the hedge funds they manage, if any. This information includes each fund’s

investment strategies221

 

219 See supra note 

and the percentage of the fund’s assets managed using high204.

220 See supra note 218 and accompanying text.

221 See Questions 19 and 20 on Form PF. One commenter, although advising caution in 

using strategy data to analyze industry trends, asserted that the reporting could provide 

valuable information about emerging systemic risk. See MSCI Letter (“a buildup of 

assets in one or a set of related strategies should cause the FSOC to question the market’s 

capacity to support such a strategy...” and create “conditions where crowded trades could 

be unwound quickly, with a systemic impact.”). Another commenter suggested that we 

revise the question to allow reporting as of the end of the reporting period rather than 

over the course of the period and to permit advisers to report based on capital allocation 

rather than net asset value. See MFA Letter. We have revised the instructions to permit 

both these options. We have, however, also retained the requirement to report based on 
75

frequency trading strategies.

222 Advisers must also report each hedge fund’s significant 

counterparty exposures (including identity of counterparties).

223 In response to 

comments, we have modified the questions regarding counterparty exposures to clarify 

instructions and to reduce the reporting burden by more closely aligning the requirements

with information already determined in connection with many contractual trading 

arrangements.

224

Finally, section 1c requires information regarding each hedge fund’s trading and 

clearing practices in Question 24 and activities conducted outside the securities and 

derivatives markets in Question 25. Some commenters supported the reporting required 

in Question 24.

225 However, one commenter expressed concern that the question as 

proposed would require burdensome manual aggregation.226

 

percentage of net asset value because we believe this will provide valuable information 

regarding leverage.

 In response, we have 

simplified this question by requiring a less detailed breakdown, removing the sub-classes 

222 See Question 21 on Form PF. Some commenters suggested removing this question 

because, in their view, it would not provide information relevant to systemic risk 

assessment. See, e.g., AIMA General Letter; MFA Letter. This information may, 

however, be important to understanding how hedge funds interact with the markets and 

their role in providing trading liquidity. We have modified the instructions to this 

question to make it easier for advisers to determine whether a particular fund is using a 

relevant strategy.

223 See Questions 22 and 23 on Form PF.

224 See MFA Letter. Specifically, these questions have been modified to (i) clarify that 

exposure should be mark-to-market exposure (rather than potential exposure), (ii) narrow 

the conditions under which affiliates are treated as a single counterparty group in order to 

track legal and contractual arrangements among the parties, (iii) focus on counterparties 

generally (rather than just trading counterparties), (iv) reference exposures before taking 

into account collateral postings and (v) be less prescriptive regarding the treatment of 

assets in custody and unsettled trades.

225 See AFL-CIO Letter; AFR Letter.

226 See MFA Letter.
76

of securities and derivatives included in the proposal. We expect that, by requiring less 

refinement in the categories of investments, these changes will reduce the burden of 

responding to this question. The revisions also align this question with the similar 

questions in the FSA Survey and ESMA’s proposed reporting template.227

The information required in section 1c is designed to enable FSOC to monitor 

systemic risk that could be transmitted through counterparty exposure, track how 

different strategies are affected by and correlated with different market stresses, and 

follow the extent of private fund activities conducted away from regulated exchanges and 

clearing systems. This information could be important to understanding 

interconnectedness, which relates to the factors that FSOC must consider in making a 

determination to designate a nonbank financial company for FRB supervision under the 

Dodd-Frank Act.228

Several commenters agreed that some or all of the information required in 

section 1c would be valuable.

229 For instance, one commenter, referring to the 

counterparty information, argued that “[f]rom a systemic risk perspective, this is the most 

relevant information on the form, as it goes to the heart of the issue of connectivity.”230

 

227 See ESMA Proposal, supra note 

 

Some of these questions, including those about significant trading counterparty exposures 

and trading and clearing practices, are based on the FSA Survey, and some of the changes 

from the proposal discussed above more closely align this section with the FSA Survey

33.

228 See section 113(a) of the Dodd-Frank Act; FSOC Second Notice, supra note 6.

229 See AFL-CIO Letter; AFR Letter; MSCI Letter.

230 See MSCI Letter; infra note 274.
77

and ESMA’s proposed reporting template, which will promote international consistency 

in hedge fund reporting.

231

2. Section 2 of Form PF

A private fund adviser must complete section 2 of Form PF if it had at least $1.5

billion in hedge fund assets under management as of the end of any month in the prior

fiscal quarter.

232

We are adopting Form PF with several changes to the information that advisers 

are required to report in section 2. These changes, which are discussed in detail below, 

are intended to respond to industry concerns while still providing FSOC the information 

it needs to monitor systemic risk across the hedge fund industry. In general, we expect 

that these changes will reduce the burden of responding to the Form and more closely 

align the Form with ESMA’s proposed reporting template.

 This section of the Form requires additional information regarding the 

hedge funds these advisers manage, which we have tailored to focus on relevant areas of 

financial activity that have the potential to raise systemic concerns. This information 

corresponds to areas of potential concern that were identified in the Proposing Release 

and is designed to assist FSOC in monitoring and assessing the extent to which stresses at 

hedge funds could have systemic implications.

 

231 For example, ESMA’s proposed reporting template would ask for identification of the 

hedge fund’s top five counterparties in terms of net credit exposure. It would also ask for 

estimates of the percentage of the fund’s securities or derivatives traded on a regulated 

exchange versus over the counter and the percentage of the fund’s derivatives and repos 

cleared by a central clearing counterparty versus bilaterally. In addition, the template 

would require advisers to identify a predominant trading strategy using categories similar 

to those on Form PF. See ESMA Proposal, supra note 33.

232 See Instruction 3 to Form PF; supra section II.A.4 of this Release.
78

a. Section 2a of Form PF

Section 2a requires certain aggregate information about the hedge funds the

adviser manages. For example, Question 26 requires the adviser to report the value of 

assets invested (on a short and long basis) in different types of securities and 

commodities (e.g., different types of equities, fixed income securities, derivatives, and 

structured products). One commenter acknowledged the importance of collecting this 

information, agreeing that it “could feed a variety of possible systemic risk indices.”233 

Some commenters, however, expressed concern regarding the amount of detail required 

in this question,

234 and the commenter who generally supported this question nonetheless 

thought the asset classes placed too much emphasis on asset backed securities when 

compared with other asset classes.235 In response, the amount of detail regarding asset 

backed securities has been reduced so that the adviser need only provide a breakdown of 

mortgage backed securities, asset backed commercial paper, collateralized debt and loan 

obligations, other asset backed securities and other structured products.

236

 

233 MSCI Letter.

 We continue 

234 See, e.g., ABA Committees Letter; MFA Letter.

235 See MSCI Letter.

236 This question has also been modified to separate foreign exchange derivatives used for 

investment from those used for hedging in response to a comment arguing that the 

proposed category should exclude foreign currency hedges. See MFA Letter. We have 

also added a category for physical real estate, which was not included in the FSA Survey 

but has been added in ESMA’s proposed reporting template, in order to increase 

international consistency. See ESMA Proposal, supra note 33; see also supra note 31. In 

addition, following consultation with staff representing FSOC’s members, we have 

separated investments in money market funds from other types of cash management 

funds and deposits from other types of cash equivalents. These changes are intended to 

provide additional detail regarding how cash equivalents are held because, at times of 

economic stress, these forms of holdings may have different implications for systemic 

risk. 
79

to believe, however, that the remaining detail in this question is justified by the potential 

value of this information to FSOC’s systemic risk monitoring activities.237 One 

commenter suggested that, instead of the proposed categories of assets, we allow advisers 

to report based on GAAP classifications under FAS 157.238 We do not believe this is a 

workable alternative because FAS 157 does not employ a standard set of asset classes, 

and the value of this information depends in part on the ability of regulators to make 

comparisons across funds.

239 We also believe that our approach is more consistent with 

international hedge fund reporting standards.240

Question 26 also requires the adviser to report the duration, weighted average 

tenor or 10-year bond equivalent of fixed income portfolio holdings (including asset 

backed securities). This differs from the proposal, which would have required all 

advisers to report duration. We are giving advisers the option of instead reporting 

weighted average tenor or 10-year bond equivalents because we understand from 

comments received that advisers use a wide range of metrics to measure interest rate 

sensitivity.241

 

237 See Proposing Release, supra note 

 We expect that this revised approach will reduce the burden of reporting 

because advisers will generally be able to rely on their existing practices when providing 

this information. This approach may limit the ability of regulators to make comparisons 

12, at text accompanying n. 120 for a discussion of 

potential uses for this data.

238 See MFA Letter (this comment letter refers only to GAAP categories, but the commenter 

clarified on a call with staff that it was referring to the classifications under FAS 157).

239 We note that nothing would prevent an adviser from relying on its classifications of 

assets for financial reporting purposes when completing Form PF to the extent that asset 

classes overlap.

240 See FSA Survey; ESMA Proposal, supra note 33.

241 See ABA Committees Letter; MFA Letter.
80

across advisers but will still yield valuable information about sensitivities to interest rate 

changes.

242

Question 27 requires the adviser to report the value of turnover in certain assets 

classes (including listed equities, corporate bonds, sovereign bonds and futures) in the 

hedge funds’ portfolios during the reporting period. This is intended to provide an 

indication of the adviser’s frequency of trading in those markets and the amount of 

liquidity hedge funds contribute to those markets. The proposal would have required the 

adviser to calculate a single turnover rate for its entire hedge fund portfolio. However, 

commenters warned that this would prove difficult to calculate if an adviser trades in 

many different instrument types and, in particular, that the value of certain types of 

derivatives would overwhelm the influence of other instruments on the aggregate 

turnover number.243 These commenters suggested instead that we ask for turnover by 

asset class, as was done in the FSA Survey (and, more recently, ESMA’s proposed 

reporting template).244 We found these comments persuasive and have revised the 

question to request turnover in targeted asset classes.245

 

242 See MSCI Letter (arguing that duration information may not be valuable for making 

comparisons across the industry because there are many ways in which it may be 

calculated).

243 See ABA Committees Letter; MFA Letter. Some commenters also argued that this 

question would not provide information valuable to monitoring systemic risk. See, e.g., 

ABA Committees Letter; Fidelity Letter; SIFMA Letter. However, based on our 

consultation with staff representing FSOC’s members, we believe that turnover will 

provide important insight into the role of hedge funds in providing trading liquidity in 

certain markets.

244 See FSA Survey, supra note 32; ESMA Proposal, supra note 33.

245 This is generally consistent with the international standards, though, unlike the FSA 

Survey and ESMA’s proposed reporting template, we do not include derivatives (other 
81

Question 27 has also been revised to request turnover data expressed as the value 

of transactions during the period rather than as a rate. This change has been made in 

order to make the data easier to compare to broader market data and to improve the 

comparability of the data with data that is or would be collected on the FSA survey and 

ESMA’s proposed reporting template. In addition, we believe that the revised approach

will be less burdensome for advisers than calculating the proposed portfolio turnover rate

because advisers would have been required to determine the value of purchases and sales 

during the period as an intermediate step in calculating the portfolio turnover rate.

246

Finally, in response to Question 28, the adviser must report a geographical

breakdown of investments held by the hedge funds it advises.

247 This question has been 

modified from the proposal to require a less detailed breakdown (focusing on regions 

rather than countries) with additional, separate disclosure regarding investment in 

particular countries of interest. These changes are intended to respond to comments we 

received suggesting that advisers do not track this information in a manner consistent 

with our proposed, more granular geographical breakdown.248

 

than futures) because we have focused on assets classes where we believe turnover is 

currently most likely to occur at rates that raise systemic concerns.

 We anticipate that the

246 See the Proposing Release, supra note 12, for the proposed definition of “turnover rate” 

in the Glossary of Terms to Form PF.

247 See Question 28 on Form PF.

248 See ABA Committees Letter; MFA Letter. We have not, as one commenter suggested, 

used any particular service provider’s methodology of categorizing geographical 

exposures because our staff understands, based on conversations with industry 

representatives, that there is no single methodology that hedge fund advisers employ. See

MFA Letter (suggesting that we use “Bloomberg’s country of risk methodology”). In 

response to commenter concerns, we have removed some of the instructions regarding 

how the location of investments should be determined and expanded Instruction 15 to 

explain that the numerator should be calculated in the same manner as gross asset value. 
82

revised approach will reduce the burden of responding to this question because the less 

granular categories should allow more advisers to rely on their existing classifications.

The information required in section 2a is designed to assist FSOC in monitoring 

asset classes in which hedge funds may be significant investors and trends in hedge 

funds’ exposures. In particular, it is intended to allow FSOC to identify concentrations in 

particular asset classes (or in particular geographic regions) that are building or 

transitioning over time. It will also aid FSOC in examining large hedge fund advisers’ 

role as a source of liquidity in different asset classes. In some cases, section 2a requires

that the information be broken down into categories that are designed to facilitate use in 

the FRB’s flow of funds report, a tool that is used for evaluating trends in and risks to the 

U.S. financial system.

249

One commenter expressed concern that advisers do not collect or calculate the 

exposure or turnover information that section 2a requires on a monthly basis or track 

 This information also is designed to address requirements under 

section 204(b)(3) of the Advisers Act specifying certain mandatory contents for records 

and reports that must be maintained and filed by advisers to private funds. For example, 

it will provide information about the types of assets held and trading practices.

 

See MFA Letter. These changes allow advisers to rely on their internal methodologies 

and service provider reports in determining where to report investments and, by using 

gross asset value, rather than the more general value definition set out in Instruction 15, 

avoid the possibility that the reported value of certain derivative instruments would 

overwhelm the influence of other instruments. We have also added a “supranational” 

region, which is intended to capture investments that, because of their multinational 

scope, cannot meaningfully be placed in a single region.

249 See supra note 218 and infra note 475. For example, in some cases the data is required to 

be broken down between issuers that are financial institutions and those that are not. The 

FRB publishes flow of funds data on a quarterly basis.
83

geographical concentrations.250 As discussed above, we are adopting section 2a with 

several changes that are designed to address commenters’ concerns and reduce the 

reporting burden, though we continue to believe that monthly exposure and turnover 

values will be important to allow FSOC to track trends in the industry and to discourage 

“window dressing.”251 We acknowledge that advisers may incur additional burdens in 

responding to these questions, and we have taken this into account in considering the 

costs and benefits of this rulemaking.252

b. Section 2b of Form PF

 The revised approach to the information 

required in section 2a strikes an appropriate balance between the burden imposed and 

need for the information.

Consistent with our proposal, section 2b of Form PF requires a large hedge fund 

adviser to report certain additional information about any hedge fund it advises that has a 

net asset value of at least $500 million as of the end of any month in the prior fiscal 

quarter (a “qualifying hedge fund”).253

 

250 See ABA Committees Letter.

 Two commenters disagreed with limiting 

251 See infra notes 285-292 and accompanying text. See also Proposing Release, supra

note 12, at text accompanying n. 120 for a discussion of potential uses for this data.

252 See infra sections IV.B and V of this Release (discussing increases in our burden and cost 

estimates in response to comments received).

253 See Instruction 3 to Form PF. An adviser is not required to complete section 2 with 

respect to a fund of hedge funds that satisfies the requirements described in Instruction 7 

to Form PF. For purposes of determining whether a private fund is a qualifying hedge 

fund, the adviser must aggregate any parallel funds and funds that are part of the same 

master-feeder arrangement and, to the extent discussed above in section II.A.5 of this 

Release, any parallel managed accounts and relevant funds of related persons. See

Instructions 5 and 6 to Form PF and the definition of “qualifying hedge fund” in the 

Glossary of Terms to Form PF. See also infra section II.C.5 of this Release for a 

discussion of parallel funds, master-feeder arrangements and aggregation for reporting 
84

reporting on section 2b to hedge funds with net assets of $500 million or more, arguing 

that information regarding smaller funds is important to monitoring certain group 

behaviors relevant to systemic risk and that smaller funds are equally likely to engage in 

improper activities, such as insider trading.254 Two other commenters argued for a higher 

threshold, suggesting that no fund of this size could be systemically important.255 We are 

adopting the threshold as proposed because we believe it balances the needs of FSOC for 

information regarding relatively large hedge funds and the burdens of the more detailed

reporting that section 2b requires.256

Also consistent with our proposal, Question 30 in section 2b requires reporting of 

the same information as that requested in section 2a regarding exposure to different types 

of assets except, in this case, the information is reported for each qualifying hedge fund, 

rather than on an aggregate basis. This question has been modified from the proposal in 

the same manner as Question 26.

257

 

purposes. This aggregation is intended to prevent an adviser from structuring its 

activities to avoid the reporting requirements.

 

254 See AFL-CIO Letter; AFR Letter.

255 See Fidelity Letter (arguing that the FSA threshold of $500 million, upon which the 

qualifying hedge fund threshold used in the Form PF is based, should be scaled to $2.4 

billion based on the relative size of equity markets in the United States and the United 

Kingdom); SIFMA Letter. As discussed above, these comments appear to be based on 

the mistaken premise that the thresholds are intended to establish a cutoff separating the 

risky from the safe. To the contrary, the reporting thresholds are intended only to ensure 

that FSOC has sufficient context for its analysis while minimizing the burden imposed on 

advisers. We understand based on our staffs’ consultation with staff representing 

FSOC’s members that, in order to assess potential systemic risk posed by the activities of 

certain funds, FSOC would benefit from access to data about funds that, on an individual 

basis, may not be a source of systemic risk.

256 In addition, certain of the information that would be obtained with respect to smaller 

hedge funds will already have been captured on an aggregate basis in section 2a.

257 See supra notes 233-242 and accompanying text for a discussion of those changes. 
85

Section 2b also requires, on a per fund basis, data not requested in section 2a. For 

instance, the adviser must report information regarding the qualifying hedge fund’s 

portfolio liquidity,258 holdings of unencumbered cash259 and concentration of 

positions.

260

 

258 See Question 32 on Form PF. This question requires reporting of the percentage of the 

fund’s portfolio capable of being liquidated within different time periods. See Proposing 

Release, supra note 

These questions have been modified from the proposal to allow advisers to 

rely more on their own methodologies in responding, consistent with our changes to 

Instruction 15 to the Form, and to align the Form more closely with ESMA’s proposed 

12, at text accompanying n. 124 for a discussion of potential uses for 

this data. We have modified the instructions to this question to address commenter 

concerns by allowing advisers to rely more on their own methodologies in responding. 

See CCMR Letter; MFA Letter. We have also conformed the liquidity periods to those 

included in ESMA’s proposed reporting template. See ESMA Proposal, supra note 33. 

One commenter objected to the question more generally, saying that the data is not 

currently tracked in the manner required and many firms would need to “devote 

significant time and resources” to building models and systems. TCW Letter. Another 

commenter, however, supported this question, noting that “[t]his [information] is 

increasingly a request of hedge fund investors, particularly for comingled funds, where a 

given investor can be adversely impacted by a sudden large redemption by another 

party.” MSCI Letter. We have taken into account both of these comments in considering 

the costs and benefits of this rulemaking and believe that the value of the information to 

FSOC warrants the potential burden imposed. See infra sections IV.B and V of this 

Release (discussing increases in our burden and cost estimates in response to comments 

received).

259 See Question 33 on Form PF. In response to a comment we received, we have modified 

the definition of “unencumbered cash” to include the value of “overnight repos” used for 

liquidity management (so long as the assets purchased are U.S. treasury securities or 

agency securities) because we are satisfied that, for this purpose, the liquidity of these 

positions is sufficiently cash-like. See MFA Letter.

260 See Questions 34 and 35 on Form PF. Question 34 requires the total number of open 

positions held by the fund, and Question 35 requires reporting, for each position that 

represents 5% or more of the fund’s net asset value, of the position’s portion of the fund’s 

net asset value and sub-asset class. One commenter asked for clarification regarding the 

meaning of “position,” as used in these questions and elsewhere in the Form. See MFA

Letter. In response, we have added an instruction to the Form explaining that advisers 

should determine whether a set of legal and contractual rights constitutes a “position” in a 

manner consistent with their internal recordkeeping and risk management procedures. 

See Instruction 15 to Form PF. This general instruction also supplants the detailed 

instructions proposed in Question 35, which have, accordingly, been removed.
86

reporting template. A new Question 31 has been added, which requires the adviser to 

identify the reporting fund’s base currency because this information is necessary to 

interpret responses to questions regarding foreign exchange exposures and the effect of 

changes in currency rates on the reporting fund’s portfolio.261

In Questions 36 through 38, the adviser must also provide information regarding 

the fund’s collateral practices with counterparties.

262 These questions have been 

significantly modified from the proposal in order to reduce the amount of detail required, 

including by removing the breakdown of collateral into initial and variation margin. 

These changes were made because a commenter persuaded us that “[w]hile some of this 

information is potentially illuminating in the context of systemic risk... this section [as 

proposed] is more burdensome than it need be for its purpose.”263 We have also modified 

these questions by requiring information regarding rehypothecation only with respect to 

the fund’s aggregate collateral (rather than on a counterparty-by-counterparty basis). 

Commenters persuaded us that, because collateral is often fungible, this question would 

have been difficult to answer as proposed and that the additional detail is unnecessary.264

Question 39 in section 2b also requires the adviser to report whether the hedge 

fund cleared any trades directly through a central clearing counterparty (“CCP”) during 

 

We anticipate that these changes will reduce the burden of responding to these questions.

 

261 See also Question 30, regarding reporting fund exposures, and Question 42, regarding the 

effect of changes in certain market factors on the fund’s portfolio.

262 Questions 36 and 37 focus on collateral practices with the fund’s top five counterparties, 

and Question 38 focuses on rehypothecation of the fund’s aggregate collateral.

263 MSCI Letter.

264 See MFA Letter; MSCI Letter.
87

the reporting period. The proposal would have required the adviser to identify the three 

CCPs to which the fund has the greatest net counterparty credit exposure and provide the 

amount of that exposure. The information this question requires has been significantly 

reduced because commenters argued persuasively that the fund’s relationship is typically 

with a swap dealer, futures commission merchant or direct clearing member who then 

interacts with the CCP rather than directly with a CCP and that, as a result, advisers “may 

not have easy access to the data requested by this question.”265

The information that Questions 30 through 35 require is designed to assist FSOC 

in monitoring the composition of hedge fund exposures over time as well as the liquidity 

of those exposures. In addition, information reported in response to Questions 36 

through 38 is intended to aid FSOC in its monitoring of credit counterparties’ unsecured 

exposure to hedge funds as well as the hedge fund’s exposure and ability to respond to 

market stresses. Finally, Question 39 is intended to assist FSOC in monitoring whether 

hedge funds and CCPs become increasingly interconnected over time. This information 

could be important to understanding, for instance, concentrations in the hedge fund 

industry and interconnectedness, which relate to the factors that FSOC must consider in 

 If responses to the 

revised question indicate that many reporting funds clear transactions directly through 

CCPs, the Commissions may consider in the future whether a question like the one 

proposed should be added to the Form. The change to Question 39 will reduce the 

burden of responding to the Form.

 

265 MFA Letter; see also AIMA General Letter.
88

making a determination to designate a nonbank financial company for FRB supervision 

under the Dodd-Frank Act.266

Section 2b also requires for each qualifying hedge fund data regarding certain 

hedge fund risk metrics. For instance, Question 40 requires the adviser to report value at 

risk (“VaR”) for each month of the reporting period if, during the reporting period, the 

adviser regularly calculated a VaR metric for the qualifying hedge fund. One commenter 

confirmed that, “[f]or all but the most illiquid strategies, hedge fund managers utilize 

these statistical measures [VaR and similar measures] for internal management and for 

investor reporting.”267 We are adopting this question substantially as proposed but with 

several clarifying changes.

268

In Question 41, the adviser must also indicate whether there are risk metrics other 

than, or in addition to, VaR that it considers important to managing the fund’s risks. 

Several commenters, noting that some advisers do not use VaR, expressed concern that a 

negative response regarding the use of VaR would create a presumption that the adviser 

 

266 See section 113(a) of the Dodd-Frank Act; FSOC Second Notice, supra note 6.

267 See MSCI Letter. This commenter, however, cautioned that variability in the calculation 

of VaR will make meaningful aggregation of this information difficult and suggested 

removing the question. As proposed, in order to minimize the reporting burden 

associated with this question, we are not requiring that all advisers calculate VaR using a 

standardized set of assumptions. Although this approach may, as the commenter 

suggested, reduce the ability of regulators to make comparisons across hedge funds using 

this data, we believe that it will also provide valuable risk information with respect to 

individual funds.

268 For instance, we have specified the units for reporting the confidence interval and 

weighting factor, combined the “none” and “equal” weighting options and clarified that 

the monthly reporting should be at the end of each month and not for the span of the 

month.
89

is not prudently managing risk.269

In addition, Question 42 requires the adviser to report the impact on the fund’s 

portfolio from specified changes to certain identified market factors, if regularly 

considered in formal testing in the fund’s risk management, broken down by the long and 

short components of the qualifying hedge fund’s portfolio. We are adopting this question 

with several changes from the proposal.

 This new question will give advisers an opportunity to 

indicate that they are using risk metrics other than VaR, and it will also provide valuable 

information regarding industry practice that may inform FSOC’s understanding of risk 

management and future rulemakings.

270 Most of the changes clarify the instructions, 

but the question has also been modified so that an adviser may omit a response to any

market factor that it did not regularly consider in formal testing even if the factor could 

have an impact on the fund’s portfolio or the adviser considered it qualitatively.271

 

269 See IAA Letter; MFA Letter.

 Under 

the proposal, an adviser would have been permitted to omit a response with respect to a

market factor only if it did not regularly consider that factor in the reporting fund’s risk 

management, whether in formal testing or otherwise. This change has been made in 

response to commenter concerns regarding the potential burden of responding to this 

270 These include changes intended to clarify (1) how the fund’s portfolio should be 

separated into long and short components, (2) the period over which the changes should 

be deemed to occur and (3) how to address factors that would otherwise become negative 

when a given change is applied. We have also modified the magnitude of some of the 

market factor changes that advisers must test in order to reflect recent data on the 

frequency with which such changes may occur.

271 For this purpose, “formal testing” means that the adviser has models or other systems 

capable of simulating the effect of a market factor on the fund’s portfolio, not that the 

specific assumptions outlined in the question were used in testing. If the factor is 

relevant but not tested, the adviser would need to check a box to that effect but would not 

report a numerical response.
90

question.

272

Some commenters would have preferred removal of Question 42 entirely, arguing 

that it would not yield information valuable to systemic risk monitoring because the 

variability in responses would hinder the ability of regulators to make comparisons across 

funds.

 We believe it will reduce that burden in the aggregate because fewer 

advisers will need to provide detailed responses and for individual advisers because those 

without existing quantitative models will not be required to build or acquire them in order 

to respond to the question.

273

 

272 See, e.g., TCW Letter. This commenter wrote that “[a]n analyst at the firm estimated that 

it would take one to two days for the firm’s systems to compute and verify the data for 

one fund’s response to [this question].” Based on a discussion with this commenter, our 

staff understands that this estimate assumes that the fund holds securities that are very 

complex to model (such as non-agency mortgage backed securities) and that the 

modeling is intended to achieve a high level of confidence. Our staff further understands 

that for many other asset classes, this modeling would require minutes or hours rather 

than days and that, even for complex securities, advisers are able to obtain 

approximations about which they are reasonably confident in significantly less time. As 

a result, we believe that this commenter’s estimate represents an effort significantly 

beyond the likely average burden this question requires. We also understand that the 

majority of the estimated one to two days represents time spent allowing the adviser’s 

systems to calculate the responses and not employee hours. We note, finally, that we 

have significantly extended the filing deadline for large hedge fund advisers, reducing the 

likelihood that this task will compete with other tasks for the firm’s computing resources 

and, consequently, the potential systems costs associated with this question. See supra

section II.B.2 of this Release. Nonetheless, we have taken this comment into account in 

considering the costs and benefits of this rulemaking. See infra sections IV.B and V of 

this Release (discussing increases in our burden and cost estimates in response to 

comments received).

 However, although variability in the assumptions used to complete the question 

may limit certain types of industry-wide comparisons, the variability itself, when taken 

together with other information collected on the Form, may provide important 

comparative information. Based on our staffs’ consultations with staff representing 

273 See IAA Letter; TCW Letter.
91

FSOC’s members, we believe this question will also provide valuable risk information 

with respect to individual funds.274

Item D of section 2b also requires reporting of certain financing information for 

each qualifying hedge fund in Question 43. This question includes a monthly breakdown 

of the fund’s secured and unsecured borrowing, the value of the collateral and other 

credit support posted in respect of the secured borrowing and the types of creditors. 

Question 43 has been modified from the proposal to clarify instructions and remove some 

of the detail regarding collateral postings (including information regarding 

rehypothecation of collateral, which is now covered on an aggregate basis elsewhere in 

section 2b).275 We anticipate that these changes will reduce the burden of responding to 

this question. One commenter argued that advisers would have difficulty responding to

the parts of Question 43 relating to the fund’s borrowings via prime brokerage because 

they lack transparency into the prime brokerage relationship.276

 

274 See Proposing Release, supra note 

 This comment suggests, 

however, that prime brokers do not currently report this information to advisers, not that 

advisers are unable to obtain this information on request. It should be noted that advisers 

have successfully completed the FSA Survey, which includes a similar breakdown of 

12, at text accompanying n. 127 (discussing potential 

uses for this data). One commenter suggested removing this question in favor of 

expanding the questions regarding counterparty exposures so that an adviser would

complete those questions using multiple stress scenarios to probe for contingent 

exposures. See MSCI Letter; see also supra note 230. We believe at this time that the 

question we are adopting strikes a more appropriate balance between the value of the 

information collected and the burden of reporting. 

275 See supra note 264 and accompanying text.

276 See MFA Letter.
92

borrowings (though not the collateral information), and that the revisions we have made 

to this question simplify the collateral reporting requirements.

An adviser must also report in Questions 44 and 45 the fund’s total notional 

derivatives exposures as well as the net mark-to-market value of its uncleared derivatives 

positions and the value of the collateral and other credit support posted in respect of those 

uncleared positions. Under the proposal, advisers would have reported only the notional 

value of the fund’s derivatives positions and the value of collateral posted in respect of 

those positions. One commenter pointed out, however, that the “absolute value of 

notional values cannot meaningfully be compared to variation margin amounts” because 

margin is posted based on net market values rather than notional amounts.277 At this 

commenter’s suggestion, this question has been revised to request both notional value 

and net market value. We have, however, narrowed the scope of transactions about 

which collateral information is requested. Specifically, an adviser is required to report 

market values and collateral values only for transactions that are not cleared by a CCP. 

We have taken this approach because we believe margining practices associated with 

cleared derivatives make obtaining information regarding collateral practices in 

connection with those transactions unnecessary. For the same reasons discussed above in 

connection with changes made to Questions 36 and 37, this question has been revised to 

reduce the amount of detail required regarding the posting of collateral.278

 

277 See MFA Letter.

 We anticipate 

that these changes will, on net, reduce the burden of responding to Questions 44 and 45

278 See supra notes 262-264 and accompanying text.
93

and, by allowing comparisons of collateral practices to net exposures, provide more 

valuable information for FSOC.

In response to Questions 46 and 47, the adviser must provide a breakdown of the 

term of the fund’s available financing and the identity of, and amount owed to, each 

creditor to which the fund owed an amount equal to or greater than 5 percent of the 

fund’s net asset value as of the reporting date.

279 One commenter argued that the 

breakdown of available financing should not include uncommitted lines of credit because 

the lender may not provide them on request.280 However, the extent to which financing 

may become rapidly unavailable is precisely the information this question is designed to 

elicit. We are adopting Questions 46 and 47 substantially in the form proposed.281

The information that Item D of section 2b requires is designed to assist FSOC in 

monitoring, among other things, the qualifying hedge fund’s leverage, the unsecured 

exposure of credit counterparties to the fund, and the committed term of that leverage, 

which may be important to monitor if the fund comes under stress. This information is 

also relevant to the fund’s interconnectedness and leverage, which relate to factors that 

FSOC must consider in making a determination to designate a nonbank financial 

company for FRB supervision under the Dodd-Frank Act.282

 

279 To improve international consistency, we have conformed the liquidity periods in 

Question 46 to those included in ESMA’s proposed reporting template. See ESMA 

Proposal, supra note 33. As explained above, we have moved Question 47 from 

section 1b to section 2b. See supra note 195.

280 See MFA Letter.

281 But see, supra note 279. We have also added an instruction to Question 47 clarifying 

that the precise legal name of the creditor is not required.

282 See section 113(a) of the Dodd-Frank Act; FSOC Second Notice, supra note 6.
94

Item E of section 2b requires the adviser to report information about each 

qualifying hedge fund’s investor composition and liquidity. Questions 48 and 49, for 

example, require information regarding the fund’s side-pocket and gating arrangements. 

These questions have been modified to increase their clarity and to require numerical 

responses regarding gating arrangements only if investors have withdrawal or redemption 

rights in the ordinary course, potentially reducing the number of advisers that need to 

respond to all elements of Question 49. Question 48 has also been expanded so that the

adviser must check a box indicating whether additional assets have been placed in a sidepocket since the end of the prior reporting period. Without this additional information,

FSOC would not be able to distinguish between advisers frequently using side-pockets 

and those who have simply had a side-pocket in place for an extended period. We 

believe, therefore, that this additional information will be important to interpreting the 

information proposed to be collected. We do not anticipate that this addition will 

significantly increase the burden of responding to this question because we believe that 

advisers already track assets held in side-pockets and the response only requires checking 

a box.

Finally, the adviser must provide, in Question 50, a breakdown of the percentage 

of the fund’s net asset value that is locked in for different periods of time. This question 

has been modified from the proposal to clarify instructions and to improve international 

consistency by conforming the liquidity periods to those included in ESMA’s proposed 

reporting template.283

 

283 See ESMA Proposal, supra note 33.
95

The information that Item E of section 2b requires is designed to allow FSOC to 

monitor the hedge fund’s susceptibility to failure through investor redemptions in the 

event the fund experiences stress due to market or other factors. For instance, this 

information, together with information collected in Questions 32 and 46 and elsewhere 

on the Form, is intended to assist FSOC in determining whether the fund may have a 

mismatch in the maturity or liquidity of its assets and liabilities, which relate to factors 

that FSOC must consider in making a determination to designate a nonbank financial 

company for FRB supervision under the Dodd-Frank Act.284

Certain data in the Form, while filed with the Commissions on an annual or 

quarterly basis, must be reported on a monthly basis to provide sufficiently granular data 

to allow FSOC to better identify trends and to mitigate “window dressing.”285 Nearly all 

of these requirements appear in section 2 of the Form, which only large hedge fund 

advisers complete. Although no commenters expressly supported the monthly data 

requirements within the Form, some commenters recommended that large advisers be 

required to file more often than quarterly, which could impose a greater burden than

monthly reporting on a quarterly filing.286 Several commenters, however, suggested that 

advisers should only report data as of the end of the quarterly reporting period.287

 

284 See section 113(a) of the Dodd-Frank Act; FSOC Second Notice, supra note 

 One 

commenter, while conceding that some funds already report certain data to investors on a 

6.

285 See, e.g., Questions 27, 28, 31, 33, 34, 43, 44, 45 and 56 on Form PF.

286 See AFL-CIO Letter; AFR Letter. See also CII Letter.

287 See, e.g., BlackRock Letter (arguing that data should be provided, at most, on a quarterly 

basis); Fidelity Letter; MFA Letter; SIFMA Letter (proposing that reporting be no more 

frequent than quarterly, at least for private equity fund advisers).
96

monthly basis, asserted that such monthly reporting involves significantly less data and is 

based on internal valuation estimates only.288 Other commenters doubted that advisers 

would engage in “window dressing” and argued that the increased costs to advisers 

would outweigh the benefits.289

Based on our staffs’ consultations with staff representing FSOC’s members, we 

agree with commenters who argued that rapidly changing markets and portfolios merit 

collecting certain information more often than on a quarterly basis, and we are not 

persuaded that the large hedge fund and large liquidity fund advisers required to respond 

to these questions will be overwhelmed by this reporting. Also, as discussed above, we 

have made several changes that increase the ability of advisers to rely on their own 

internal methodologies in responding to the Form, which is expected to ease the burden 

of reporting monthly information by clarifying that advisers need not incur substantial 

additional burdens in verifying the data.290 Finally, the monthly data about which 

commenters were most concerned were the monthly performance data proposed to be 

collected in section 1b of the Form.291 Question 17 has, however, been modified to 

require monthly data only in the case that the adviser is already calculating it, making the 

reporting burden essentially one of copying information onto the Form.292

 

288 See BlackRock Letter.

 Accordingly, 

289 See, e.g., Fidelity Letter; MFA Letter.

290 See supra note 188 and text accompanying.

291 See Question 17 on Form PF; supra section II.C.1.b of this Release.

292 See supra nn. 198-202 and accompanying text.
97

except as discussed above, we are adopting the requirements to report monthly 

information as proposed.

3. Section 3 of Form PF

A private fund adviser must complete section 3 of Form PF if it manages one or 

more liquidity funds and had at least $1 billion in combined liquidity fund and registered 

money market fund assets under management as of the end of any month in the prior 

fiscal quarter.

293 Section 3 requires that the adviser report certain information for each 

liquidity fund it manages. The adviser must provide information regarding the fund’s 

portfolio valuation and its valuation methodology, as well as the liquidity of the fund’s 

holdings.

294 This section also requires information regarding whether the fund, as a 

matter of policy, is managed in compliance with certain provisions of rule 2a-7 under the 

Investment Company Act, which is the principal rule through which the SEC regulates 

registered money market funds.295

 

293 See sections II.A.2 and II.B.4 of this Release for the definition of “liquidity fund” and a 

discussion of this reporting threshold. See also Instructions 3, 5 and 6 to Form PF. 

Form PF is a joint form between the SEC and the CFTC only with respect to sections 1 

and 2 of the form. Section 3 of the form, which requires more specific reporting 

regarding liquidity funds, is only required by the SEC.

 Items B and C of section 3 require the adviser to

report the amount of the fund’s assets invested in different types of instruments, 

294 See Questions 52, 53 and 55 on Form PF. The SEC has modified the instructions to 

Question 55 to clarify the units in which responses are to be reported and to clarify that 

the net asset value requested in parts (a) and (b) of Question 55 is the net asset value 

reported to current and prospective investors, which may or may not be the same as the 

net asset value reported in Questions 9 and 55(c), which are based on fair value.

295 See Question 54 of Form PF. The restrictions in rule 2a-7 are designed to ensure, among 

other things, that money market funds’ investing remains consistent with the objective of 

maintaining a stable net asset value. Many liquidity funds state in investor offering 

documents that the fund is managed in compliance with Investment Company Act rule 

2a-7 even though that rule does not apply to liquidity funds.
98

information for each open position of the fund that represents 5 percent or more of the 

fund’s net asset value and information regarding the fund’s borrowings.

296 Finally, 

Item D of section 3 asks for certain information regarding the fund’s investors, including 

the concentration of the fund’s investor base and the liquidity of its ownership 

interests.

297

The information that section 3 requires is designed to assist FSOC in assessing the 

risks undertaken by liquidity funds, their susceptibility to runs, and how their investments 

might pose systemic risks either among liquidity funds or through contagion to registered 

money market funds. In addition, this information is intended to aid FSOC in monitoring 

leverage practices among liquidity funds and their interconnectedness to securities 

lending programs, which relate to factors that FSOC must consider in making a 

determination to designate a nonbank financial company for FRB supervision under the 

Dodd-Frank Act.298

 

296 See Questions 56-59 on Form PF. The SEC has modified these questions from the 

proposal by removing instructions that have been supplanted by general instructions. See

Instruction 15 to Form PF. 

 Finally, this information will assist FSOC in assessing the extent to 

which the liquidity fund is being managed consistent with restrictions imposed on 

registered money market funds that might mitigate their likelihood of posing systemic 

297 See Questions 60-64 on Form PF. For purposes of these questions, beneficial owners are 

persons who would be counted as beneficial owners under section 3(c)(1) of the 

Investment Company Act or who would be included in determining whether the owners 

of the fund are qualified purchasers under section 3(c)(7) of that Act. (15 U.S.C. 80a3(c)(1) or (7)). The SEC has made clarifying changes to the instructions to Question 64. 

To improve international consistency, the SEC has also conformed the liquidity periods 

in Question 64 to those included in ESMA’s proposed reporting template. See ESMA 

Proposal, supra note 33. 

298 See section 113(a) of the Dodd-Frank Act; FSOC Second Notice, supra note 6.
99

risk. Commenters generally did not address the requirements of section 3, and the SEC 

is, therefore, adopting this section of the Form substantially as proposed.299

4. Section 4 of Form PF

A private fund adviser must complete section 4 of Form PF if it had at least $2

billion in private equity fund assets under management as of the end of its most recently 

completed fiscal year.300 This section of the Form requires additional information 

regarding the private equity funds these advisers manage, which has been tailored to 

focus on relevant areas of financial activity that have the potential to raise systemic 

concerns. As discussed in the Proposing Release, information regarding the activities of 

private equity funds, certain of their portfolio companies and the creditors involved in 

financing private equity transactions may be important to the assessment of systemic 

risk.301 The Proposing Release identified two practices of private equity funds, in 

particular, that could result in systemic risk: (1) the potential shift of market risk to 

lending institutions when bridge loans cannot be syndicated or refinanced;302

 

299 The SEC received only one comment specifically addressing the requirements of 

section 3, which questioned whether requiring information regarding investor liquidity is 

appropriate considering the focus of liquidity funds on short-term investments. See MFA 

Letter. The SEC continues to believe that this information is important to understanding 

whether a fund may suffer a mismatch between the maturity of its obligations and the 

maturity of its investments and is, therefore, adopting this question substantially as 

proposed. But see, supra note

and (2) the 

297.

300 See Instruction 3 to Form PF. See also sections II.A.3 and II.B.4 of this Release for the 

definition of “private equity fund” and a discussion of this reporting threshold. Form PF 

is a joint form between the SEC and the CFTC only with respect to sections 1 and 2 of 

the form. Section 4 of the form, which requires more specific reporting regarding private 

equity funds, is only required by the SEC.

301 See Proposing Release, supra note 12, at section II.A.3.

302 See Proposing Release, supra note 12, at nn. 71-73 and accompanying text.
100

imposition of substantial leverage on portfolio companies that may themselves be 

systemically significant.303

Several commenters agreed that the activities identified in the Proposing Release 

are important areas of concern for monitoring systemic risk with respect to private equity 

funds.304 Other commenters, however, disagreed with the analysis, arguing that private 

equity funds and their advisers do not have the potential to pose systemic risk.305 These 

commenters affirmed that certain characteristics identified in the Proposing Release, 

including limitations on investor redemption rights and an absence of significant leverage 

at the fund level, are common to private equity funds and tend to mitigate their potential 

for systemic risk.306

The SEC acknowledges that several potentially mitigating factors suggest that 

private equity funds may have less potential to pose systemic risk than some other types 

of private funds, and this has been taken into account in requiring substantially less 

 

303 See Proposing Release, supra note 12, at nn. 74-75 and accompanying text.

304 See, e.g., AFL-CIO Letter (pointing to evidence that the use of so-called “covenant-lite” 

loans is again expanding); CPIC Letter (noting the importance of gathering information 

about all types of entities using leverage and asserting that, “the Commission should not 

be pressured to scale back further or provide broad exemptions for private equity 

funds.”); Merkl February Letter. See also Proposing Release, supra note 12, at n. 73 and 

accompanying text (discussing risks associated with “covenant-lite” loans).

305 See, e.g., Olympus Letter; PEGCC Letter (contending that private equity funds are like 

any other shareholders and that they should not be singled out for “a discriminatory and 

onerous reporting regime designed to monitor how their portfolio companies use 

leverage.”); SIFMA Letter.

306 See, e.g., Olympus Letter; PEGCC Letter; SIFMA Letter. These commenters also noted 

that these funds typically focus on long-term investments and are legally isolated from 

the financial obligations of portfolio companies and other funds. They also asserted that 

private equity funds and their investments tend to be relatively small and are not 

interconnected. See also Proposing Release, supra note 12, at n. 77 and accompanying 

text.
101

information with respect to private equity funds than with respect to hedge funds or 

liquidity funds. The design of Form PF, however, is not intended to reflect a 

determination as to where systemic risk exists but rather to provide empirical data to 

FSOC with which it may make a determination about the extent to which the activities of 

private equity funds or their advisers pose such risk.

307 Based on SEC staff’s 

consultation with staff representing FSOC’s members, the SEC continues to believe that 

targeted information regarding private equity leverage practices may be important to 

FSOC’s monitoring of systemic risk.308

One commenter argued that, if the SEC is concerned only with the use of 

leverage, the information could be gathered more effectively from the financial 

institutions that lend the money or, in the case of leveraged portfolio companies that are 

themselves financial institutions, incur the debt.309

 

307 One industry observer has explained the importance of transparency in allowing 

regulators to examine where risks may exist in the alternative investment industry, 

arguing that, “[r]egulation has to aim at trying to prevent the next crisis, not simply 

cleaning up the mess from the previous one. It may indeed be the case that the alternative 

investment industry is too small and/or is leveraged at too low a level, at least relative to 

average bank sector leverage, to be a likely source of future systemic harm but the 

opacity issue, which has for a long time hampered supervisors’ efforts to understand the 

industry’s significance, makes this hard to tell. Requiring the industry to submit at least to

disclosure and transparency obligations that help regulators and central banks do a better

job of identifying systemic risk concentrations in the system is a reasonable step forward. 

Resistance to the imposition of obligations of this sort would merely serve to suggest that

there is something to hide.” Eilis Ferran, The Regulation of Hedge Funds and Private 

Equity: A Case Study in the Development of the EU’s Regulatory Response to the 

Financial Crisis, University of Cambridge and European Corporate Governance Institute 

(Feb. 2011).

 Staff representing FSOC’s members

has explained to the SEC’s staff, however, that collecting leverage data from private 

308 See Proposing Release, supra note 12, at section II.A.3.

309 See PEGCC Letter.
102

equity advisers has several potential advantages. First, it provides a more complete 

accounting than other data sources of the leverage that may have been imposed on 

portfolio companies. Although portfolio companies may take on leverage through 

financial institutions regulated in the United States, they may also incur leverage from 

other sources, including hedge funds and foreign financial institutions. As a result, 

portfolio company leverage information collected through U.S. bank regulators would 

likely provide an incomplete picture and may fail to capture trends with potential 

systemic importance, such as greater reliance on leverage obtained from outside the 

regulated financial sectors or from foreign sources. Even if regulators are only 

concerned about the risks that a portfolio company’s debt may impose on financial 

institutions, those risks cannot be fully understood without information regarding the 

company’s entire balance sheet, including debt from other sources.

Second, because the SEC understands that private equity advisers routinely track 

the leverage of their portfolio companies, collecting data directly from these advisers is 

likely to be the most efficient means of monitoring portfolio company leverage. In 

contrast, obtaining portfolio company leverage information through bank regulators could 

be less efficient because (1) banks are less likely to be actively tracking leverage 

information specifically attributable to portfolio companies, (2) bank regulators do not 

have a single collection mechanism for this data and (3) data may need to be aggregated 

across several different bank regulators.

Third, collecting leverage data from private equity advisers would fill gaps in the 

data that could appear if FSOC were to attempt aggregating information from many 

different U.S. bank regulators. It also provides a check on any data that may be collected 
103

from other sources. Indeed, other types of information that the SEC collects from 

investment advisers has already proven valuable in cross-checking data that bank 

regulators collect.

310

Fourth, FSOC has stated that it is concerned that leveraged lending practices can 

raise systemic risk concerns.311 Private equity advisers are repeat participants in the 

leveraged loan market (often more so than other types of companies that access credit 

through these markets), and tracking their portfolio company leverage practices can 

signal trends in emerging risks in those markets. Indeed a recent study found that the 

private equity fund sponsors’ bank relationships were an important factor in explaining 

the favorable loan terms obtained by private equity portfolio companies, both as a result 

of the private equity sponsor’s repeat interactions reducing information asymmetries and 

the competition among banks to cross-sell other business to the private equity sponsor.312

 

310 The SEC’s Form N-MFP, for instance, has provided a valuable check against information 

that banking regulators collect with respect to portfolio holdings of registered money 

market funds.

 

This empirical data suggests that collecting data on private equity portfolio company 

leverage trends in fact may be the most efficient way to collect systemic risk trend data 

for the broader leveraged loan market because private equity portfolio companies’ 

practices in this area may be a bellwether due to their sponsors’ repeat player status. In 

311 See FSOC 2011 Annual Report, supra note 19, at 12 (“Although it is difficult to make 

definitive determinations regarding the appropriateness of risk pricing, there have been 

some indicators that credit underwriting standards might have overly eased in certain 

products, such as leveraged loans, reflecting the dynamics of competition among 

arranging bankers. ...Sound underwriting standards, which were abandoned in the run-up 

to the crisis, will encourage greater investor confidence and stability in the market”)

312 See Victoria Ivashina & Anna Kovner, The Private Equity Advantage: Leveraged Buyout 

Firms and Relationship Banking, 24 REV. OF FIN. STUDIES 7 (July 2011).
104

addition, this approach appears consistent with an emerging international approach

favoring broad monitoring of credit intermediation across the economy.

313

The SEC is, however, adopting Form PF with several significant changes that 

reduce the frequency of reporting with respect to private equity funds, as discussed 

above, and more closely align the required reporting with information available on 

portfolio company financial statements. These changes, which are discussed in detail 

below and in section II.B of this Release, are intended to respond to industry concerns 

while still providing FSOC the information it needs to monitor the potential for systemic 

risk across the private fund industry. In general, we expect that these changes will reduce 

the burden of responding to the Form.

Section 4 requires that large private equity advisers report certain information for 

each private equity fund they manage, including certain information about guarantees of 

portfolio company obligations and the leverage of the portfolio companies that the fund 

controls. Specifically, Question 66 requires information about the amount of guarantees

that the adviser, the reporting fund or any other related person of the adviser issues in 

respect of a portfolio company’s obligations.

314

 

313 See FSB Shadow Banking Report, supra note 

 Questions 67 through 70 require the 

28; ESMA Proposal, supra note 33; 

Proposing Release, supra note 12, at n. 33. See also CPIC Letter (affirming the 

importance of gathering information about all types of entities using leverage).

314 Following consultation with staff representing FSOC’s members, we have broadened the 

scope of this question to capture guarantees from the adviser and its related persons rather 

than just those from the reporting fund. This change is intended to allow FSOC and other 

regulators to confirm broadly whether the adviser or the reporting fund has direct or 

indirect exposure to the liabilities of portfolio companies in excess of the amounts of their 

investments. In addition to Question 66, the proposal included a separate question 

regarding the fund’s borrowings, but a commenter pointed out that this substantially 

duplicated the information requested in Question 13 on Form PF, so the proposed 

question is not being adopted. See comment letter of George Merkl (Mar. 23, 2011). See
105

adviser to report: (1) the weighted average debt-to-equity ratio of controlled portfolio 

companies in which the fund invests, (2) the range of that debt-to-equity ratio among 

these portfolio companies and (3) the aggregate gross asset value of these portfolio 

companies.

315

In addition, Questions 71 and 72 ask for the total amount of borrowings 

categorized as current liabilities and as long-term liabilities on the most recent balance 

sheets of the fund’s controlled portfolio companies. These questions replace the question 

that the SEC proposed, which would have required advisers to report the maturity profile 

of the debt of its private equity funds’ controlled portfolio companies.316

 

also the Proposing Release, supra note 

 This change has 

been made in response to commenter concerns regarding the burden of gathering the data 

12, for the proposed version of Question 57 on 

Form PF.

315 A “controlled portfolio company” is defined as a portfolio company that is controlled by 

the private equity fund, either alone or together with the private equity fund’s affiliates or 

other persons that are, as of the reporting date, part of a club or consortium investing in 

the portfolio company. “Control” has the same meaning as used in Form ADV and 

generally means the power, directly or indirectly, to direct the management or policies of 

a person, whether through ownership of securities, by contract, or otherwise. See 

Glossary of Terms to Form PF; Glossary of Terms to Form ADV. One commenter 

suggested the average ratio required in Question 68 would be unreliable because it 

depends on accounting methodologies, which may vary. See PEGCC Letter. While this 

measure may have its limitations, the SEC believes, based on its staff’s consultations 

with staff representing FSOC’s members, that this question will provide an important 

indication of portfolio company leverage and is not aware of an alternative that would 

yield more reliable information without imposing additional burdens on advisers. 

Question 70, regarding the aggregate gross asset value of the reporting fund’s controlled 

portfolio companies, has been added to provide a measure of scale as context for 

interpreting the average leverage ratio. An adviser must already know this information in 

order to calculate the average leverage ratio, so the SEC does not expect this addition to 

meaningfully increase the reporting burden.

316 See the Proposing Release, supra note 12, (discussing the proposed version of 

Question 62 on Form PF).
106

that would have been required to respond to the question as proposed.317

In response to Questions 73 and 74, the adviser must report the portion of the 

controlled portfolio companies’ borrowings that is payment-in-kind or zero coupon,

 The SEC 

anticipates that these changes will reduce the burden of responding to these questions 

because less information is required and the information will be readily available on the 

financial statements of the fund’s controlled portfolio companies.

318

and whether the fund or any of its controlled portfolio companies experienced an event of 

default on any of its debt during the reporting period.319 In addition, Question 75 

requires the adviser to provide the identity of the institutions providing bridge financing 

to the adviser’s controlled portfolio companies and the amount of that financing. 

Question 76 requires certain information if the fund controls any financial industry 

portfolio company, such as the portfolio company’s name, its debt-to-equity ratio, and the 

percentage of the portfolio company beneficially owned by the fund.320

 

317 See IAA Letter.

 Question 79 

318 See Question 73 on Form PF. One commenter argued that the SEC should not include 

this question because it has not identified any systemic risk associated with this type of 

indebtedness. See PEGCC Letter. The indebtedness in question, however, allows the 

borrower to increase its leverage by deferring interest payments (all at a time subsequent 

to the creditors making their credit determinations) and may result in additional risk 

being shifted to systemically important financial institutions or other holders of the debt.

319 See Question 74 on Form PF. One commenter suggested this question should cover only 

controlled portfolio companies rather than all of the fund’s portfolio companies, and the 

SEC has made this change. See ABA Committees Letter; see also infra discussion 

accompanying notes 324-327. This commenter also suggested that potential events of 

default that have not ripened into events of default should not require an affirmative 

response, and the SEC has modified the instructions to this address this comment.

320 A “financial industry portfolio company” generally is defined as a nonbank financial 

company, as defined in the Dodd-Frank Act, or a bank, savings association, bank holding 

company, financial holding company, savings and loan holding company, credit union, or 

other similar company regulated by a federal, state or foreign banking regulator. See 
107

requires the adviser to report whether any of its related persons co-invest in any of the 

fund’s portfolio companies.

The information that Question 66 requires is intended to provide FSOC 

information regarding the exposure of large private equity advisers and their funds to the 

risks of their portfolio companies. The information that Questions 67 through 76 require 

is designed to allow FSOC to assess the potential exposure of banks and other lenders to 

the portfolio companies of funds managed by large private equity advisers and to monitor 

whether trends in those areas could have systemic implications. Information reported in 

response to Question 76 is also intended to allow FSOC to monitor investments by the 

funds of large private equity advisers in companies in the financial industry that may be 

particularly important to the stability of the financial system.

Finally, Questions 77 and 78 require a breakdown of the fund’s investments by 

industry and by geography.

321 Two commenters suggested removing these questions, 

arguing that the value of the information would not exceed the burden of reporting it.322

 

Glossary of Terms to Form PF. One commenter suggested this question should cover 

only controlled portfolio companies rather than all of the fund’s portfolio companies, and 

the SEC has made this change. See ABA Committees Letter; see also IAA Letter; see 

also infra discussion accompanying notes 

 

Regulators, however, will be able to use this information to monitor global and industry 

324-327. The SEC has added a requirement to 

report the gross asset value of each financial industry portfolio company to provide a 

measure of scale as context for interpreting the leverage ratio. This information should 

be readily available on portfolio company financial statements, so the SEC does not 

expect this addition to meaningfully increase the reporting burden.

321 The SEC has modified the instructions to these questions to reflect clarifications 

suggested by a commenter. See Merkl February Letter. Question 78, which requires a 

geographical breakdown of investments in portfolio companies, has also been modified 

for reasons discussed above. See supra note 247 and accompanying text.

322 See Merkl February Letter; PEGCC Letter.
108

concentrations among private equity funds, and concentration is one of the factors that 

FSOC must consider in making a determination to designate a nonbank financial 

company for FRB supervision under the Dodd-Frank Act.323

Most of the reporting in section 4 relates to portfolio companies because the SEC 

understands that leverage in private equity structures is generally incurred at the portfolio 

company level. This reporting is limited to controlled portfolio companies, rather than 

portfolio companies generally, to ensure that advisers are able to obtain the relevant 

information without incurring potentially substantial additional burdens. Several 

commenters suggested, however, that the proposed standard of “control” was too low, 

leaving advisers responsible for reporting information they may not be entitled to 

access.

 In addition, the information 

required is largely based on the financial statements of the controlled portfolio companies 

and, therefore, should be readily available to the adviser.

324 The SEC is not persuaded that advisers are likely to have such difficulty 

obtaining the information required concerning controlled portfolio companies because the 

majority of this information is available from the financial statements of the portfolio 

companies or relates to the fund’s own investments in the portfolio companies.325

 

323 See section 113(a) of the Dodd-Frank Act.

 In 

324 See, e.g., ABA Committees Letter (suggesting instead “a standard of majority voting 

control”); IAA Letter (asserting that an adviser may not have access to some of the 

required data “even if the fund owns 50% or more of such portfolio company”); PEGCC 

Letter. See supra note 315 (discussing the definition of “control.)”

325 Advisers may not know the North American Industry Classification System, or NAICS, 

codes for its controlled portfolio companies, but this information should be readily 

obtainable from the company. The details regarding bridge loans required in Question 75 

on the Form may not be available directly from a controlled portfolio company’s 

financial statements, but it is likely either that the adviser was involved in arranging or 

consenting to the loans (because the loans were an important part of the fund’s 
109

addition, modifications from the proposal have replaced a requirement for information 

that may not have been available on portfolio company financial statements with a 

requirement for information that will appear on any audited portfolio company’s financial 

statements.326 Accordingly, the SEC is adopting the definition of “controlled portfolio 

company” substantially as proposed.327

Two commenters supported collecting the information proposed to be required in 

section 4.

328

5. Aggregation of Master-Feeder Arrangements, Parallel Fund 

Structures and Parallel Managed Accounts

 However, they also argued that the required reporting should not be 

restricted to controlled portfolio companies but should extend to all of the fund’s 

portfolio companies. In their view, the largest portfolio companies are the least likely to 

have a controlling shareholder and the most likely to pose systemic risk. The SEC is 

sensitive to this concern but believes at this time that requesting information regarding all 

portfolio companies would increase the difficulty of responding to section 4 without a 

sufficiently large corresponding increase in the value of the data collected.

For purposes of reporting information on Form PF, an adviser may provide 

information regarding master-feeder arrangements and parallel fund structures in the 

 

investment in the company or because they were incurred after the fund obtained a 

controlling interest in the company) or were the subject of the fund’s due diligence prior 

to investing in the company.

326 See supra note 317 and accompanying text.

327 The SEC has, however, made one change to this definition, which clarifies that whether a 

group is a club or consortium for this purpose should be determined as of the reporting 

date. In other words, the adviser need not aggregate the control rights of another fund 

with those of its own solely because, at some point prior to the reporting date, such as the 

date of acquisition, they formed a club or consortium.

328 See AFL-CIO Letter; AFR Letter.
110

aggregate or separately, provided that it does so consistently throughout the Form.329 For 

example, an adviser may complete either a single section 1b for all of the funds in a 

master-feeder arrangement or a separate section 1b for each fund in the arrangement. 

Any adviser choosing to aggregate funds in the reporting must check the “yes” box in 

Question 6 or Question 7, as applicable, and, in the case of Question 7, provide the 

additional information required with respect to the other funds in the parallel fund 

structure.330 Advisers are not required to report information regarding parallel managed 

accounts other than to complete Question 11 in section 1b of the Form.331

These aggregation requirements have been modified from the proposal, which 

would have required advisers to report aggregated information regarding master-feeder 

arrangements and parallel managed accounts but separate information regarding parallel 

funds. One commenter recommended that “the Commissions instead provide managers 

with flexibility to provide information about private funds in a manner that best 

represents the activities of their funds and is consistent with their internal reporting 

procedures, while providing complete information to regulators.”332

 

329 See Instructions 5 and 6 to Form PF. The aggregation requirements for reporting 

purposes differ from the aggregation requirements for determining whether the adviser or 

any fund meets a reporting threshold. See supra section II.A.5. A “parallel fund

structure” is a structure in which one or more private funds pursues substantially the same 

investment objective and strategy and invests side by side in substantially the same 

positions as another private fund. See Glossary of Terms to Form PF. A “master-feeder 

arrangement” is an arrangement in which one or more funds (“feeder funds”) invest all or 

substantially all of their assets in a single private fund (“master fund”).

 We are persuaded 

that requiring advisers to aggregate or disaggregate funds in a manner inconsistent with 

330 See also supra note 193 and accompanying text.

331 See Instructions 5 and 6 to Form PF. See also supra note 197.

332 MFA Letter.
111

their internal recordkeeping and reporting may impose additional burdens and that, so 

long as the structure of those arrangements is adequately disclosed, a prescriptive 

approach to aggregation is not necessary.

With respect to parallel managed accounts, commenters encouraged us not to 

require aggregation for reporting purposes or at least limit the questions that require 

advisers to aggregate parallel managed accounts for reporting purposes.333 In particular, 

these commenters argued that aggregating these funds for reporting purposes would be 

difficult and “result in inconsistent and misleading data” because their characteristics are 

often somewhat different from the funds with which they are managed.334 We are 

persuaded that including parallel managed accounts in the reporting may reduce the 

quality of data while imposing additional burdens on advisers. As a result, the 

instructions have been revised so that advisers are not required to aggregate parallel 

managed accounts with their private funds for reporting purposes.335 A question has, 

however, been added to the Form requiring advisers to report the total amount of parallel 

managed accounts related to each reporting fund.336

 

333 See, e.g., IAA Letter; TCW Letter. One commenter agreed that the proposal 

appropriately required reporting on parallel managed accounts. See AIMA General 

Letter. For the reasons discussed below, however, we are persuaded that the better 

approach is not to require aggregation of these accounts for reporting purposes.

 This will allow FSOC to take into 

account the greater amount of assets an adviser may be managing using a given strategy 

for purposes of analyzing the data reported on Form PF. 

334 IAA Letter. See also MFA Letter.

335 See Instructions 5 and 6 to Form PF. The approach we are adopting is also similar to the 

approach used in the FSA Survey, which asks for only limited information regarding 

“strategy assets.” See IAA Letter.

336 See question 12 of Form PF.
112

D. Confidentiality of Form PF Data 

Form PF elicits non-public information about private funds and their trading 

strategies, the public disclosure of which could adversely affect the funds and their 

investors. The SEC does not intend to make public Form PF information identifiable to 

any particular adviser or private fund, although the SEC may use Form PF information in 

an enforcement action. The Dodd-Frank Act amends the Advisers Act to preclude the 

SEC from being compelled to reveal this information except in very limited 

circumstances.337 Similarly, the Dodd-Frank Act exempts the CFTC from being 

compelled under FOIA to disclose to the public any information collected through 

Form PF and requires that the CFTC maintain the confidentiality of that information 

consistent with the level of confidentiality established for the SEC in section 204(b) of 

the Advisers Act.

338 The Commissions will make information collected through Form PF

available to FSOC, as the Dodd-Frank Act requires, subject to the confidentiality 

provisions of the Dodd-Frank Act.339

The Dodd-Frank Act contemplates that Form PF data may also be shared with

other Federal departments or agencies or with self-regulatory organizations, in addition to 

the CFTC and FSOC, for purposes within the scope of their jurisdiction.340

 

337 See Proposing Release, supra note 

In each case, 

any such department, agency or self-regulatory organization would be exempt from being 

12, at n.39. 

338 Form PF data is filed with the SEC, and made available to the CFTC, pursuant to 

section 204(b) of the Advisers Act, making this data subject to the confidentiality 

protections applicable to data required to be filed under that section.

339 See section 204(b) of the Advisers Act.

340 See section 204(b)(8)(B)(i) of the Advisers Act.
113

compelled under FOIA to disclose to the public any information collected through 

Form PF and must maintain the confidentiality of that information consistent with the 

level of confidentiality established for the SEC in section 204(b) of the Advisers Act.

341 

Prior to sharing any Form PF data, the SEC also intends to require that any such 

department, agency or self-regulatory organization represent to us that it has in place 

controls designed to ensure the use and handling of Form PF data in a manner consistent 

with the protections established in the Dodd-Frank Act.

342

Certain aspects of the Form PF reporting requirements also help to mitigate the 

potential risk of inadvertent or improper disclosure. For instance, because data on 

Form PF generally could not, on its own, be used to identify individual investment 

positions, the ability of a competitor to use Form PF data to replicate a trading strategy or 

trade against an adviser is limited.343 In addition, the deadlines for filing Form PF have, 

in most cases, been significantly extended from the proposal.344

 

341 See sections 204(b)(9) and (10) of the Advisers Act.

Some commenters 

342 This would be consistent with the SEC’s current practice of requiring that it receive, prior 

to sharing nonpublic information with other regulators, “such assurances of 

confidentiality as the [SEC] deems appropriate.” See section 24(c) of the Exchange Act 

and rule 24c-1 thereunder.

343 Questions 26, 30, 35 and 57 on Form PF ask about exposures of the reporting fund but 

require only that the adviser identify the exposure within broad asset classes, not the 

individual investment position. Large private equity advisers must identify any financial 

industry portfolio companies in which the reporting fund has a controlling interest, but 

these investments are likely to be in private companies whose securities are not widely 

traded (and, therefore, do not raise the same trading concerns) or in public companies 

about which information regarding significant beneficial owners is already made public 

under sections 13(d) and 13(g) of the Exchange Act.

344 See supra section II.B.2 of this Release (discussing filing deadlines).
114

supported these extensions in part because filings will, as a result, generally contain less 

current, and therefore less sensitive, data.345

In addition, our staff is working to design controls and systems for the use and 

handling of Form PF data in a manner that reflects the sensitivity of this data and is 

consistent with the confidentiality protections established in the Dodd-Frank Act. As 

discussed below, this will include programming the Form PF filing system with 

appropriate confidentiality protections.346

Several commenters confirmed that the information collected on Form PF is 

competitively sensitive or proprietary and emphasized the importance of controls for 

safekeeping.

 For instance, SEC staff is studying whether 

multiple access levels can be established so that SEC employees are allowed only as 

much access as is reasonably needed in connection with their duties.

347 These commenters also made several recommendations for protecting 

the data, including: (1) storing identifying information using a code;348 (2) limiting the 

ability to transfer Form PF data by email or portable media;349 (3) limiting access to 

personnel who “need to know”;350 (4) extending filing deadlines so the data contains less 

current information;351

 

345 See infra note 

and (5) sharing the data with other regulators only in aggregated 

351 and accompanying text.

346 See infra section II.E of this Release.

347 See, e.g., ABA Committees Letter; AIMA General Letter; CPIC Letter; MFA Letter; 

SIFMA Letter.

348 ABA Committees Letter; Kleinberg General Letter; Seward Letter.

349 ABA Committees Letter.

350 Id.

351 AIMA General Letter; Kleinberg General Letter.
115

and anonymous form.352 As discussed above, the deadlines for filing Form PF have, in 

most cases, been significantly extended from the proposal.353

In advance of the compliance date for Form PF, SEC staff will review the controls 

and systems in place for the use and handling of Form PF data.

 SEC staff is also carefully 

considering the other recommendations of commenters in designing controls and systems

for Form PF.

354

E. Filing Fees and Format for Reporting 

 Depending on the 

progress at that time toward the development and deployment of these controls and 

systems, the SEC will consider whether to delay the compliance date for Form PF.

Under Advisers Act rule 204(b)-1(b), Form PF must be filed through an electronic 

system designated by the SEC for this purpose. On September 30, 2011, the SEC issued 

notice of its determination that the Financial Industry Regulatory Authority (“FINRA”) 

will develop and maintain the filing system for Form PF as an extension of the existing 

Investment Adviser Registration Depository (“IARD”).

355

 

352 AIMA General Letter; Seward Letter.

This filing system will have 

certain features, including being programmed to reflect the heightened confidentiality 

protections created for Form PF filing information under the Dodd-Frank Act and allow

for secure access by FSOC and other regulators as permitted under the Dodd-Frank Act. 

353 See supra notes 344-345 and accompanying text.

354 See infra section III of this Release (discussing the compliance date for Form PF).

355 See Approval of Filing Fees for Exempt Reporting Advisers and Private Fund Advisers, 

Investment Advisers Act Release No. IA-3297 (Sept. 30, 2011), 76 FR 62100 (Oct. 6, 

2011).
116

Under the Advisers Act rule 204(b)-1, advisers required to file Form PF must pay 

to the operator of the Form PF filing system fees that the SEC has approved.

356 The SEC 

in a separate order has approved filing fees that reflect the costs reasonably associated 

with these filings and the development and maintenance of the filing system.

357

We are working with FINRA to allow advisers to file Form PF either through a 

fillable form on the system website or through a batch filing process utilizing the

eXtensible Markup Language (“XML”) tagged data format. In connection with the batch 

filing process, we anticipate publishing a taxonomy of XML data tags in advance of the 

compliance date for Form PF. We believe that certain advisers may prefer to report in 

XML format because it allows them to automate aspects of their reporting and thus 

minimize burdens and generate efficiencies for the adviser. 

 

Commenters who addressed this aspect of the proposal supported having FINRA 

develop the reporting system as an extension of the IARD platform.

358

 

356 See Advisers Act rule 204(b)-1(d); section 204(c) of the Advisers Act.

 Commenters also 

supported a batch filing capability, with one specifically agreeing that “[a]utomated 

357 See Order Approving Filing Fees for Exempt Reporting Advisers and Private Fund

Advisers, Investment Advisers Act Release No. IA-3305 (Oct. 24, 2011).

358 See AIMA General Letter (agreeing that using the IARD and FINRA is a “sensible 

solution.”); MFA Letter. We explained in the Form PF Proposing Release that the filing 

system would need to be programmed with special confidentiality protections designed to 

ensure the heightened confidentiality protections created for Form PF filing information 

under the Dodd-Frank Act. See Proposing Release, supra note 12, at n. 9 and 

accompanying text and section II.E. These commenters expressed the view that 

maintaining the confidentiality of Form PF data is an important consideration in 

developing the filing system. Our staffs are working closely with FINRA in designing 

controls and systems to ensure that Form PF data is handled and used in a manner 

consistent with the protections established in the Dodd-Frank Act, and as noted above, 

we are carefully considering recommendations from commenters in designing controls

and systems for the use and handling of Form PF data.
117

submission of information via the IARD or other electronic system to [utilize] the 

eXtensible Markup Language (XML) tagged data format or similar format is likely to be 

an important time saver for a large number of firms.”359

III. EFFECTIVE AND COMPLIANCE DATES

The effective date for CEA rule 4.27, Advisers Act rule 204(b)-1 and Form PF is 

March 31, 2012.

The Commissions are adopting a two-stage phase-in period for compliance with 

Form PF filing requirements. For the following advisers, the compliance date for CEA

rule 4.27 and Advisers Act rule 204(b)-1 is June 15, 2012:

• Any adviser having at least $5 billion in assets under management attributable 

to hedge funds as of the last day of the fiscal quarter most recently completed 

prior to June 15, 2012; 360

• Any adviser managing a liquidity fund and having at least $5 billion in 

combined assets under management attributable to liquidity funds and 

registered money market funds as of the last day of the fiscal quarter most 

recently completed prior to June 15, 2012;

361

 

359 AIMA General Letter. See also Kleinberg General Letter.

and

360 For this purpose, advisers must calculate the value of assets under management pursuant 

to the instructions in Form ADV and aggregate assets under management in the same 

manner as they would when determining whether they satisfy reporting thresholds under 

Form PF. See supra section II.A.5 of this Release.

361 Id.
118

• Any adviser having at least $5 billion in assets under management attributable 

to private equity funds as of the last day of its first fiscal year to end on or 

after June 15, 2012.

362

For instance, an adviser with $5 billion in hedge fund assets under management as of 

March 31, 2012, must file its first Form PF within 60 days following June 30, 2012.363 In 

addition, an adviser having a June 30 fiscal year end and $5 billion in private equity fund 

assets under management as of June 30, 2012, must file its first Form PF within 120 days 

following June 30, 2012.

364

For all other advisers, the compliance date for CEA rule 4.27 and Advisers Act

rule 204(b)-1 is December 15, 2012. As a result, most advisers must file their first 

Form PF based on information as of December 31, 2012.

This timing provides most private fund advisers with a significant amount of time 

to prepare for filing, requiring only the largest advisers, whose resources and systems 

should better position them to begin reporting, to report in less than a year following 

adoption of Form PF. This approach is designed to balance the need for regulators to 

begin collecting and analyzing data regarding the private fund industry with the ability of 

advisers to efficiently prepare for filing. We currently anticipate that this timeframe will 

 

362 Id.

363 This assumes the adviser’s fiscal quarters are based on calendar quarters. Of course, if 

the adviser also exceeds the threshold for liquidity fund advisers, its filing would be due 

within 15 days.

364 This assumes the adviser does not also exceed the $5 billion threshold for hedge fund or 

liquidity fund advisers.
119

also give the SEC sufficient time to create and program a system to accept filings of 

Form PF.

365

We are adopting compliance dates that significantly extend the proposed 

compliance date of December 15, 2011. We are taking this approach, in part, because we 

are adopting these rules later than originally expected. The revised approach is also 

intended to respond to commenters who recommended a later compliance date. These 

commenters argued that the proposed compliance date would have provided advisers 

insufficient “time to identify the information to be included, establish automated systems 

and procedures to collect and calculate the information, and develop procedures to 

review, complete and verify the Form.”366 A majority of these commenters suggested 

extending compliance to at least nine months after publication of the final Form, though 

some argued for a year or more.367 In support of an extended compliance date, 

commenters emphasized that, without sufficient time to prepare for the initial filing, the 

reporting process will be manually intensive or require costly system enhancements.368

 

365 The SEC is working closely with FINRA to create and program a system for Form PF 

filings, and FINRA expects to be able to accept Form PF filings in this timeframe.

 

As explained above, our revised approach is designed to provide the largest advisers, 

whose resources and systems should better position them to begin reporting, at least eight 

366 MFA Letter. See also infra note 367.

367 See, e.g., AIMA General Letter (nine months); BlackRock Letter (nine months); CPIC

Letter (one year); Fidelity Letter (one year); IAA Letter (nine months); Kleinberg 

General Letter (one year); MFA Letter (nine months); PEGCC Letter (one year); TCW 

Letter (nine months); Seward Letter (two years); SIFMA Letter (nine months); USCC

Letter (270 days).

368 See AIMA General Letter; Kleinberg General Letter.
120

months before they start filing Form PF, and the vast majority of advisers will have over 

a year before their first Form PF is due.

IV. PAPERWORK REDUCTION ACT

SEC:

Section 204(b) of the Advisers Act directs the SEC to require private fund 

advisers to file reports containing such information as the SEC deems necessary and 

appropriate in the public interest and for investor protection or for the assessment of 

systemic risk. Rule 204(b)-1 and Form PF under the Advisers Act implement this 

requirement. Form PF contains a new “collection of information” within the meaning of 

the Paperwork Reduction Act (“PRA”).

369

Form PF is intended to provide FSOC with information that will assist it in 

fulfilling its obligations under the Dodd-Frank Act relating to nonbank financial 

 The title for the new collection of information 

is: “Form PF under the Investment Advisers Act of 1940, reporting by investment 

advisers to private funds.” For purposes of this PRA analysis, the paperwork burden 

associated with the requirements of rule 204(b)-1 is included in the collection of 

information burden associated with Form PF and thus does not entail a separate 

collection of information. The SEC is submitting this collection of information to the 

Office of Management and Budget (“OMB”) for review in accordance with 44 U.S.C. 

3507(d) and 5 CFR 1320.11. An agency may not conduct or sponsor, and a person is not 

required to respond to, a collection of information unless it displays a currently valid 

control number.

 

369 44 U.S.C. 3501-3521.
121

companies and systemic risk monitoring.370 The SEC may also use the information in 

connection with its regulatory and examination programs. The respondents to Form PF 

are private fund advisers.371

Specifically, smaller private fund advisers must report annually and provide only 

basic information regarding their operations and the private funds they advise. Large 

private equity advisers also must report on an annual basis but are required to provide 

additional information with respect to the private equity funds they manage. Finally, 

large hedge fund advisers and large liquidity fund advisers must report on a quarterly 

basis and provide more information than other private fund advisers.

 Compliance with Form PF is mandatory for any private fund 

adviser that had at least $150 million in regulatory assets under management attributable 

to private funds as of the end of its most recently completed fiscal year.

372

 

370 See supra section I.A of this Release; see also of the Proposing Release, supra note 12, at 

section II.A.

 The PRA 

analysis set forth below takes into account the difference in filing frequencies among 

different categories of private fund adviser. It also reflects the fact that the additional 

information Form PF requires large hedge fund advisers to report is more extensive than 

371 The requirement to file the Form applies to any investment adviser registered, or required 

to register, with the SEC that advises one or more private funds and had at least $150 

million in regulatory assets under management attributable to private funds as of the end 

of its most recently completed fiscal year. See Advisers Act rule 204(b)-1(a). It does not 

apply to state-registered investment advisers or exempt reporting advisers.

372 See section II.A of this Release (describing who must file Form PF), section II.B of this 

Release (discussing the frequency with which private fund advisers must file Form PF), 

section II.C.2 of this Release (describing the information that large hedge fund advisers 

must report on Form PF), and sections II.C.3 and II.C.4 of this Release (describing the 

information that large liquidity and private equity fund advisers must report on Form PF). 

See also Instruction 9 to Form PF (discussing the frequency with which private fund 

advisers must file Form PF).
122

the additional information required from large liquidity fund advisers, which in turn is 

more extensive than that required from large private equity advisers. 

As discussed in section II of this Release, the SEC has sought to minimize the 

reporting burden on private fund advisers to the extent appropriate. In particular, the 

SEC has taken into account an adviser’s size and the types of private funds it manages in 

designing scaled reporting requirements. In addition, where practical, the SEC has 

permitted advisers to rely on their existing practices and methodologies to report 

information on Form PF.373

Advisers must file Form PF through the Form PF filing system on the IARD.

374 

Responses to the information collections will be kept confidential to the extent permitted 

by law.375

A. Burden Estimates for Annual Reporting by Smaller Private Fund 

Advisers

In the Implementing Adopting Release, the SEC estimated that there will be 

approximately 4,270 SEC-registered advisers managing private funds after taking into 

account recent changes to the Advisers Act and a year of normal growth in the population 

of registered advisers.

376

 

373 The SEC also believes that private fund advisers already collect or calculate some of the 

information required on the Form at least as often as they must file the Form. See supra

note 

 The SEC estimates that approximately 700 of these advisers 

146.

374 See section II.E of this Release.

375 See section II.D of this Release.

376 Specifically, the SEC estimated that (1) 3,320 private fund advisers that are currently 

registered with the SEC will remain registered after certain advisers make the switch to 

state registration prompted by the Dodd-Frank Act’s amendments to section 203A of the 

Advisers Act, (2) 750 advisers to private funds will register with the Commission as a 

result of the Dodd-Frank Act’s elimination of the private adviser exemption and 
123

will not be required to file Form PF because they have less than $150 million in private 

fund assets under management.377 Accordingly, the SEC anticipates that, when advisers 

begin reporting on Form PF, a total of approximately 3,570 advisers will be required to 

file all or part of the Form.378 Out of this total number, the SEC estimates that 

approximately 3,070 will be smaller private fund advisers, not meeting the thresholds as 

Large Private Fund Advisers.379 Commenters did not address the SEC’s estimates of the 

total number of respondents or the number of smaller private fund advisers.380

 

(3) 200 additional advisers to private funds will register in the next year. See

Implementing Adopting Release, supra note 11, at n.637 and accompanying text. 

Estimates of registered private fund advisers are based in part on the number of advisers 

that reported a fund in Section 7.B of Schedule D to the version of Form ADV in use 

prior to the date of this release. Because these responses included funds that the adviser’s 

related persons manage as well as those the adviser itself manages, these data may overestimate the total number of private fund advisers.

377 Based on IARD data as of October 1, 2011. See supra section II.A of this Release for a 

discussion of the minimum reporting threshold.

378 4,270 total private fund advisers – 700 with less than $150 million in private fund assets 

under management = 3,570 advisers. The SEC notes, however, that if a private fund is 

advised by both an adviser and one or more subadvisers, only one of these advisers is 

required to complete Form PF. See section II.A.6 of this Release. As a result, it is likely 

that some portion of these advisers either will not be required to file Form PF or will be 

subject to a reporting burden lower than is estimated for purposes of this PRA analysis. 

The SEC has not attempted to adjust the burden estimates downward for this purpose 

because the SEC does not currently have reliable data with which to estimate the number 

of funds that have subadvisers.

379 Based on the estimated total number of registered private fund advisers that would not 

meet the thresholds to be considered Large Private Fund Advisers. (3,570 estimated 

registered private fund advisers – 250 large hedge fund advisers – 80 large liquidity fund 

advisers – 170 large private equity fund advisers = 3,070 smaller private fund advisers.)

380 The SEC has updated these estimates to reflect: (1) updated data from IARD, (2) the 

addition of a minimum reporting threshold of $150 million in private fund assets, which 

reduces the number of advisers subject to the reporting requirements, and (3) the revised 

estimates of large hedge fund advisers and large private equity advisers discussed in 

section II.A.4 of this Release. See supra section II.A of this Release and notes 88 and 89.
124

Smaller private fund advisers must complete all or portions of section 1 of 

Form PF and file on an annual basis. As discussed in greater detail above, section 1 

requires basic data regarding the reporting adviser’s identity and certain information 

about the private funds it manages, such as performance, leverage and investor data.381

The SEC estimates that smaller private fund advisers will require an average of 

approximately 40 burden hours to compile, review and electronically file the required 

information in section 1 of Form PF for the initial filing and an average of approximately 

15 burden hours for subsequent filings.

 If 

the reporting adviser manages any hedge funds, section 1 also requires basic information 

regarding those funds, including their investment strategies, counterparty exposures and 

trading and clearing practices. 

382

 

381 See supra section II.C.1.

 These estimates reflect an increase compared 

to the proposal from 10 to 40 hours for the initial filing and from 3 to 15 hours for 

subsequent filings.

382 These estimates are based, in part, on the SEC’s understanding that much of the 

information in sections 1a and 1b of Form PF is currently maintained by most private 

fund advisers in the ordinary course of business. See supra note 146. In addition, the 

SEC expects the time required to determine the amount of the adviser’s assets under 

management that relate to private funds of various types to be largely included in the 

approved burden associated with the SEC’s Form ADV. As a result, responding to 

questions on Form PF that relate to assets under management and determining whether an 

adviser is a Large Private Fund Adviser should impose little or no additional burden on 

private fund advisers. Of course, not all questions on Form PF impose the same burden, 

and the burden of responding to questions may vary substantially from adviser to adviser. 

These estimates are intended to reflect averages for compiling, reviewing and filing the 

Form, do not indicate the time that may be spent on specific questions and may not 

reflect the time spent by an individual adviser.
125

The SEC has increased these estimates to reflect comments suggesting that the 

estimates included in the proposal were too low.

383 Commenters did not provide

alternative estimates for these burdens. However, commenters addressing the large 

hedge fund adviser burdens did provide alternative estimates.

384 As discussed below, the 

SEC is also increasing its hour burden estimates with respect to large hedge fund advisers 

based on, among other things, the estimates these commenters provided.385

Although the SEC has increased these estimates, it has also taken into account 

changes from the proposal that it expects, on the whole, to mitigate the burden of 

reporting the information required in section 1. For instance, we have modified the 

requirement to report performance by allowing advisers to report monthly and quarterly 

results only if such results are already calculated for the fund.

 In the 

absence of specific commenter estimates for the smaller adviser reporting burden, the 

SEC has, therefore, scaled these estimates in proportion to the increases it is making to its 

burden hour estimates for large hedge fund advisers.

386

 

383 See, e.g., AIMA General Letter; IAA Letter; SIFMA Letter.

 In addition, we have

removed from section 1b a question requiring identification of significant creditors and 

384 See, e.g., MFA Letter. 

385 See infra section IV.B of this Release.

386 Several commenters argued that carrying out valuations to report monthly and quarterly 

performance for private equity funds would result in significant cost burdens and require 

significantly more time than was estimated. See, e.g., comment letter of Atlas Holdings 

(March 9, 2011) (“Atlas Letter”); PEGCC Letter. We have, however, modified the 

reporting requirements so that advisers only need to provide monthly and quarterly 

performance results to the extent already calculated. See supra notes 198-202 and 

accompanying text. In other words, because advisers will have always already calculated 

the required performance data for purposes other than reporting on Form PF, the burden 

of reporting it on the Form is essentially one of data entry.
126

substantially reduced the amount of information required with respect to trading and

clearing practices in section 1c.387 We have also made several global changes to the 

Form that we anticipate will reduce the burden of reporting. These include the removal 

of the certification, the increased ability of advisers to rely on their existing 

methodologies and recordkeeping practices and allowing advisers to omit information 

regarding parallel managed accounts from their responses to the Form.388 We have also 

added four new questions in section 1b that will increase the burden of completing that 

portion of the Form, but the SEC expects the other changes described above to result in a 

net reduction in the burden of completing the Form relative to the proposal.

389

Based on the foregoing, the SEC estimates that the amortized average annual 

 

 

387 One commenter suggested the question we removed would have been “very 

burdensome.” See PEGCC Letter.

388 See, e.g., supra section II.C.5 of this Release and notes 183-188 and accompanying text.

389 See supra section II.C.1 of this Release. The SEC originally proposed one of the new 

questions on Form ADV, and it requires that advisers report the assets and liabilities of 

each fund broken down using categories that are based on the fair value hierarchy 

established under GAAP. For advisers obtaining fund audits in accordance with GAAP 

or a similar international accounting standard, the burden of this question is simply that 

of entering the data on the Form. In the Implementing Adopting Release, the SEC 

estimated that approximately 3% of registered advisers have at least one private fund 

client that may not be audited. See Implementing Adopting Release, supra note 11, at nn. 

634-636 and accompanying text. For this sub-group of advisers, the cost and hour 

burdens of determining fair values for the funds’ assets have already been accounted for 

in connection with Form ADV because advisers are required to report regulatory assets 

under management in that form using the fair value of private fund assets. See

Implementing Adopting Release, supra note 11, at section VI and nn. 632-641 and 723 

and accompanying text. The question does not require advisers to determine the fair 

value of liabilities for which they do not already make such determination, so this subgroup of advisers would not incur an incremental cost to fair value liabilities in order to 

respond to this question. This sub-group of advisers may incur an additional hours 

burden to determine the categories applicable to the fund’s assets and liabilities, and in 

determining to increase its average hour burden estimates for both smaller private fund 

advisers and Large Private Fund Advisers, the SEC has taken into account the 

contribution of this additional hours burden.
127

burden of periodic filings will be 23 hours per smaller private fund adviser for each of the 

first three years,390 and the amortized aggregate annual burden of periodic filings for 

smaller private fund advisers will be 70,600 hours for each of the first three years.391

B. Burden Estimates for Large Hedge Fund Advisers

The SEC estimates that 250 advisers will be classified as large hedge fund 

advisers.392

Because large hedge fund advisers generally must report more information on 

Form PF than other private fund advisers, the SEC estimates that these advisers will 

require, on average, more hours than other Large Private Fund Advisers to configure 

systems and to compile, review and electronically file the required information. 

Accordingly, the SEC estimates that large hedge fund advisers will require an average of 

approximately 300 burden hours for an initial filing and 140 burden hours for each 

subsequent filing.

 As discussed above, large hedge fund advisers must complete section 1 of 

the Form and provide additional information regarding the hedge funds they manage in 

section 2 of the Form. These advisers must report information regarding the hedge funds 

they manage on a quarterly basis.

393

 

390 The SEC estimates that a smaller private fund adviser will make 3 annual filings in three 

years, for an amortized average annual burden of 23 hours (1 initial filing x 40 hours + 2 

subsequent filings x 15 hours = 70 hours; and 70 hours ÷ 3 years = approximately 23 

hours). After the first three years, filers generally will not incur the start-up burdens 

applicable to the first filing.

391 23 burden hours on average per year x 3,070 smaller private fund advisers = 70,600 

burden hours per year.

392 See supra note 88.

393 The estimates of hour burdens and costs for large hedge fund advisers provided in the 

Paperwork Reduction Act and cost-benefit analyses are based, in part, on burden data that 

advisers provided in response to the FSA Survey and on the experience of SEC staff. 
128

These estimates reflect an increase compared to the proposal from 75 to 300 hours 

for the initial filing and from 35 to 140 hours for subsequent filings. The SEC has 

increased these estimates to reflect comments suggesting that the estimates included in 

the proposal were too low.

394 One industry group reported that some members attempted 

to complete the proposed version of Form PF for one or more funds and, “[b]ased on 

their experience, and recognizing that efficiencies will develop over time, [this group

estimated] that large managers on average will expend 150-300 hours to submit the initial 

Form.”395

 

These estimates also assume that some Large Private Fund Advisers will find it efficient 

to automate some portion of the reporting process, which will increase the burden of the 

initial filing but reduce the burden of subsequent filings. This efficiency gain is reflected 

in our burden estimates, which are higher for the first report than subsequent reports, and 

certain of the anticipated automation costs are accounted for in our cost estimates. See 

infra note

 The SEC has revised its estimates in this PRA analysis based on the top end of 

435 and accompanying text. Of course, not all questions on Form PF impose 

the same burden, and the burden of responding to questions may vary substantially from 

adviser to adviser. These estimates are intended to reflect averages for compiling, 

reviewing and filing the Form, do not indicate the time that may be spent on specific 

questions and may not reflect the time spent by an individual adviser.

394 See, e.g., AIMA Letter; IAA Letter; Kleinberg General Letter; MFA Letter; TCW Letter. 

395 MFA Letter. This commenter referred to “large managers” generally, but based on the 

context, this comment appears to relate to large hedge fund advisers specifically. This 

commenter went on to state that “managers with more complex strategies will expend 

considerably more time.” Other commenters addressing these estimates did not provide 

alternative estimates, though one indicated that some clients had already exceeded the 

Proposing Release’s estimates in preparing to report on the proposed Form and another 

commenter, itself one of the largest private fund advisers in the United States, argued that 

the estimates were understated by “orders of magnitude.” See BlackRock Letter; see also

Kleinberg General Letter. In addition, advisers that manage many funds may incur 

higher costs than advisers that manage fewer funds even if they manage similar amounts 

of assets. The SEC’s estimates are intended to reflect average burdens, and it recognizes 

that particular advisers may, based on their circumstances, incur burdens substantially 

greater than or less than the estimated averages. In addition, we have based our estimates 

in part on data that advisers provided in response to the FSA Survey regarding the time 

required to complete that survey. Although Form PF generally requires more information 

regarding hedge funds than the FSA Survey, the SEC believes, based on this data and 

based on the MFA comment letter, that the average burden of completing Form PF is 

very unlikely to be in the thousands or tens of thousands of hours.
129

this range, which represents a conservative interpretation of this commenter’s estimate. 

This approach appears justified in this case based on other comments suggesting that the 

hours burden imposed on these advisers could be significantly higher than the SEC 

estimated in the Proposing Release.

396

The SEC notes, however, that this commenter’s estimates were based on the Form 

as proposed and we have made a number of changes from the proposal that we expect, on 

the whole, to mitigate significantly the reporting burden. For example, we have modified 

a number of questions to reduce the amount of detail required or to allow advisers to rely 

more on their existing methodologies or recordkeeping practices, including questions 

regarding trading and clearing practices, interest rate sensitivities, geographical 

concentrations, turnover, collateral practices, CCP exposures and sensitivities to changes 

in specified market factors.397 We have also made several global changes to the Form 

that we anticipate will reduce the burden of reporting. These include allowing large 

hedge fund advisers to report only annually on funds that are not hedge funds, the 

removal of the certification, expanding the ability to disregard funds of funds and 

allowing advisers to omit information regarding parallel managed accounts from their 

responses to the Form.398 We have also added four new questions in section 1b, which 

will increase the burden of completing that portion of the Form.399

 

396 See supra note 

 The SEC believes, 

however, that the increased burden attributable to these new questions is less than the 

394 and accompanying text.

397 See supra section II.C.1 and II.C.2 of this Release.

398 See, e.g., supra sections II.B.1 and II.C.5 of this Release and notes 129 and 183-188 and 

accompanying text.

399 See supra section II.C.1.
130

reduced burden attributable to other changes to the Form because the new questions 

require limited information that, in many cases, will be readily available to advisers while 

some of the SEC’s modifications to reduce the reporting burdens are intended to address 

areas of the Form that commenters identified as particularly burdensome. In light of 

these changes, the SEC believes that the commenter estimates, which were based on the 

proposed Form, likely represent an upper bound of the average burden to large hedge 

fund advisers.

Based on the foregoing, the SEC estimates that the amortized average annual 

burden of periodic filings will be 610 hours per large hedge fund adviser for each of the 

first three years.400 In the aggregate, the amortized annual burden of periodic filings will 

then be 153,000 hoursfor large hedge fund advisers for each of the first three years.401

C. Burden Estimates for Large Liquidity Fund Advisers

The SEC estimates that 80 advisers will be classified as large liquidity fund 

advisers.402

 

400 The SEC estimates that a large hedge fund adviser will make 12 quarterly filings in three 

years, for an amortized average annual burden of 610 hours (1 initial filing x 300 hours + 

11 subsequent filings x 140 hours = 1,840 hours; and 1,840 hours ÷ 3 years = 

approximately 610 hours). After the first three years, filers generally will not incur the 

start-up burdens applicable to the first filing.

 Commenters did not address this estimate. As discussed above, large 

liquidity fund advisers must complete section 1 of the Form and provide additional 

information regarding the liquidity funds they manage in section 3 of the Form. In 

addition, these advisers must report information regarding the liquidity funds they 

manage on a quarterly basis.

401 610 burden hours on average per year x 250 large hedge fund advisers = 153,000 hours.

402 See supra note 88.
131

Large liquidity fund advisers generally must report less information on Form PF 

than large hedge fund advisers but more information than large private equity advisers 

and smaller private fund advisers. Accordingly, the SEC estimates that large liquidity 

fund advisers will require, on average, fewer hours than large hedge fund advisers but 

more hours than other advisers to configure systems and to compile, review and 

electronically file the required information. Specifically, the SEC estimates these 

advisers will require an average of approximately 140 burden hours for an initial filing 

and 65 burden hours for each subsequent filing.403

These estimates reflect an increase compared to the proposal from 35 to 140 hours 

for the initial filing and from 16 to 65 hours for subsequent filings. The SEC has 

increased these estimates to reflect comments suggesting that the estimates included in 

the proposal were too low.

404

 

403 The estimates of hour burdens and costs for large liquidity fund advisers provided in the 

Paperwork Reduction Act and cost-benefit analyses are based, in part, on a comparison to 

the requirements and estimated burden for large hedge fund advisers (which estimates, in 

turn, are based in part on burden data that advisers provided in response to the FSA 

Survey) and on the experience of SEC staff. These estimates also assume that some 

Large Private Fund Advisers will find it efficient to automate some portion of the 

reporting process, which will increase the burden of the initial filing but reduce the 

burden of subsequent filings. This efficiency gain is reflected in our burden estimates, 

which are higher for the first report than subsequent reports, and certain of the anticipated 

automation costs are accounted for in our cost estimates. See infra note

 Commenters did not provide alternative estimates for these 

burdens. However, commenters addressing the large hedge fund adviser burdens did 

435 and 

accompanying text. Of course, not all questions on Form PF impose the same burden, 

and the burden of responding to questions may vary substantially from adviser to adviser. 

These estimates are intended to reflect averages for compiling, reviewing and filing the 

Form, do not indicate the time that may be spent on specific questions and may not 

reflect the time spent by an individual adviser.

404 See, e.g., AIMA Letter; IAA Letter; BlackRock Letter. No commenters specifically 

addressed the burden estimates for liquidity fund advisers, though several commented on 

the burden estimates generally.
132

provide alternative estimates.

405 As discussed above, the SEC is also increasing its hour 

burden estimates with respect to large hedge fund advisers based on, among other things, 

the estimates these commenters provided.406

Although the SEC has increased these estimates, it has also taken into account 

changes from the proposal that it expects, on the whole, to mitigate the burden of 

reporting for large liquidity fund advisers. For instance, we have eliminated from 

section 1b a question requiring identification of significant creditors.

 In the absence of specific commenter 

estimates for the large liquidity fund adviser reporting burden, the SEC has, therefore, 

scaled these estimates in proportion to the increases it is making to its burden hour 

estimates for large hedge fund advisers.

407 We have also 

made several global changes that we anticipate will reduce the burden of reporting. 

These include allowing large liquidity fund advisers to report only annually on funds that 

are not liquidity funds, removing the certification, expanding the ability to disregard 

funds of funds, the increased ability of advisers to rely on their existing methodologies 

and recordkeeping practices and allowing advisers to omit information regarding parallel 

managed accounts from their responses to the Form.408

 

405 See, e.g., MFA Letter. 

 We have also added four new 

questions in section 1b that will increase the burden of completing that portion of the 

406 See supra section IV.B of this Release.

407 See supra section II.C.1 of this Release. One commenter suggested the question we 

removed would have been “very burdensome.” See PEGCC Letter.

408 See, e.g., supra sections II.B.1 and II.C.5 of this Release and notes 129 and 183-188 and 

accompanying text.
133

Form, but the SEC expects the other changes described above to result in a net reduction 

in the burden of completing the Form relative to the proposal.

409

Based on the foregoing, the SEC estimates that the amortized average annual 

burden of periodic filings will be 290 hours per large liquidity fund adviser for each of 

the first three years.

 

410 In the aggregate, the amortized annual burden of periodic filings 

will then be 23,200 hoursfor large liquidity fund advisers for each of the first three 

years.

411

D. Burden Estimates for Large Private Equity Advisers

The SEC estimates that 170 advisers will be classified as large private equity 

advisers.412

Large private equity advisers generally must report less information on Form PF 

than other Large Private Fund Advisers but more information than smaller private fund 

advisers. Accordingly, the SEC estimates that large private equity advisers will require, 

on average, fewer hours than large hedge fund advisers and large liquidity fund advisers 

 As discussed above, large private equity advisers must complete section 1 of 

the Form and provide additional information regarding the private equity funds they 

manage in section 4 of the Form. These advisers are only required to report on an annual 

basis.

 

409 See supra section II.C.1 of this Release.

410 The SEC estimates that a large liquidity fund adviser will make 12 quarterly filings in 

three years, for an amortized average annual burden of 290 hours (1 initial filing x 140 

hours + 11 subsequent filings x 65 hours = 855 hours; and 855 hours ÷ 3 years = 

approximately 290 hours). After the first three years, filers generally will not incur the 

start-up burdens applicable to the first filing.

411 290 burden hours on average per year x 80 large hedge fund advisers = 23,200 hours.

412 See supra note 89.
134

but more hours than other advisers to configure systems and to compile, review and 

electronically file the required information. Specifically, the SEC estimates these 

advisers will require an average of approximately 100 burden hours for an initial filing 

and 50 burden hours for each subsequent filing.413

These estimates reflect an increase compared to the proposal from 25 to 100 hours 

for the initial filing and from 12 to 50 hours for subsequent filings. The SEC has 

increased these estimates to reflect comments suggesting that the estimates included in 

the proposal were too low.

414 Commenters did not provide alternative estimates for these 

burdens. However, commenters addressing the large hedge fund adviser burdens did 

provide alternative estimates.

415 As discussed above, the SEC is also increasing its hour 

burden estimates with respect to large hedge fund advisers based on, among other things, 

the estimates these commenters provided.416

 

413 The estimates of hour burdens and costs for large private equity advisers provided in the 

Paperwork Reduction Act and cost-benefit analyses are based, in part, on a comparison to 

the requirements and estimated burden for large hedge fund advisers (which estimates, in 

turn, are based in part on burden data that advisers provided in response to the FSA 

Survey) and on the experience of SEC staff. These estimates also assume that some 

Large Private Fund Advisers will find it efficient to automate some portion of the 

reporting process, which will increase the burden of the initial filing but reduce the 

burden of subsequent filings. This efficiency gain is reflected in our burden estimates, 

which are higher for the first report than subsequent reports, and certain of the anticipated 

automation costs are accounted for in our cost estimates. See infra note

 In the absence of specific commenter 

estimates for the large private equity adviser reporting burden, the SEC has, therefore, 

435 and 

accompanying text. Of course, not all questions on Form PF impose the same burden, 

and the burden of responding to questions may vary substantially from adviser to adviser. 

These estimates are intended to reflect averages for compiling, reviewing and filing the 

Form, do not indicate the time that may be spent on specific questions and may not 

reflect the time spent by an individual adviser.

414 See, e.g., Atlas Letter; PEGCC Letter; USCC Letter.

415 See, e.g., MFA Letter. 

416 See supra section IV.B of this Release.
135

scaled these estimates in proportion to the increases it is making to its burden hour 

estimates for large hedge fund advisers.

Although the SEC has increased these estimates, it has also taken into account 

changes from the proposal that it expects, on the whole, to mitigate the burden of 

reporting for large private equity advisers. For instance, we have modified the 

requirement to report performance by allowing advisers to report monthly and quarterly 

results only if such results are already calculated for the fund.417 In addition, we have

eliminated from section 1b a question requiring identification of significant creditors and 

have revised questions in section 4 requiring information regarding portfolio company 

leverage to align the information required more closely with information available on the 

balance sheets of those companies.418 We have also made several global changes to the 

Form that we anticipate will reduce the burden of reporting. These include requiring only 

annual (rather than quarterly) reporting, removing the certification, expanding the ability 

to disregard funds of funds, increasing the ability of advisers to rely on their existing 

methodologies and recordkeeping practices and allowing advisers to omit information 

regarding parallel managed accounts from their responses to the Form.419

 

417 See supra note 

 We have also 

added four new questions in section 1b that will increase the burden of completing that 

386.

418 See supra sections II.C.1 and II.C.4 of this Release. One commenter suggested the 

question we removed would have been “very burdensome.” See PEGCC Letter.

419 See, e.g., supra sections II.B.1 and II.C.5 of this Release and notes 129 and 183-188 and 

accompanying text.
136

portion of the Form, but the SEC expects the other changes described above to result in a 

net reduction in the burden of completing the Form relative to the proposal.

420

Based on the foregoing, the SEC estimates that the amortized average annual 

burden of periodic filings will be 67 hours per large private equity adviser for each of the 

first three years.421 In the aggregate, the amortized annual burden of periodic filings will 

then be 11,400 hoursfor large private equity advisers for each of the first three years.422

E. Burden Estimates for Transition Filings, Final Filings and Temporary 

Hardship Exemption Requests

In addition to periodic filings, a private fund adviser must file very limited 

information on Form PF in three situations. 

First, any adviser that transitions from quarterly to annual filing because it has 

ceased to be a large hedge fund or large liquidity fund adviser must file a Form PF 

indicating that it is no longer obligated to report on a quarterly basis. The SEC estimates 

that approximately 9 percent of quarterly filers will need to make a transition filing each 

year with a burden of 0.25 hours, or a total of 7 burden hours per year for all private fund 

advisers.423

 

420 See supra section II.C.1 of this Release.

 No commenters addressed these estimates. The SEC has not changed its 

421 The SEC estimates that a large private equity adviser will make 3 annual filings in three 

years, for an amortized average annual burden of 67 hours (1 initial filing x 100 hours + 2 

subsequent filings x 50 hours = 200 hours; and 200 hours ÷ 3 years = approximately 67 

hours). After the first three years, filers generally will not incur the start-up burdens 

applicable to the first filing.

422 67 burden hours on average per year x 170 large private equity advisers = 11,400 hours.

423 This estimate is based on IARD data on the frequency of advisers to one or more private 

funds ceasing to have assets under management sufficient to cause them to be large hedge 

fund or large liquidity fund advisers. ((80 large liquidity fund advisers + 250 large hedge 

fund advisers) x 0.09 x 0.25 hours = 7 hours.)
137

estimates of the rate of transition filings and the burden hours per filing from the 

proposal, but it has reduced its estimate of the total burden hours per year because fewer 

filers will be required to report on a quarterly basis.424

Second, filers who are no longer subject to Form PF’s periodic reporting 

requirements must file a final report indicating that fact. The SEC estimates that 

approximately 8 percent of the advisers required to file Form PF will have to file such a 

report each year with a burden of 0.25 of an hour, or a total of 71 burden hours per year 

for all private fund advisers.425 No commenters addressed these estimates. The SEC has 

not changed its estimates of the rate of final filings and the burden hours per filing from 

the proposal, but it has reduced its estimate of the total burden hours per year because the 

addition of a minimum reporting threshold will result in fewer filers reporting on 

Form PF.426

Finally, an adviser experiencing technical difficulties in submitting Form PF may 

request a temporary hardship exemption by filing portions of Form PF in paper format.427

 

424 Under the proposal, large private equity advisers would also have been required to file on 

a quarterly basis. See supra section II.B.1 of this Release.

 

The information that must be filed is comparable to the information that Form ADV filers 

provide on Form ADV-H when requesting a temporary hardship exemption relating to 

that form. In the case of Form ADV-H, the SEC has estimated that the average burden of 

425 Estimate is based on IARD data on the frequency of advisers to one or more private funds 

withdrawing from SEC registration. (3,570 private fund advisers x 0.08 x 0.25 hours = 

71 hours.)

426 See supra section II.A of this Release.

427 See Advisers Act rule 204(b)-1(f). The rule requires that the adviser complete and file 

Item A of Section 1a and Section 5 of Form PF, checking the box in Section 1a indicating 

that the filing is a request for a temporary hardship exemption. 
138

filing is 1 hour and that approximately 1 in every 1,000 advisers will file annually.428 

Assuming that Form PF filers request hardship exemptions at the same rate and that the 

applications impose the same burden per filing, the SEC expects approximately 4 filers to 

request a temporary hardship exemption each year429 for a total of 4 burden hours.430

F. Aggregate Hour Burden Estimates

 No 

commenters addressed these estimates, and they remain unchanged from the proposal.

Based on the foregoing, the SEC estimates that Form PF would result in an 

aggregate of 258,000 burden hours per year for all private fund advisers for each of the 

first three years, or 72 burden hours per year on average for each private fund adviser 

over the same period.431

G. Cost Burden

In addition to the hour burdens identified above, advisers subject to the Form PF 

reporting requirements will incur cost burdens. Firms required to file Form PF must also 

pay filing fees. In a separate order, the SEC has established filing fees for the Form PF 

filing system of $150 per annual filing and $150 per quarterly filing.432

 

428 See Implementing Adopting Release, supra note 

 We estimate that 

11, at section VI.F.

429 3,570 private fund advisers x 1 request per 1,000 advisers = approximately 4 advisers.

430 4 advisers x 1 hour per response = 4 hours.

431 70,600 hours for periodic filings by smaller advisers + 153,000 hours for periodic filings 

by large hedge fund advisers + 23,200 hours for periodic filings by large liquidity fund 

advisers + 11,400 hours for periodic filings by large private equity fund advisers + 7

hours per year for transition filings + 71 hours per year for final filings + 4 hours per year 

for temporary hardship requests = approximately 258,000 hours per year. 258,000 hours 

per year ÷ 3,570 total advisers = 72 hours per year on average.

432 See supra section II.E of this Release.
139

this will result in advisers paying aggregate filing fees of approximately $684,000 per 

year.433

Several commenters suggested that advisers would also need to modify existing 

systems or deploy new systems to support Form PF reporting.

434 As discussed in the 

Proposing Release and below, the SEC acknowledges that advisers may incur costs to 

develop systems and expects that Large Private Fund Advisers, in particular, may find it 

efficient to automate some portion of the reporting process, which will increase the 

burden of the initial filing but reduce the burden of subsequent filings.

435 The SEC has 

assumed that some of the hours that it estimates advisers will spend on preparing their 

initial filings on Form PF will be attributable to programmers preparing systems for the 

reporting.436 The SEC understands that some advisers may outsource all or a portion of 

these systems requirements to software consultants, vendors, filing agents or other thirdparty service providers and believes that the emergence of such service providers may 

serve to make filing on Form PF more efficient than is reflected in its estimates.437

 

433 ((3,070 smaller private fund advisers + 170 large private equity advisers) x $150 per 

annual filing) + ((250 large hedge fund advisers + 80 large private equity advisers) x 

$150 per quarterly filing x 4 quarterly filings per year) = $684,000 per year.

 

434 See, e.g., BlackRock Letter; IAA Letter; Kleinberg General Letter; PEGCC Letter; 

SIFMA Letter.

435 See infra section V.B of this Release, especially nn. 511-515; Proposing Release, supra

note 11, at section V.B.

436 See infra notes 511, 513 and 515.

437 The SEC has based its estimates on the use of internal resources, for which some cost 

data is available, because it believes that an adviser would engage third-party service 

providers only if the external costs were comparable, or less than, the estimated internal 

costs of compiling, reviewing and filing the Form PF. As a result, the SEC’s estimates of 

hour and cost burdens in this PRA analysis, and of costs in section V.B of this Release, 

may overstate the actual burdens and costs that will be incurred once third-party services 

become available.
140

Advisers may also incur costs associated with the acquisition or use of hardware 

needed to perform computations or otherwise process the data required on Form PF.438 

Smaller private fund advisers are unlikely to bear these costs because the information 

they are required to provide is limited and will, in many cases, already be maintained in 

the ordinary course of business.

439

Commenters did not provide estimates for the costs of acquiring or using 

hardware for purposes of Form PF. SEC staff contacted several organizations, including 

self-regulatory organizations, prime brokers and fund service providers, to help develop 

an estimate for these costs. Although these organizations generally were not able to 

provide such estimates, some expressed the view that the hardware costs would be small 

relative to the human capital costs and, for Large Private Fund Advisers, software 

development costs that Form PF imposes.

 Even among Large Private Fund Advisers, these costs 

are likely to vary significantly. For instance, the cost to any Large Private Fund Adviser 

may depend on how many funds or the types of funds it manages, the state of its existing 

systems and the complexity of its business. In addition, large hedge fund and large 

liquidity fund advisers must file Form PF more frequently, on shorter deadlines and 

generally with more information than large private equity advisers, increasing the 

likelihood that filings will compete with other demands for computing resources and that 

additional resources will be required.

440

 

438 See supra note 

 The SEC estimates, based in part on these 

conversations and the factors discussed above, that these costs will fall across a broad 

272.

439 See supra note 382.

440 See supra notes 435-436 and accompanying text.
141

range for Large Private Fund Advisers. Those who are required to file less information, 

less frequently and on longer deadlines, who have excess capacity in their existing 

systems or whose business is relatively simple, may incur no incremental hardware costs. 

On the other hand, some Large Private Fund Advisers may need to acquire (or obtain the 

use of) computing resources equivalent to an additional server, which the SEC estimates 

would cost approximately $50,000 fully deployed. This suggests an aggregate 

incremental cost in the first year of reporting between $0 and $25,000,000, though the 

actual cost is likely to fall in between these two end-points.441

CFTC:

As adopted, CEA rule 4.27 does not impose any additional burden upon registered 

CPOs and CTAs that are dually registered as investment advisers with the SEC. By filing 

the Form PF with the SEC, these dual registrants would be deemed to have satisfied 

certain of their filing obligations with the CFTC should the CFTC adopt such 

requirements, and the CFTC is not imposing any additional burdens herein. Therefore, 

any burden imposed by Form PF through CEA rule 4.27 on entities registered with both 

the CFTC and the SEC has been accounted for within the SEC’s calculations regarding 

the impact of this collection of information under the PRA or, to the extent the reporting 

may relate to commodity pools that are not private funds, the CFTC anticipates that it 

would account for this burden should it adopt a future rulemaking establishing reporting 

requirements with respect to those commodity pools.

442

 

441 $50,000 x 500 Large Private Fund Advisers = $25,000,000.

442 44 U.S.C. 3501-3521.
142

V. ECONOMIC ANALYSIS

As discussed above, the Dodd-Frank Act amended the Advisers Act to, among 

other things, authorize the SEC to promulgate reporting requirements for private fund 

advisers. The Dodd-Frank Act also directs the SEC and CFTC to jointly issue, after 

consultation with FSOC, rules establishing the form and content of any reports to be filed 

under this new authority.443 In enacting Sections 404 and 406 of the Dodd-Frank Act, 

Congress determined to require that private fund advisers file reports with the SEC and 

specified certain types of information that should be subject to reporting and/or 

recordkeeping requirements, but Congress left to the SEC the determination of the 

specific information to be maintained or reported. When determining the form and 

content of such reports, the Dodd-Frank Act authorizes the SEC to require that private 

fund advisers file such information “as necessary and appropriate in the public interest 

and for the protection of investors, or for the assessment of system risk by [FSOC].”444

The SEC is adopting Advisers Act rule 204(b)-1 and Form PF, and the CFTC is 

adopting CEA rule 4.27 and sections 1 and 2 of Form PF, to implement the private fund 

adviser reporting requirements that the Dodd-Frank Act directs the Commissions to 

promulgate. Under these new rules, private fund advisers having at least $150 million in 

private fund assets under management must file with the SEC information responsive to 

all or portions of Form PF on a periodic basis. The scope of the required information and 

the frequency of the reporting is related to the amount of private fund assets that each 

 

443 See section 211(e) of the Advisers Act.

444 See section 204(b)(1)(A) of the Advisers Act.
143

private fund adviser manages and the types of private fund to which those assets relate.445

The Advisers Act directs the SEC, when engaging in rulemaking that requires it to 

consider or determine whether an action is necessary or appropriate in the public interest, 

to consider, in addition to the protection of investors, whether the action will promote 

efficiency, competition and capital formation.

 

Specifically, smaller private fund advisers must report annually and provide only basic 

information regarding their operations and the private funds they advise. Large private 

equity advisers also must report on an annual basis but are required to provide additional 

information with respect to the private equity funds they manage. Finally, large hedge 

fund advisers and large liquidity fund advisers must report on a quarterly basis and 

provide more information than other private fund advisers. 

446

 

445 See section II.A of this Release (describing who must file Form PF); see also section II.B 

of this Release (discussing the frequency with which private fund advisers must file 

Form PF); section II.C of this Release (describing the information that private fund 

advisers must report on Form PF). See also proposed Instruction 9 to Form PF for 

information regarding the frequency with which private fund advisers must file Form PF.

 The Commissions are sensitive to the 

costs and benefits of their respective rules and have carefully considered the costs and 

benefits of this rulemaking. The SEC’s consideration of the costs and benefits of this 

rulemaking has included whether this rulemaking will promote efficiency, competition 

and capital formation. In the proposal, the Commissions identified certain costs and 

benefits of Advisers Act rule 204(b)-1, CEA rule 4.27 and Form PF and requested 

comment on all aspects of their cost-benefit analyses. The comments the Commissions 

received on those analyses are discussed below. 

446 See section 202(c) of the Advisers Act.
144

In considering the benefits and costs of this rulemaking, we have also considered 

alternatives to the requirements we are adopting. All of these alternatives would require 

at least some registered private fund advisers to report at least some information because 

Congress directed the SEC to adopt such reporting requirements. Among the alternatives 

that we considered were requirements that varied along the following five dimensions: 

(1) requiring more or less information; (2) requiring more or fewer advisers to complete 

the Form; (3) allowing advisers to rely more on their existing methodologies and 

recordkeeping practices in completing the Form (or, alternatively, requiring more 

standardized responses); (4) requiring more or less frequent reporting; and (5) allowing 

advisers more or less time to complete and file the Form.

Alternatives along each of these dimensions have advantages and disadvantages. 

Obtaining more standardized information from more advisers more often and more 

quickly would likely improve the value of the Form PF data to FSOC and other 

regulators, and several commenters supported alternatives along one or more of these 

dimensions.447 The Commissions are concerned, however, that the costs of such changes 

may, in general, increase more quickly than the benefits.448 On the other hand, the 

Commissions have considered, and are adopting changes from the proposal, that allow 

advisers more time to file the Form,449

 

447 See, e.g., AFL-CIO Letter; AFR Letter. See also CII Letter; MSCI Letter.

permit large private equity advisers to file less 

448 See, e.g., supra discussion following notes 101 and 158 and text accompanying note 256. 

We believe, however, that there are some exceptions, such as the additional information it 

has determined to request in section 1b of the Form. See supra section II.C.1 of this 

Release.

449 See supra section II.B.2 of this Release.
145

frequently,450 generally reduce the amount of information required,451 reduce the number 

of advisers required to file the Form452 and allow advisers to rely more on their existing 

methodologies and recordkeeping practices.453 A number of commenters supported these 

changes and, in some cases, would have preferred that we further reduce the reporting 

burdens.454

A. Benefits

 We believe, however, that the approach we are adopting strikes an 

appropriate balance between the benefits of the information to be collected and the costs 

to advisers of providing it. These benefits and costs are discussed in greater detail below.

We believe that Form PF will create two principal classes of benefits. First, the 

information collected will facilitate FSOC’s understanding and monitoring of systemic 

risk in the private fund industry and assist FSOC in determining whether and how to 

deploy its regulatory tools with respect to nonbank financial companies. Second, we 

expect this information to enhance the Commissions’ ability to evaluate and develop

regulatory policies and improve the efficiency and effectiveness of our efforts to protect

investors and maintain fair, orderly and efficient markets.

Congress passed the Dodd-Frank Act in the wake of what some have called “the 

greatest financial crisis since the Great Depression.”455

 

450 See supra section II.B.1 of this Release.

 The crisis imposed immense 

451 See supra section II.C of this Release.

452 See supra section II.A of this Release.

453 See supra section II.C of this Release.

454 See, e.g., IAA Letter; MFA Letter; PEGCC Letter; SIFMA Letter.

455 The Financial Crisis Inquiry Report: Final Report of the National Commission on the 

Causes of the Financial and Economic Crisis in the United States, FINANCIAL CRISIS 

INQUIRY COMMISSION (Jan. 2011) (“Financial Crisis Inquiry Report”) at xv.
146

costs on individuals and businesses, with millions of jobs disappearing from the U.S. 

economy, large numbers of families losing their homes to foreclosure, nearly $11 trillion 

in household wealth lost, including retirement accounts and life savings, and many

businesses, large and small, facing serious challenges.

456 Congress responded to the 

crisis, in part, by establishing FSOC as the center of a framework intended “to prevent a 

recurrence or mitigate the impact of financial crises that could cripple financial markets 

and damage the economy.”457

Under the Dodd-Frank Act, FSOC must “monitor emerging risks to U.S. financial 

stability” and employ its regulatory tools to address those risks.

 The goal of this framework, in other words, is the 

avoidance of significant harm to the U.S. economy from future financial crises.

458 For this purpose, the 

Dodd-Frank Act granted FSOC the ability to determine that a nonbank financial company 

will be subject to the supervision of the FRB if the company may pose risks to U.S. 

financial stability as a result of its activities or in the event of its material financial 

distress. FSOC may also recommend to the FRB heightened prudential standards for 

designated nonbank financial companies.459 In addition, the Dodd-Frank Act authorizes 

FSOC to issue recommendations to primary financial regulators for more stringent 

regulation of financial activities that it determines may create or increase systemic risk.460

 

456 See id., at xv-xvi. See also Senate Committee Report, supra note 5, at 39.

457 Id.

458 See id., at 2. See also supra note 6 and accompanying text.

459 See supra note 7 and accompanying text.

460 See supra note 8 and accompanying text.
147

Congress recognized that FSOC would need information from private fund 

advisers to carry out its duties and to determine whether and how to exercise these 

regulatory authorities. For instance, a Senate committee report noted that “no precise 

data regarding the size and scope of hedge fund activities are available[, and while] hedge 

funds are generally not thought to have caused the current financial crisis, information 

regarding their size, strategies, and positions could be crucial to regulatory attempts to 

deal with a future crisis.”461 To that end, Congress mandated that the Commissions, as 

the primary regulators of private fund advisers, gather information from these advisers

for FSOC’s use. The Commissions have designed Form PF, in consultation with staff 

representing FSOC’s members, to implement this mandate.462

Recent releases from FSOC illuminate how Form PF will serve an essential role 

in FSOC’s monitoring of, and exercise of regulatory authority over, the private fund 

industry. For instance, in one release, FSOC confirmed that the information reported on 

Form PF is important not only to conducting an assessment of systemic risk among 

private fund advisers but also to determining how that assessment should be made.463 

Guidance in this FSOC release also suggests the role Form PF data will play in the 

process of determining whether a private fund adviser or the funds it manages will be 

subject to FRB supervision.464

 

461 See Senate Committee Report, supra note

 More specifically, the Dodd-Frank Act identifies certain 

5, at 38.

462 See section II.C of this Release (describing the information that private fund advisers 

must report on Form PF).

463 See supra note 21 and accompanying text.

464 In the proposed three-stage process for making such determinations, the first and second 

stages would utilize publicly available data and data that, like Form PF, is collected by 
148

factors that FSOC must consider in making a determination to designate a nonbank 

financial company for FRB supervision, and FSOC’s recent guidance organizes those 

factors into categories, including size, interconnectedness, use of leverage, liquidity risk 

and maturity mismatch and concentration.465 As discussed in detail throughout 

section II.C of this Release, the information reported on Form PF is designed, in part, to 

provide FSOC with data to assess these factors in a manner that is relevant to the 

particular type of fund about which the adviser is reporting.466 Finally, we expect that 

FSOC will use Form PF data to supplement the data that it collects regarding other 

financial market participants and gain a broader view of the financial system than is 

currently available to regulators.467

In addition to the content of the Form, the reporting frequency, filing deadlines 

and reporting thresholds have been designed to provide FSOC the information it needs to 

monitor systemic risk across the private fund industry while balancing the burdens these 

reporting requirements will impose on advisers. For instance, although most advisers 

will only report annually on Form PF, large hedge fund and large liquidity fund advisers 

will report quarterly because we understand, based on our staffs’ consultations with staff 

 In this manner, we believe that the information 

collected through Form PF could play an important role in FSOC’s monitoring of 

systemic risk, both in the private fund industry and in the financial markets more broadly.

 

other regulators. A third stage of screening would generally involve OFR collecting 

additional, targeted information directly from these firms, which FSOC would analyze 

along with Form PF data and other data used in the first two stages. See supra notes 45-

46 and accompanying text.

465 See FSOC Second Notice, supra note 6.

466 See, e.g., supra notes 192, 228, 266, 282, 284, 298 and 323 and accompanying text.

467 See, e.g., Proposing Release, supra note 12, at n. 120 and accompanying text.
149

representing FSOC’s members, that this will provide FSOC with timely data that it may 

use to identify emerging trends in systemic risk.

468 The filing deadlines are, similarly,

designed to provide FSOC with timely data so that it may understand and monitor 

systemic risk on a reasonably current basis.469 Moreover, as discussed above, the 

reporting thresholds are designed to provide FSOC with a broad picture of the private 

fund industry while relieving smaller advisers from much of the costs associated with the 

more detailed reporting.470 We understand that obtaining this broad picture will help 

FSOC to contextualize its analysis and assess whether systemic risk may exist across the 

private fund industry and to identify areas where OFR may want to obtain additional 

information.471

Certain publications from international groups and researchers have suggested

that data like that collected on Form PF will be valuable to the regulation of systemic 

risk. For instance, as discussed above, several international groups have continued 

working to close information gaps by increasing the disclosures provided to regulators.472 

These groups have emphasized the importance, in their view, of designing and collecting 

better information to support the identification and modeling of systemic risk.473

 

468 See supra section II.B.1 of this Release (discussing reporting frequency and comments on 

the proposed reporting frequency).

 In 

469 See supra section II.B.2 of this Release (discussing reporting deadlines and comments on 

the proposed deadlines).

470 See supra section II.A.4.a of this Release (discussing large adviser thresholds and 

comments on the proposed thresholds). See also section II.A of this Release (discussing 

the minimum reporting thresholds).

471 Id.

472 See supra notes 28-29 and accompanying text.

473 Id.
150

addition, research papers have suggested that information regarding private funds should 

play an important role in monitoring systemic risk, and one study argues that more direct 

measures of systemic risk would be possible with information from the majority of funds 

in the industry.474 Another recent research paper argues that expanding the FRB’s flow 

of funds data to include more detailed quarterly information regarding the holding and 

transfer of financial instruments, including information regarding the portfolios of hedge 

funds, “would have been of material value to U.S. regulators in ameliorating the recent 

financial crisis and could be of aid in understanding the potential vulnerabilities of an 

innovative financial system in the future.”475 Others have commented on hedge fund 

reporting specifically, stating that “[t]ransparency to regulators can help them measure 

and manage possible systemic risk and is relatively costless.”476

Other academics and economists, while supporting regulatory efforts to assess 

and mitigate systemic risk, have cautioned that achieving the goal of substantially 

reducing systemic risk may prove difficult. For example, while the authors of one recent 

work support establishing “early warning indicators” for financial crises, they argue that 

 

474 See, e.g., Nicholas Chan, Mila Getmansky, Shane Haas and Andrew Lo, Systemic Risk 

and Hedge Funds, in The Risks of Financial Institutions (Mark Carey and Rene Stulz, 

eds., 2007) at 238; Monica Billio, Mila Getmansky, Andrew Lo and Loriana Pelizzon, 

Econometric Measures of Systemic Risk in the Finance and Insurance Sectors, 

NATIONAL BUREAU OF ECONOMIC RESEARCH (July 2010).

475 Leonard Nakamura, Durable Financial Regulation: Monitoring Financial Instruments as 

a Counterpart to Regulating Financial Institutions, NATIONAL BUREAU OF ECONOMIC 

RESEARCH (May 2011) at 1.

476 Stephen Brown, et al., Hedge Funds, Mutual Funds, and ETFs, in REGULATING WALL 

STREET: THE DODD-FRANK ACT AND THE NEW ARCHITECTURE OF GLOBAL FINANCE

360 (Viral V. Acharya, et al., eds., 2011) (supporting “regular and timely” reporting of

asset positions and leverage levels). See also Ferran, supra note 307, at 28.
151

the most significant challenge is not the design of a framework for systemic risk analysis

but rather:

the well-entrenched tendency of policy makers and market participants to treat the 

signals as irrelevant archaic residuals of an outdated framework, assuming that 

old rules of valuation no longer apply. If the past... is any guide, these signals 

will be dismissed more often than not.477

Accordingly, although collecting information on Form PF will increase the transparency 

of the private fund industry to regulators (an important prerequisite to understanding and 

monitoring systemic risk), transparency alone may not be sufficient to address systemic 

risk.

 

478

Some commenters agreed that Form PF data will “facilitate FSOC’s ability to 

promote the soundness of the U.S. financial system.”479 One commenter characterized 

Form PF as determining the extent to which FSOC and the SEC have access to “data 

essential to monitoring systemic risks that, as we saw in 2007 and 2008, cause substantial 

damage to the financial markets and the broader economy when they go unchecked.”480

 

477 Carmen M. Reinhart and Kenneth S. Rogoff, This Time is Different: Eight Centuries of 

Financial Folly (2009) (“Reinhart and Rogoff”) at 277, 280 and 281 (after observing this 

tendency to disregard signals of systemic risk, the authors conclude that this “is why we 

also need to think about improving institutions,” which may be important to reducing this 

risk).

 

Another commenter stated that Form PF data could aid in the assessment of “systemic 

478 See also FSOC 2011 Annual Report, supra note 19, at ii (explaining that identifying and 

mitigating potential threats to financial stability “is an inherently difficult exercise. No 

financial crisis emerges in exactly the same way as its predecessors, and the most 

significant future threats will often be the ones that are hardest to diagnose and preempt” 

but going on to state that, “[n]onetheless, there is a strong case for improving the quality 

of information available to the public, supervisors, and regulators about risks in financial 

institutions and markets.”)

479 CII Letter. See also, e.g., AFL-CIO Letter; AFR Letter.

480 AFL-CIO Letter.
152

risks due to connectivity and contagion.”481 One commenter who expressed reservations 

regarding specific aspects of the proposal nonetheless supported “the approach proposed 

by the SEC and CFTC to collect information from registered private fund managers 

through periodic, confidential reports on Form PF” and agreed that gathering data “from 

different types of market participants, including investment advisers and the funds they 

manage, ...is a critical component of effective systemic risk monitoring and 

regulation.”482

Some commenters, however, doubted that Form PF would be beneficial for 

monitoring systemic risk.

 

483 One commenter, for instance, argued that “Form PF

requires firms to calculate and disclose information with uncertain benefits to regulators, 

and the broad scope of private funds subject to this burden has not been justified.”484 

Others argued that particular types of funds, such as private equity funds, should be 

excluded from the reporting because they do not, in their view, have the potential to pose 

systemic risk or that certain of the proposed questions on Form PF would not prove 

beneficial for systemic risk analysis.485

 

481 MSCI Letter (though also noting that they “see less potential benefit from this exercise to 

track the formation of asset class bubbles” and that certain of the requested information 

would be difficult to aggregate for purposes of industry-wide analysis; see section II.C 

for a discussion of some of this commenter’s observations regarding use of particular 

data collected on Form PF).

 As discussed above, based on SEC staff’s

482 MFA Letter.

483 See, e.g., Fidelity Letter; PEGCC Letter; TCW Letter; USCC Letter.

484 CCMR Letter; see also USCC Letter (acknowledging, however, that “greater access to 

comprehensive market and industry information will assist [FSOC] in identifying 

emerging threats to the stability of the U.S. financial system.”); BlackRock Letter; 

SIFMA Letter.

485 See, e.g., PEGCC Letter. See also supra section II.C of this Release.
153

consultation with staff representing FSOC’s members, we continue to believe that 

targeted information regarding the leverage practices of private equity funds will provide 

information that FSOC may use to monitor activities and trends in this industry that are 

of potential systemic importance.486 In addition, we have made a number of changes 

from the proposal intended to address the specific concerns of these commenters and 

believe that Form PF, as adopted, will be an important source of information for FSOC as 

it carries out its duties as they relate to the private fund industry.487

We cannot predict today what the scope of the next financial crisis will be, and 

Form PF is only one part of a broader framework established under the Dodd-Frank Act 

to monitor and address systemic risk.

488

Reporting on Form PF will also benefit investors and other market participants by 

improving the information available to the Commissions regarding the private fund

industry and how it interacts with markets. Today, regulators have little reliable data 

 Other measures contemplated by the DoddFrank Act, including the so-called “Volcker rule,” enhanced regulation of swaps and the 

FRB’s oversight of systemically important financial institutions may be critical to 

identifying and mitigating the next financial crisis. We anticipate, however, that Form PF 

will improve the information available to regulators as they seek to prevent or mitigate 

the effects of future financial crises, and if this information helps to avoid even a small 

portion of the costs of a financial crisis like the most recent one, the benefits of Form PF 

will be very significant. 

 

486 See supra notes 307-308 and accompanying text. 

487 See supra section II of this Release (discussing changes from the proposal).

488 See supra note 457 and accompanying text.
154

regarding this rapidly growing sector and frequently have to rely on data from other 

sources, which when available may be incomplete. The SEC recently adopted 

amendments to Form ADV that will require the reporting of important information 

regarding private funds, but this includes little or no information regarding, for instance, 

performance, leverage or the riskiness of a fund’s financial activities.

489

In addition, this data will provide the Commissions with a more complete view of 

the financial markets in general and the private fund industry in particular. This broader 

perspective and more reliable data may enhance the Commissions’ ability to develop and 

frame regulatory policies regarding the private fund industry, its advisers and the markets 

in which they participate, and to more effectively evaluate the outcomes of regulatory

policies and programs directed at this sector, including for the protection of private fund 

investors. For instance, Form PF data may help the Commissions to discern relationships 

between regulatory actions and private fund results or activities.

 As discussed 

above, the data collected through Form PF, which will be more reliable than existing data 

regarding the industry and significantly extend the data available through the revised 

Form ADV, will assist FSOC in identifying and addressing risks to U.S. financial

stability. This may, in turn, protect investors and other market participants from 

significant losses.

 

489 See Implementing Adopting Release, supra note 11. Information reported on Form ADV 

is made available to the public, while Form PF data generally will not be. See supra

section II.D (discussing confidentiality of Form PF data). This has informed the SEC’s 

determination to require certain private fund information on Form ADV and other private 

fund information on Form PF.
155

We also expect the Form PF data to improve the efficiency and effectiveness of 

the Commissions’ oversight of private fund advisers by enabling staff to manage and 

analyze information related to the risks that private funds pose more quickly, more 

effectively and at a lower cost than is currently possible. This will allow the 

Commissions to more efficiently and effectively target their examination programs. The 

Commissions will be able to use Form PF information to generate reports on the industry, 

its characteristics and trends. We expect that these reports will help the Commissions to 

anticipate regulatory problems, allocate and reallocate resources, and more fully evaluate 

and anticipate the implications of various regulatory actions the Commissions may 

consider taking. This will increase both the efficiency and effectiveness of the 

Commissions’ programs and, thereby, increase investor protection. Form PF data will 

also help the Commissions better understand the investment activities of private funds 

and the scope of their potential effect on investors and the markets that the Commissions

regulate. 

Commenters generally focused on the benefits of Form PF as they relate to 

systemic risk rather than investor protection. However, one supporter, who represents 

twelve million workers and sponsors pension and employee benefit plans holding almost 

half a trillion dollars in assets, agreed that “[c]omprehensive disclosure requirements for 

private funds will provide important protections for [its] members’ retirement 

savings.”490

 

490 AFL-CIO Letter. See also AFR Letter.

 On the other hand, some commenters who questioned Form PF’s merits 

expressed skepticism regarding the Form’s benefits generally, not just with respect to the 
156

monitoring of systemic risk.491 As discussed in detail above, we have made a number of 

changes from the proposal designed to address commenter concerns regarding certain 

aspects of the proposed reporting requirements.492

The Commissions believe that private fund advisers, investors in private funds 

and the companies in which private funds may invest will also enjoy certain benefits 

related to Form PF. For example, we identified above two principal classes of benefits –

assistance to FSOC in carrying out its mission and improvements to the ability of 

regulators to protect investors and oversee markets – in which these groups will share, 

including indirectly as participants in the U.S. financial system. With respect to hedge 

fund advisers, for instance, data indicate that the number of funds shut down each year 

increased significantly during the recent financial crisis, suggesting that these advisers 

may benefit if a future financial crisis is averted or mitigated.

 However, we continue to believe that 

Form PF, as adopted, will increase the amount and quality of information available 

regarding a previously opaque area of investment activity and, thereby, enhance the

ability of regulators to protect investors and maintain fair, orderly and efficient markets.

493

 

491 See, e.g., supra note 

 Private fund investors 

and private fund advisers will also benefit if reporting on Form PF, by requiring advisers 

to review their fund’s portfolios, trading practices and risk profiles, causes advisers to 

improve their risk management practices or internal controls.

484.

492 See supra section II of this Release (discussing changes from the proposal).

493 See HedgeFund Intelligence Global Review 2011, HFI (Spring 2011) (“HFI 2011 Global 

Review”).
157

Reporting on Form PF may also result in a positive effect on capital formation. 

Although Form PF data generally will be non-public, Form PF will increase transparency 

to regulators.494

Should the CFTC adopt certain of its proposed systemic risk reporting 

requirements, the coordination between the CFTC and SEC on this rulemaking would

result in significant efficiencies for any private fund adviser that is also registered as a 

CPO or CTA with the CFTC. This is because, under CEA rule 4.27, filing Form PF 

would satisfy both SEC and CFTC reporting obligations with respect to commodity pools 

that are “private funds” and CPOs and CTAs would have the option of reporting on 

Form PF regarding commodity pools that are not private funds to satisfy certain other 

CFTC reporting obligations, in each case should the CFTC adopt such reporting 

obligations.

 The SEC believes that private fund advisers may, as a result, assess 

more carefully the risks associated with particular investments and, in the aggregate, 

allocate capital to investments with a higher value to the economy as a whole. To the 

extent that changes in investment allocations lead to improved economic outcomes in the 

aggregate, Form PF reporting may result in a positive effect on capital available for 

investment.

As discussed in section I.B of this Release, we have also coordinated with foreign 

financial regulators regarding the reporting of systemic risk information regarding private 

funds and anticipate that this coordination, as reflected in Form PF, will result in greater 

efficiencies in private fund reporting, as well as information sharing and private fund 

 

494 See supra section II.D (discussing confidentiality of Form PF data).
158

monitoring among foreign financial regulators. Ongoing work among various 

international organizations has emphasized the importance of filling gaps in the data 

regarding financial market participants, and one goal of this coordination is to collect 

comparable information regarding private funds, which will aid in the assessment of 

systemic risk on a global basis.495 Several commenters agreed that international 

coordination in connection with private fund reporting is important and encouraged us to 

take an approach consistent with international precedents.496 We have made several 

changes from the proposal intended to more closely align Form PF with international 

precedent.497

As discussed above, we also believe that private fund advisers already collect or 

calculate some of the information required on the Form at least as often as they must file 

the Form, creating efficiencies for, and benefiting, advisers in satisfying their reporting 

requirements.

498

B. Costs

Reporting on Form PF will also impose certain costs on private fund advisers and, 

potentially, other market participants. For the most part, these are the same costs 

discussed in the PRA analysis above because that analysis must account for the burdens 

of responding to the Commissions’ reporting requirements. In order to minimize these 

direct costs, the reporting requirements are scaled to the adviser’s size, the size of funds

 

495 See supra note 29 and accompanying text.

496 See supra note 30 and accompanying text.

497 See supra note 35 and accompanying text.

498 See supra note 382; Proposing Release, supra note 12, at n.105; but see supra note 146.
159

and the types of private funds each adviser manages. For instance, smaller private fund 

advisers and large private equity advisers generally must report less information and less 

frequently than large hedge fund advisers and large liquidity fund advisers.

499

We expect that the costs Form PF imposes will be most significant for the first 

report that a private fund adviser is required to file because the adviser will need to 

familiarize itself with the new reporting form and may need to configure its systems in 

order to efficiently gather the required information. We also anticipate that the initial 

report will require more attention from senior personnel, including compliance managers 

and senior risk management specialists, than will subsequent reports. In addition, we

expect that some Large Private Fund Advisers will find it efficient to automate some 

portion of the reporting process, which will increase the burden of the initial filing but 

reduce the burden of subsequent filings.

 This 

scaled approach is intended to provide FSOC with a broad picture of the private fund 

industry while relieving smaller advisers from much of the costs associated with the more 

detailed reporting. It is also designed to reflect the different implications for systemic 

risk that may be presented by different investment strategies, and thus seeks to adjust the 

costs of the reporting in proportion to the differing potential benefits of the information 

reported with respect to these strategies. 

 

499 See section II.A of this Release (describing who must file Form PF); section II.B of this 

Release (discussing the frequency with which private fund advisers must file Form PF); 

section II.C of this Release (describing the information that private fund advisers must 

report on Form PF). See also Instruction 9 to Form PF (discussing information regarding 

the frequency with which private fund advisers must file Form PF).
160

Several commenters addressed the cost estimates included in the Proposing 

Release. These commenters generally viewed these estimates as understated and, in 

several cases, argued that the costs of the initial report, in particular, would be greater 

than assumed.500 These commenters offered two common explanations for the higher 

than estimated costs: (1) “[m]any of the requested items on Form PF are not tracked by 

advisory firms on the frequency, by the category or on a fund-by-fund basis in the 

manner requested by the proposed Form,” meaning that advisers would need to develop 

systems for the reporting or engage in a manual process of gathering and compiling 

data;501 and (2) completing the Form will require gathering information from many 

different internal and external parties and systems.502

We have carefully considered comments suggesting that the reporting 

requirements would be more burdensome than estimated in the Proposing Release, and 

the SEC has substantially increased its estimates of the hour burdens included in this 

PRA analysis, which flow through to these estimates of costs.

503

 

500 See, e.g., AIMA Letter; IAA Letter; Kleinberg General Letter; MFA Letter; PEGCC 

Letter; Seward Letter. 

 We have, however, also 

taken these comments into consideration in making a number of changes from the 

proposal that are intended to reduce the burdens of reporting on Form PF. These include 

global changes to the Form, such as allowing most advisers more time to file following 

the end of a fiscal period (reducing the likelihood that Form PF will compete with other 

priorities for advisers’ resources or require employment of additional personnel), 

501 TCW Letter; but see also supra note 146.

502 See, e.g., Kleinberg General Letter; MFA Letter; PEGCC Letter.

503 See supra notes 383, 394-395, 404 and 414 and accompanying text.
161

extending the compliance date, allowing large private equity advisers to report annually 

rather than quarterly, increasing the threshold for large private equity advisers and 

permitting greater reliance on advisers’ existing methodologies and recordkeeping 

practices. We have also modified specific questions in response to comments so that 

responding to the Form is less burdensome.504 We expect, on the whole, that these 

changes will mitigate the cost of reporting.505

After filing their initial reports, we anticipate that advisers will incur significantly 

lower costs because much of the work involved in the initial report is non-recurring and 

because of efficiencies realized from system configuration and reporting automation 

efforts accounted for in the initial reporting period. In addition, we estimate that senior 

personnel will bear less of the reporting burden in subsequent reporting periods, reducing 

costs though not necessarily reducing the burden hours.

 In addition, we have added a minimum 

reporting threshold, which will not reduce the burden to any particular filer of reporting

but will reduce the aggregate burden that Form PF imposes because fewer advisers will 

be required to report. 

One commenter agreed that efficiencies will be realized over time,506 but another 

stated that, at least for private real estate funds, they would not.507

 

504 See supra section II.C of this Release.

 Having considered 

505 See supra notes 388-389, 397-398, 407-409 and 418-420 and accompanying text. We 

also note that the original cost estimates, as well as the revised estimates included in this 

Release, include allocations for systems development among Large Private Fund 

Advisers (who are most likely to find automation cost effective) and assume that 

information would need to be gathered from many sources, both internal and external. 

See supra note 435 and accompanying text.

506 See MFA Letter.
162

these comments, we continue to believe that, for the average adviser (and particularly for 

those with more liquid portfolios and greater systems capabilities), efficiencies will be 

realized over time. We have, however, also increased the cost estimates for subsequent 

filings in recognition of concerns regarding the overall burden of the reporting and the 

possibility that efficiencies are not the same for all types of private fund adviser.

Based on the foregoing, we estimate508

(1) 40 burden hours at a cost of $13,600

that the periodic filing requirements under 

Form PF (including configuring systems and compiling, automating, reviewing and 

electronically filing the report) will impose: 

509

(2) 15 burden hours at a cost of $4,200

per smaller private fund 

adviser for the initial annual report; 

510

 

507 See comment letter of The National Association of Real Estate Investment Managers 

(Mar. 24, 2011).

per smaller private fund adviser 

for each subsequent annual report; 

508 We understand that some advisers may outsource all or a portion of their Form PF 

reporting responsibilities to software consultants, vendors, filing agents or other thirdparty service providers. We have based our estimates on the use of internal resources, for 

which some cost data is available, because we believe that an adviser would engage thirdparty service providers only if the external costs were comparable, or less than, the 

estimated internal costs of compiling, reviewing and filing the Form PF. The hourly 

wage data used in this Economic Analysis section of the Release is based on the 

Securities Industry and Financial Markets Association’s Report on Management & 

Professional Earnings in the Securities Industry 2010 and Office Salaries in the 

Securities Industry 2010 (“SIFMA Earnings Reports”). This data has been modified to 

account for an 1,800-hour work-year and multiplied by 5.35 for management and 

professional employees and by 2.93 for general and compliance clerks to account for 

bonuses, firm size, employee benefits and overhead. 

509 We expect that for the initial report these activities will most likely be performed equally 

by a compliance manager at a cost of $273 per hour and a senior risk management 

specialist at a cost of $409 per hour and that, because of the limited scope of information 

required from smaller private fund advisers, these advisers generally would not realize 

significant benefits from or incur significant costs for system configuration or 

automation. ($273/hour x 0.5 + $409/hour x 0.5) x 40 hours = approximately $13,600. 
163

(3) 100 burden hours at a cost of $31,000511

(4) 50 burden hours at a cost of $13,900

per large private equity fund 

adviser for the initial annual report;

512

(5) 300 burden hours at a cost of $93,100

per large private equity fund 

adviser for each subsequent annual report; 

513

 

510 We expect that for subsequent reports senior personnel will bear less of the reporting 

burden. As a result, we estimate that these activities will most likely be performed 

equally by a compliance manager at a cost of $273 per hour, a senior compliance 

examiner at a cost of $235 per hour, a senior risk management specialist at a cost of $409 

per hour and a risk management specialist at a cost of $192 per hour. ($273/hour x 0.25

+ $235/hour x 0.25 + $409/hour x 0.25 + $192/hour x 0.25) x 15 hours = approximately 

$4,200.

per large hedge fund adviser 

for the initial quarterly report; 

511 The SEC expects that for the initial report, of a total estimated burden of 100 hours, 

approximately 60 hours will most likely be performed by compliance professionals and 

40 hours will most likely be performed by programmers working on system configuration 

and reporting automation. Of the work performed by compliance professionals, the SEC 

anticipates that it will be performed equally by a compliance manager at a cost of $273 

per hour and a senior risk management specialist at a cost of $409 per hour. Of the work 

performed by programmers, the SEC anticipates that it will be performed equally by a 

senior programmer at a cost of $304 per hour and a programmer analyst at a cost of $224 

per hour. ($273/hour x 0.5 + $409/hour x 0.5) x 60 hours + ($304/hour x 0.5 + $224/hour 

x 0.5) x 40 hours = approximately $31,000.

512 The SEC expects that for subsequent reports senior personnel will bear less of the 

reporting burden and that significant system configuration and reporting automation costs 

will not be incurred. As a result, the SEC estimates that these activities will most likely 

be performed equally by a compliance manager at a cost of $273 per hour, a senior 

compliance examiner at a cost of $235 per hour, a senior risk management specialist at a 

cost of $409 per hour and a risk management specialist at a cost of $192 per hour. 

($273/hour x 0.25 + $235/hour x 0.25 + $409/hour x 0.25 + $192/hour x 0.25) x 50 hours 

= approximately $13,900.

513 We expect that for the initial report, of a total estimated burden of 300 hours, 

approximately 180 hours will most likely be performed by compliance professionals and 

120 hours will most likely be performed by programmers working on system 

configuration and reporting automation. Of the work performed by compliance 

professionals, we anticipate that it will be performed equally by a compliance manager at 

a cost of $273 per hour and a senior risk management specialist at a cost of $409 per 

hour. Of the work performed by programmers, we anticipate that it will be performed 

equally by a senior programmer at a cost of $304 per hour and a programmer analyst at a 
164

(6) 140 burden hours at a cost of $38,800514

(7) 140 burden hours at a cost of $43,500

per large hedge fund adviser 

for each subsequent quarterly report; 

515

(8) 65 burden hours at a cost of $18,000

per large liquidity fund 

adviser for the initial quarterly report; and

516

Assuming that there are 3,070 smaller private fund advisers, 250 large hedge fund 

advisers, 80 large liquidity fund advisers, and 170 large private equity fund advisers, the 

per large liquidity fund adviser 

for each subsequent quarterly report.

 

cost of $224 per hour. ($273/hour x 0.5 + $409/hour x 0.5) x 180 hours + ($304/hour x 

0.5 + $224/hour x 0.5) x 120 hours = approximately $93,100.

514 We expect that for subsequent reports senior personnel will bear less of the reporting 

burden and that significant system configuration and reporting automation costs will not 

be incurred. As a result, we estimate that these activities will most likely be performed 

equally by a compliance manager at a cost of $273 per hour, a senior compliance 

examiner at a cost of $235 per hour, a senior risk management specialist at a cost of $409 

per hour and a risk management specialist at a cost of $192 per hour. ($273/hour x 0.25

+ $235/hour x 0.25 + $409/hour x 0.25 + $192/hour x 0.25) x 140 hours = approximately 

$38,800.

515 The SEC expects that for the initial report, of a total estimated burden of 140 hours, 

approximately 85 hours will most likely be performed by compliance professionals and 

55 hours will most likely be performed by programmers working on system configuration 

and reporting automation. Of the work performed by compliance professionals, the SEC 

anticipates that it will be performed equally by a compliance manager at a cost of $273 

per hour and a senior risk management specialist at a cost of $409 per hour. Of the work 

performed by programmers, the SEC anticipates that it will be performed equally by a 

senior programmer at a cost of $304 per hour and a programmer analyst at a cost of $224 

per hour. ($273/hour x 0.5 + $409/hour x 0.5) x 85 hours + ($304/hour x 0.5 + $224/hour 

x 0.5) x 55 hours = approximately $43,500.

516 The SEC expects that for subsequent reports senior personnel will bear less of the 

reporting burden and that significant system configuration and reporting automation costs 

will not be incurred. As a result, the SEC estimates that these activities will most likely 

be performed equally by a compliance manager at a cost of $273 per hour, a senior 

compliance examiner at a cost of $235 per hour, a senior risk management specialist at a 

cost of $409 per hour and a risk management specialist at a cost of $192 per hour. 

($273/hour x 0.25 + $235/hour x 0.25 + $409/hour x 0.25 + $192/hour x 0.25) x 65 hours 

= approximately $18,000.
165

foregoing estimates suggest an annual cost of $107,000,000517 for all private fund 

advisers in the first year of reporting and an annual cost of $59,800,000 in subsequent 

years.518

The cost estimates above assume that risk and compliance personnel (and, in the 

case of Large Private Fund Advisers filing an initial report, programmers) will carry out 

the work of reporting on Form PF. Some commenters suggested that employees in 

portfolio management as well as legal, controller and other back office functions may 

also be involved in compiling, reviewing and filing Form PF.519 These commenters did 

not provide estimates for how the reporting burdens would be allocated among these 

groups of employees, and we believe the allocation is likely to vary significantly among 

advisers depending on the size and complexity of their operations. Based on available 

wage data, we do not believe that variations in the allocation of these responsibilities 

among the functions that we and commenters identified would result in significantly 

different aggregate cost estimates.520

 

517 (3,070 smaller private fund advisers x $13,600 per initial annual report) + (170 large 

private equity fund advisers x $31,000 per initial annual report) + (250 large hedge fund 

advisers x $93,100 per initial quarterly report) + (250 large hedge fund advisers x 3 

quarterly reports x $38,800 per subsequent quarterly report) + (80 large liquidity fund 

advisers x $43,500 per initial quarterly report) + (80 large liquidity fund advisers x 3 

quarterly reports x $18,000 per subsequent quarterly report) = approximately 

$107,000,000.

518 (3,070 smaller private fund advisers x $4,200 per subsequent annual report) + (170 large 

private equity fund advisers x $13,900 per subsequent annual report) + (250 large hedge 

fund advisers x 4 quarterly reports x $38,800 per subsequent quarterly report) + (80 large 

liquidity fund advisers x 4 quarterly reports x $18,000 per subsequent quarterly report) = 

approximately $59,800,000.

519 See, e.g., Kleinberg General Letter; MFA Letter.

520 For example, our estimates assume that the work is performed by compliance managers 

at $273 per hour, senior compliance examiners at $235 per hour, senior risk management 
166

In addition, as discussed above, a private fund adviser must file very limited 

information on Form PF if it needs to transition from quarterly to annual filing, if it is no 

longer subject to the reporting requirements of Form PF or if it requires a temporary 

hardship exemption under rule 204(b)-1(f). We estimate that transition and final filings 

will, collectively, cost private fund advisers as a whole approximately $5,200 per year.521 

We further estimate that hardship exemption requests will cost private fund advisers as a 

whole approximately $760 per year.522

 

specialists at $409 per hour, risk management specialists at $192 per hour and, in the case 

of Large Private Fund Advisers filing an initial report, programmers ranging from $304 

to $224 per hour. Based on the SIFMA Earnings Reports, indicative costs in the other 

functions that commenters identified are: $287 per hour for a senior portfolio manager; 

$211 per hour for an intermediate portfolio manager; $430 per hour for an assistant 

general counsel; $165 per hour for a fund senior accountant; $194 per hour for an 

intermediate business analyst; and $154 per hour for an operations specialist. An 

adviser’s chief compliance officer (at a cost of $423 per hour) or controller (at a cost of 

$433 per hour) may also review the filing, though we would expect that in most cases 

their involvement would be more limited than that of more junior employees. 

 No commenters addressed these estimates. The 

estimate with respect to hardship exemptions is unchanged from the proposal. The 

estimate with respect to transition and final filings have been reduced because fewer 

521 The SEC estimates that, for the purposes of the PRA, transition filings will impose 7

burden hours per year on private fund advisers in the aggregate and that final filings will 

impose 71 burden hours per year on private fund advisers in the aggregate. The SEC 

anticipates that this work will most likely be performed by a compliance clerk at a cost of

$67 per hour. (7 burden hours + 71 burden hours) x $67/hour = approximately $5,200.

522 The SEC estimates that, for the purposes of the PRA, requests for temporary hardship 

exemptions will impose 4 burden hours per year on private fund advisers in the 

aggregate. The SEC anticipants that five-eighths of this work will most likely be 

performed by a compliance manager at a cost of $273 per hour and that three-eighths of 

this work will most likely be performed by a general clerk at a cost of $50 per hour. 

(($273 per hour x 5/8 of an hour) + ($50 per hour x 3/8 of an hour)) x 4 hours =

approximately $760.
167

filers will be required to report on a quarterly basis and the addition of a minimum 

reporting threshold means that fewer advisers will report in total.523

Advisers may also incur costs related to the modification or deployment of 

systems to support their reporting obligations under Form PF.524 As discussed above, 

certain of the anticipated costs to Large Private Fund Advisers of automating Form PF 

reporting are accounted for in our cost estimates.

525 In addition, Large Private Fund 

Advisers may incur costs associated with the acquisition or use of hardware needed to 

perform computations or otherwise process the data required on Form PF.526 

Commenters did not provide estimates for these costs. However, as discussed above, we 

estimate that these costs, which are likely to vary significantly among advisers, will range 

from $0 to $25,000,000 in the aggregate for the first year of reporting, with the actual 

costs likely to fall in between these two end-points.527

Based on the foregoing estimates, we estimate that the aggregate annual costs of 

Form PF, other than for hardware costs, are approximately $108,000,000 in the first year 

 

523 See supra note 424.

524 See supra section IV.G of this Release.

525 See supra note 438 and accompanying text.

526 See supra notes 434-441 and accompanying text.

527 Id.
168

and $60,500,000 in subsequent years.528 In addition, we estimate that hardware costs will 

add between $0 and $25,000,000 in the first year.529

Reporting requirements can also impose costs beyond the direct costs associated 

with compiling and submitting data, and advisers subject to the Form PF reporting 

requirements may incur costs that are more difficult to quantify. One commenter, for 

instance, suggested an adviser may incur indirect “costs associated with the risk of 

disclosure of highly sensitive proprietary information.”530 As discussed above, Form PF

elicits non-public information about private funds and their trading strategies, the public 

disclosure of which could adversely affect the funds and their investors.531 We are, 

however, working to establish controls designed to protect this sensitive information from 

improper or inadvertent disclosure and believe that the risk of such disclosure is low.532

 

528 $107,000,000 (for periodic reporting in the first year) + $5,200 (for transition and final 

filings) + $760 (for hardship requests) + $684,000 (for filing fees) = approximately 

$108,000,000. $59,800,000 (for periodic reporting in subsequent years) + $5,200 (for 

transition and final filings) + $760 (for hardship requests) + $684,000 (for filing fees) = 

approximately $60,500,000.

 

If an adviser’s Form PF data were disclosed despite the controls intended to maintain its 

confidentiality, there is some risk that a competitor may be able to use an adviser’s data 

to replicate the adviser’s trading strategy or trade against the adviser, thereby potentially 

harming the profitability of the strategy to that adviser. However, because data on 

Form PF generally could not, on its own, be used to identify individual investment 

529 See supra notes 440-441 and accompanying text.

530 CCMR Letter.

531 See supra section II.D of this Release.

532 See supra sections II.D and II.E of this Release.
169

positions, the ability of a competitor to use Form PF data in this manner is limited.533 In 

addition, the deadlines for filing Form PF have, in most cases, been significantly 

extended from the proposal, meaning that the filings will generally contain less current, 

and therefore less sensitive, data.534

We do not expect this rulemaking to have a significant negative effect on 

competition because the information generally will be non-public and similar types of 

SEC-registered advisers will have comparable burdens under the Form.

 In the very unlikely event that improper or 

inadvertent disclosures of Form PF data occurred frequently, the disclosures could 

discourage advisers from investing the time and other resources required to develop novel 

strategies, potentially reducing the range of options available to investors and inhibiting 

financial innovation.

535

Although Form PF data generally will be non-public, Form PF will increase 

transparency to regulators.

 In addition, 

the SEC does not expect this rulemaking to have a significant negative effect on capital 

formation, again because the information collected generally will be non-public and, 

therefore, should not affect private fund advisers’ ability to raise capital.

536

 

533 See supra note 

 As discussed above, this may result in a positive effect on 

capital formation because advisers may, as a result, assess more carefully the risks 

associated with particular investments and, in the aggregate, allocate capital to 

343.

534 See supra notes 351 and 344 and accompanying text.

535 See supra section II.D of this Release for a discussion of confidentiality of Form PF data.

536 See supra section II.D of this Release for a discussion of confidentiality of Form PF data.
170

investments with a higher value to the economy as a whole.537

The SEC also recognizes that the direct costs of completing and filing Form PF 

may reduce the amount of capital that funds have available for investment or, if the costs 

are passed on to fund investors, reduce the amount of capital investors have available for 

investment. This could, in turn, affect capital formation.

 However, this increased 

transparency could also have a negative effect on capital formation if it increases 

advisers’ aversion to risk and, as a result, reduces investment in projects that may be 

risky but beneficial to the economy as a whole. To the extent that changes in investment 

allocations lead to reduced economic outcomes in the aggregate, Form PF reporting may 

result in a negative effect on capital available for investment.

538

 

537 See supra note 

 However, the direct costs of 

reporting on Form PF will, to some extent, only transfer capital from private fund 

advisers to other market participants, such as employees or service providers paid to 

complete the Form. Because private fund advisers may have different investment 

opportunities than these other market participants, this transfer may negatively affect

aggregate economic outcomes. However, some of this transferred capital will be invested 

or spent and will not represent an aggregate loss to the economy. In addition, the direct 

494 and accompanying text.

538 One commenter expressed concern regarding the possible effects of Form PF reporting 

on economic growth, investors, investment opportunities, companies, markets, market 

liquidity and tax revenue as well as “the cost in terms of jobs and capital.” Issa Letter. 

This commenter suggested that these potential negative effects could flow from several 

sources, including: (1) the possibility that advisers will locate funds outside the United 

States as a result of, or to avoid, Form PF compliance costs or that these costs will be 

passed on to investors, causing them to seek investment opportunities outside the United 

States; and (2) the possibility that advisers will form fewer funds, slow the growth of 

their funds or shut down existing funds as a result of, or to avoid, Form PF compliance 

costs. We address these possible sources of indirect costs below.
171

costs of Form PF are, on average, small compared to other economic incentives that 

motivate private funds and their advisers to invest and grow.539

One commenter expressed concern that this rulemaking could cause advisers, 

private funds or investors to seek investment opportunities outside the U.S. as a result of, 

for instance, increased costs.540 This rulemaking could impose costs on U.S. private fund 

advisers that non-U.S. private fund advisers would not bear unless they are subject to the 

Advisers Act and the Form PF reporting requirements. However, advisers generally 

would not be able to avoid these reporting obligations by simply organizing the fund in a 

third country because regulatory jurisdiction for Form PF does not depend solely on 

where the fund is formed.

541

This commenter also suggested that some fund advisers may determine not to 

form a new private fund if the costs of Form PF outweigh the marginal benefits the 

 In addition, as noted above, ESMA has proposed a 

reporting regime similar to Form PF for alternative investment fund managers subject to 

the EU Directive. If that regime is adopted, we understand most such alternative 

investment managers would bear reporting costs similar to those that Form PF imposes. 

Accordingly, we believe the competitive impact of this difference in operating costs will 

be limited. We also do not expect that private funds will, to any significant extent, seek 

to avoid these regulatory burdens by foregoing participation in the U.S. capital markets 

because of the depth and liquidity of these markets and the stability afforded by the legal 

structures in the U.S.

 

539 See infra notes 545 and 548 and accompanying text.

540 See Issa Letter.

541 See supra note 134 and accompanying text.
172

adviser expects to obtain by forming the fund.542 Reduced fund formation could diminish

competition and the number of choices available to investors. The SEC does not, 

however, believe the cost of reporting on Form PF will have a substantial negative effect 

on fund formation. An adviser with no existing private funds considering whether to 

form its first fund is likely to face little or no costs as a result of Form PF because it is 

unlikely to leap past a Large Private Fund Adviser Threshold and may not even exceed 

the minimum reporting threshold of $150 million in private fund assets under 

management.543 For an existing private fund adviser, forming a new private fund would 

increase the cost of reporting on Form PF, but the adviser would be able to leverage its 

experience and existing systems, making the incremental reporting more efficient than for 

an adviser first becoming subject to Form PF reporting requirements.544

 

542 See Issa Letter.

 In the case of 

either an adviser newly managing private funds or an adviser with existing private funds, 

the SEC believes that Form PF reporting costs are unlikely to discourage the formation of 

many funds because the costs of either becoming subject to Form PF as a smaller private 

fund adviser or reporting incrementally more information on Form PF are small when 

compared to possible management and performance fees. For example, the SEC 

543 According to HFI data, even among the top 25 hedge fund launches reported in 2010, the 

average fund size was approximately $750 million, and existing advisers launched the 

majority of those funds in any case. This data also shows that, out of 135 total hedge 

fund launches reported in 2010 exceeding $50 million, at least 110 of them raised under 

$300 million. HFI does not report in their annual global review hedge fund launches 

under $50 million. See HFI 2011 Global Review, supra note 493. See also supra

sections IV.A and IV.G of this Release (discussing estimates of Form PF reporting costs 

for smaller private fund advisers).

544 In addition, in the case of large hedge fund advisers, the more detailed information they 

must file in section 2b of the Form only applies to qualifying hedge funds that have at 

least $500 million in net assets.
173

estimates that the cost to smaller private fund advisers of completing and filing Form PF 

will average less than $14,000 per initial annual filing and $5,000 per subsequent annual 

filing – or less than 0.01% of assets under management for the smallest adviser subject to 

Form PF reporting requirements – compared to annual management and performance 

fees that, at least among hedge fund advisers, average approximately 1.5% of assets 

under management and 20% of excess returns, respectively.

545

In addition, this commenter expressed concern that the Large Private Fund 

Adviser thresholds may encourage some private fund advisers with assets under 

management near but below the thresholds to attempt to staunch growth in their funds, 

either by refusing to admit new investors or by managing the investments of the funds, to 

remain below the thresholds.546 Similarly, this commenter suggested that some funds 

may even shut down to avoid Form PF reporting costs.547

 

545 See Ibbotson, et al., supra note 

 The SEC believes, however, 

that substantial economic incentives will likely counter such behavior, including private 

fund performance fees that incentivize the private fund adviser to continue advising its 

funds and maximize fund appreciation and return. For example, a hedge fund with an

initial value of $1.5 billion that experiences a 1% excess return will net $3 million in 

performance fees, and a 1% growth in assets under management will net an additional 

$225,000 per year in management fees, compared to an estimated cost of between

95, at 15 (finding a management fee of 1.5% of assets 

under management and a 20% performance fee to be the median fee structure in the 

TASS hedge fund database). $14,000 / $150,000,000 = approximately 0.009%.

546 See Issa Letter.

547 Id.
174

$210,000 and $260,000 in the first year of reporting.

548

As discussed above, we believe that private fund advisers, investors in private 

funds and the companies in which private funds may invest will enjoy certain benefits 

related to Form PF.

 In addition, we believe the cost 

to an adviser of reporting will decline over time as the adviser becomes more familiar 

with the Form and realizes efficiencies while, at the same time, the adviser will continue 

to charge management fee and potentially collect performance fees each year. With 

respect to the large adviser threshold specifically, we anticipate that business relations 

with investors that may be damaged if the adviser turns away investor assets may also 

motivate advisers to continue to permit the size of their funds to increase as a result of 

new investment.

549

 

548 The calculations assume a management fee of 1.5% of assets under management and a 

20% performance fee. See supra note 

 We recognize, however, that many of Form PF’s benefits will be 

widely distributed across the financial system while its costs will be concentrated. 

Private fund advisers will bear most of these costs, though they may also pass some of 

these costs on to fund investors, and to the extent that capital available for investment is 

reduced, the companies in which private funds would otherwise invest may also bear 

costs. In addition, the costs of Form PF to an individual adviser will vary depending on 

factors such as the state of its existing systems and the complexity of its business. As a 

result, the costs and benefits of Form PF to particular advisers, particular investors, 

545. $93,100 for the initial quarterly report + 

$38,800 for each subsequent quarterly reporting x 3 quarterly reports = approximately 

$210,000 for the first year of reporting. See supra notes 513-514. In addition, the SEC 

has estimated that a Large Private Fund Adviser may incur between $0 and $50,000 in 

costs for the acquisition or use of hardware in the first year of reporting. See supra note 

441 and accompanying text. 

549 See supra section V.A of this Release. 
175

particular companies and individual American citizens will not be evenly distributed. For 

certain individuals and entities, the costs of Form PF may even exceed the benefits to 

them. However, we believe that the aggregate benefits of this rulemaking will be 

substantial. Moreover, the uneven distribution of the benefits and costs of Form PF 

reflects the potential for an uneven distribution of the costs and benefits of engaging in 

risky financial activities that may impose negative externalities.

550

C. CFTC Statutory Findings

Rule 4.27, as finalized, would deem a CPO registered with the CFTC that is 

dually registered as a private fund adviser with the SEC to have satisfied certain reporting 

requirements that the CFTC may adopt by filing Form PF with the SEC. The CPOs and 

CTAs that are dually registered as private fund advisers would be required to provide 

annually a limited amount of basic information on Form PF about the operations of their 

private funds. Only large CPOs and CTAs that are also registered as private fund 

advisers with the SEC would have to submit on a quarterly basis the full complement of 

 

550 See, e.g., Iman Anabtawi and Steven L. Schwarcz, Regulating Systemic Risk: Towards an 

Analytical Framework, 86 NOTRE DAME L. REV. 4, 27 (2011) (arguing that financial 

market participants will not expend sufficient effort to identify and avoid conditions 

giving rise to systemic risk and explaining that one factor contributing to this behavior is 

that “the benefits of exploiting finite capital resources accrue to individual market 

participants, each of whom is motivated to maximize use of the resource, whereas the 

costs of exploitation are distributed more widely.... The root of the commons problem in 

financial markets is the asymmetry in the distribution of gains and losses associated with 

investment decisions.... In the case of a positive outcome, the firm captures the full 

benefits of the investment’s success. In the case of a negative outcome, however, the 

firm may not suffer the full consequences of the poor investment. Rather, if the firm fails 

or merely defaults, those consequences will impact financial market participants that rely 

on the soundness of the firm’s financial condition. Furthermore, if the firm is deemed too 

systemically significant to fail, its loss may be absorbed by government as a lender of last 

resort. In either case, the uninternalized costs associated with risk-taking by financial 

firms leads them to overexploit scarce capital resources in the form of socially excessive 

risk-taking.”).
176

systemic risk related information required by Form PF.551 As noted above, the DoddFrank Act tasks FSOC with monitoring the financial services marketplace in order to 

identify potential threats to the financial stability of the United States.552 The DoddFrank Act also requires FSOC to collect information from member agencies – like the 

SEC and the CFTC – to support its functions.553

Section 15(a) of the CEA requires that the CFTC, before promulgating a 

regulation under the Act or issuing an order, consider the costs and benefits of its action. 

By its terms, CEA Section 15(a) does not require the CFTC to quantify the costs and 

benefits of a new regulation or determine whether the benefits of the regulation outweigh 

its costs. Rather, CEA section 15(a) simply requires the CFTC to “consider the costs and 

benefits” of its action. CEA section 15(a)(2) specifies that costs and benefits shall be 

evaluated in light of the following considerations: (1) protection of market participants 

and the public; (2) efficiency, competitiveness and financial integrity of futures markets; 

(3) price discovery; (4) sound risk management practices; and (5) other public interest 

considerations.

 The CFTC and the SEC are jointly 

adopting sections 1 and 2 of Form PF as a means to collect the information necessary to 

permit FSOC to fulfill its obligation to monitor private funds, and in order to identify any 

potential systemic threats arising from their activities. The CFTC and the SEC do not 

currently collect the information that is covered in proposed sections 1 and 2 of Form PF.

554

 

551 See 5 U.S.C. 801(a)(1)(B)(i).

Accordingly, the CFTC could, in its discretion, give greater weight to 

552 See section 112(a)(2)(C) of the Dodd-Frank Act.

553 See section 112(d)(1) of the Dodd-Frank Act.

554 7 U.S.C. 19(a). 
177

any of the five considerations and could, in its discretion, determine that, notwithstanding 

its costs, a particular regulation was necessary or appropriate to protect the public interest 

or to effectuate any of the provisions or to accomplish any of the purposes of the Act.

Before promulgating these final rules, the CFTC sought public comment on the 

rules themselves, including the cost-benefit considerations of section 1 and 2 of Form 

PF.555 The CFTC also specifically invited commenters to submit “any data or other 

information that they may have quantifying or qualifying the perceived costs and benefits 

of this proposed rule with their comment letters.”556

1. General Costs and Benefits

 As noted above, the CFTC and the 

SEC received comments on the cost and benefits of the proposed regulations and the 

estimates of costs included in the Proposing Release, and they have carefully considered 

those comments. CEA Rule 4.27 does not impose any additional burdens or costs upon 

registered CPOs and CTAs that are dually registered as investment advisers with the 

SEC. By filing Form PF with the SEC, these dual registrants would be deemed to have 

satisfied certain reporting obligations with the CFTC, should the CFTC adopt such 

requirements.

With respect to costs, the CFTC has determined that: (1) without the reporting 

requirements imposed by this rulemaking, FSOC will not have sufficient information to 

identify and address potential threats to the financial stability of the United States (such 

as the near collapse of Long Term Capital Management); (2) the reporting requirements, 

 

555 See generally, CFTC Proposing Release, supra note 16, at 76 FR 8068, 8087 (for CFTC’s 

request for comment on the cost-benefit considerations). 

556 See generally, CFTC Proposing Release, supra note 16, at 76 FR 8068, 8087.
178

once finalized, will provide the CFTC with better information regarding the business 

operations, creditworthiness, use of leverage, and other material information of certain 

registered CPOs and CTAs that are also registered as investment advisers with the SEC; 

and (3) while they are necessary to U.S. financial stability, the reporting requirements 

will create additional compliance costs for these registrants, as discussed in the foregoing 

portions of the Economic Analysis as well as in the PRA section of this Release.

The CFTC has determined that the proposed reporting requirements will provide a 

benefit to all investors and market participants by providing the CFTC and other policy 

makers with more complete information about these registrants and the potential risk 

their activities may pose to the U.S. financial system. In turn, this information will

enhance the CFTC’s ability to appropriately tailor its regulatory policies to the 

commodity pool industry and its operators and advisors. As mentioned above, the CFTC 

and the SEC do not have access to this information today and have instead been made to 

use information from other, less reliable sources.

2. Section 15(a) Determination

As stated above, section 15(a) of the CEA requires the CFTC to consider the costs 

and benefits of its actions in light of five broad areas of market and public concern: (1) 

protection of market participants and the public; (2) efficiency, competitiveness, and 

financial integrity of futures markets; (3) price discovery; (4) sound risk management 

practices; and (5) other public interest considerations. 

a. Protection of Market Participants and the Public

Should the CFTC adopt certain of its proposed systemic risk reporting 

requirements, the coordination between the CFTC and SEC on this rulemaking would 
179

result in significant efficiencies for any private fund adviser that is also registered as a 

CPO or CTA with the CFTC. This is because, under CEA rule 4.27, filling Form PF 

would satisfy both SEC and CFTC reporting obligations with respect to commodity pools 

that are “private funds” and may satisfy CFTC reporting obligations with respect to 

commodity pools that are not “private funds,” in each case should the CFTC adopt such 

reporting obligations. As noted above, the CFTC has determined that this coordination 

will protect such participants from duplicative reporting while still providing FSOC with 

needed information to fulfill its mission to protect the public from potential threats to the 

financial stability of the United States.

Commodity pools that fall within the definition of private funds and will be filing 

Form PF represent a sector of collective investment vehicles that have experienced a 

substantial growth and have been the subject of international concern regarding their size 

in juxtaposition with the markets as a whole. This concern has led to several countries 

instituting similar data collection efforts and it is well recognized that the U.S. contingent 

of these funds represents a sizable portion of all trading by this type of entity. Thus, this 

combined SEC/CFTC effort will contribute substantially to a better understanding of the 

impact of private investment vehicles on both the U.S. and international markets and 

provide the information necessary to intelligently develop regulatory efforts and 

oversight programs to provide adequate protection of market participants and the public

at large.

Finally, the CFTC agrees with the SEC that Form PF, as adopted, will increase 

the amount and quality of information available regarding a previously opaque area of 
180

investment activity and, thereby, enhance the ability of regulators to protect investors and 

oversee the markets that they regulate.

b. Efficiency, Competitiveness, and Financial Integrity of 

Futures Markets

Although the CFTC does not believe this rule relates directly to the efficiency or 

competitiveness of futures markets, the CFTC does recognize that the interconnectedness 

of the United States financial system is such that the integrity of futures markets depends 

on the financial stability of the entire financial system. To the extent that the information 

collected by Form PF assists the Commissions and FSOC to identify threats that may 

damage the United States financial system, the regulations herein indirectly protect the 

integrity of futures markets.

c. Price Discovery

The CFTC has not identified a specific effect on price discovery as a result of 

Form PF or related regulations.

d. Sound Risk Management

The Dodd-Frank Act tasks FSOC and its member agencies (including both the 

SEC and the CFTC) with mitigating risks to the financial stability the United States. The 

CFTC believes these regulations are necessary to fulfill that obligation. Risk 

management is provided by these regulations in two main ways: (1) assisting FSOC in 

fulfilling its mission of protecting the systemic financial stability of the United States; 

and (2) improving the ability of regulators to oversee markets. These benefits are shared 

by market participants, at least indirectly, as a part of the United States financial system. 

In addition, CPOs and CTAs that are dually registered as investment advisers will benefit 
181

from these regulations to the extent that reporting on Form PF requires such entities to 

review their firms’ portfolios, trading practices, and risk profiles; thus, the CFTC believes 

that these regulations may improve the sound risk management practices within their 

internal risk management systems. 

e. Other Public Interest Considerations

The CFTC has not identified other public interest considerations related to the 

costs and benefits of these regulations.

VI. FINAL REGULATORY FLEXIBILITY ANALYSIS

SEC:

The SEC has prepared the following Final Regulatory Flexibility Analysis 

(“FRFA”) regarding Advisers Act rule 204(b)-1 in accordance with section 4(a) of the 

Regulatory Flexibility Act (“RFA”).557 The SEC prepared the Initial Regulatory 

Flexibility Analysis (“IRFA”) in conjunction with the Proposing Release in January 

2011.558

A. Need for and Objectives of the New Rule

New Advisers Act rule 204(b)-1 and Form PF implement provisions of the DoddFrank Act by specifying information that private fund advisers must disclose 

confidentially to the SEC, which information the SEC will provide to FSOC for systemic 

risk assessment purposes. Under the new rule, private fund advisers must file 

information responsive to all or portions of Form PF on a periodic basis. The scope of 

the required information and the frequency of the reporting is related to the amount of 

 

557 5 U.S.C. 603(a).

558 See Proposing Release, supra note 12, at section VI.
182

private fund assets that each private fund adviser manages and the type of private fund to 

which those assets relate. Specifically, smaller private fund advisers and large private 

equity advisers must report annually, while large hedge fund and liquidity fund advisers 

must report quarterly and provide additional information regarding the hedge funds and 

liquidity funds, respectively, that they manage.559

B. Significant Issues Raised by Public Comment

In the Proposing Release, we requested comment on the IRFA. In particular, we 

sought comment on the number of small entities, particularly small advisers, to which the 

new Advisers Act rule and reporting requirements would apply and the effect on those 

entities, including whether the effects would be economically significant. None of the 

comment letters we received addressed the IRFA or the effect of the proposal on small 

entities, as that term was used in the IRFA.

C. Small Entities Subject to the Rule

Under SEC rules, for the purposes of the Advisers Act and the Regulatory 

Flexibility Act, an investment adviser generally is a small entity if it: (i) has assets under 

management having a total value of less than $25 million; (ii) did not have total assets of 

$5 million or more on the last day of its most recent fiscal year; and (iii) does not control, 

is not controlled by, and is not under common control with another investment adviser 

that has assets under management of $25 million or more, or any person (other than a 

 

559 See section II.A of this Release (describing who must file Form PF), section II.B of this 

Release (discussing the frequency with which private fund advisers must file Form PF), 

and section II.C of this Release (describing the information that private fund advisers 

must report on Form PF). See also proposed Instruction 9 to Form PF for information 

regarding the frequency with which private fund advisers must file Form PF.
183

natural person) that had total assets of $5 million or more on the last day of its most 

recent fiscal year.560

Advisers Act rule 204(b)-1 requires an investment adviser registered with the 

SEC to file certain information on Form PF if it manages one or more private funds and 

had at least $150 million in regulatory assets under management attributable to private 

funds as of the end of its most recently completed fiscal year. Under section 203A of the 

Advisers Act, most advisers qualifying as small entities are prohibited from registering 

with the SEC and are instead registered with state regulators. Therefore, few small 

advisers will meet the registration criterion. Fewer still are likely to meet the minimum 

reporting threshold of $150 million in regulatory assets under management attributable to 

private funds. By definition, no small entities will, on their own, meet this threshold, 

which the SEC did not include in the proposal but has added in response to commenter 

concerns.561 Advisers are, however, required to determine whether they exceed this 

threshold by aggregating their private fund assets under management with those of their 

related persons (other than separately operated related persons), with the result that some 

small entities may be subject to Form PF reporting requirements.562

 

560 See Advisers Act rule 0-7(a).

 The SEC does not 

have a precise count of the number of advisers that may satisfy the minimum reporting 

561 See supra note 56-59 and accompanying text.

562 See supra section II.A.5 of this Release. The SEC notes that related persons are 

permitted to file on a single Form PF. As a result, even in the case that a larger related 

person causes a small entity to exceed the minimum reporting threshold, the small entity 

may not ultimately bear the reporting burden. See supra section II.A.6 of this Release. 

In addition, under Advisers Act rule 0-7(a)(3), an adviser with affiliates exceeding the 

other small entity thresholds under that rule would not be regarded as a small entity, 

suggesting that it may not be possible both to qualify as a small entity under that rule and 

to satisfy the criteria that would subject an adviser to Form PF reporting obligations.
184

threshold based on the aggregate private fund assets that it and its related persons manage 

because such advisers file separate reports on Form ADV. However, because of the new 

minimum reporting threshold, the group of small entities subject to the rule as adopted

will be a subset of the group that would have been subject to the proposed rule. In the 

Proposing Release, the SEC estimated that approximately 50 small entities were 

registered with the SEC and advised one or more private funds.563

D. Projected Reporting, Recordkeeping and other Compliance 

Requirements

 Accordingly, the SEC 

estimates that no more than 50 small entities are likely to become subject to Form PF 

reporting obligations under the final rule. 

Advisers Act rule 204(b)-1 and Form PF impose certain reporting and compliance 

requirements on advisers, including small advisers. A small adviser that is subject to the 

rule must complete all or part of section 1 of the Form. As discussed above, the SEC

estimates that completing, reviewing and filing Form PF will cost approximately $13,600

for each small adviser in its first year of reporting and $4,200 per year for each 

subsequent year.

564 In addition, small entities must pay a filing fee of $150 per annual 

filing.565

E. Agency Action to Minimize Effect on Small Entities

 

The Regulatory Flexibility Act directs the SEC to consider significant alternatives 

that would accomplish the stated objective, while minimizing any significant impact on 

 

563 See Proposing Release, supra note 12, at n.212 and accompanying text.

564 See supra notes 509-510 and accompanying text.

565 See supra note 432 and accompanying text.
185

small entities. In connection with the proposed rules and amendments, the SEC

considered the following alternatives: (1) the establishment of differing compliance or 

reporting requirements or timetables that take into account the resources available to 

small entities; (2) the clarification, consolidation, or simplification of compliance and 

reporting requirements under the rule for small entities; (3) the use of performance rather 

than design standards; and (4) an exemption from coverage of the rule, or any part 

thereof, for small entities.

Regarding the first and fourth alternatives, the SEC is adopting a minimum 

reporting threshold of $150 million as well as reporting requirements and timetables that 

differ for entities of smaller sizes. A small entity adviser that is subject to the rule only 

needs to file Form PF annually and complete applicable portions of section 1 of the 

form.566

 

566 If the adviser has no hedge fund assets under management, it need not complete 

section 1.C of the Form. Advisers that manage a significant amount of both registered 

money market fund and liquidity fund assets must complete section 3 of Form PF, but 

there are no small entities that manage a registered money market fund.

 Large Private Fund Advisers must file additional information, and large hedge 

fund or large liquidity fund advisers must file more frequently. In addition, the filing fees 

that a smaller adviser must pay in a given year are lower than those that a large hedge 

fund or large liquidity fund advisers must pay over the same period. Regarding the 

second alternative, the information that a small entity subject to the rule must provide 

under section 1 of Form PF is much simpler than the information required of large hedge 

fund or large liquidity fund advisers and is consolidated in one section of the form. 

Regarding the third alternative, the SEC has, in a number of cases, permitted advisers to 

rely on their own methodologies in providing the information that the Form requires, 
186

though the use of performance standards is limited by the need to obtain comparable 

information from all filers.

CFTC:

Under CEA rule 4.27, the CFTC would not impose any additional burden upon 

registered CPOs and CTAs that are dually registered as investment advisers with the SEC 

because such entities are only required to file Form PF with the SEC. Further, certain 

CPOs registered with the CFTC that are also registered with the SEC would be deemed to 

have satisfied certain CFTC-related filing requirements, should the CFTC adopt such 

requirements, by completing and filing the applicable sections of Form PF with the SEC. 

Therefore, any burden imposed by Form PF through rule 4.27 on small entities registered 

with both the CFTC and the SEC has been accounted for within the SEC’s calculations 

regarding the impact of this collection of information under the RFA or, to the extent the 

reporting may relate to commodity pools that are not private funds, the CFTC anticipates 

that it would account for this burden should it adopt a future rulemaking establishing 

reporting requirements with respect to those commodity pools. Accordingly, the 

Chairman, on behalf of the CFTC, hereby certifies pursuant to 5 U.S.C. 605(b) that the 

rules as adopted will not have a significant impact on a substantial number of small 

entities.

VII. STATUTORY AUTHORITY

CFTC:

The CFTC is adopting rule 4.27 [17 CFR 4.27] pursuant to its authority set forth 

in section 4n of the Commodity Exchange Act [7 U.S.C. 6n].

SEC:
187

The SEC is adopting rule 204(b)-1 [17 CFR 275.204(b)-1] pursuant to its

authority set forth in sections 204(b) and 211(e) of the Advisers Act [15 U.S.C. 80b-4 and 

15 U.S.C. 80b-11], respectively. 

The SEC is adopting rule 279.9 pursuant to its authority set forth in sections 

204(b) and 211(e) of the Advisers Act [15 U.S.C. 80b-4 and 15 U.S.C. 80b-11], 

respectively.

LIST OF SUBJECTS 

17 CFR Part 4

Advertising, Brokers, Commodity futures, Commodity pool operators, 

Commodity trading advisors, Consumer protection, Reporting and recordkeeping 

requirements.

17 CFR Parts 275 and 279

Reporting and recordkeeping requirements, Securities.

TEXT OF FINAL RULES

Commodity Futures Trading Commission

For the reasons set out in the preamble, the CFTC is amending Title 17, Chapter I 

of the Code of Federal Regulations as follows:

PART 4—COMMODITY POOL OPERATORS AND COMMODITY TRADING 

ADVISORS

1. The authority citation for part 4 continues to read as follows:

Authority: 7 U.S.C. 1a, 2, 4, 6(c), 6b, 6c, 6l, 6m, 6n, 6o, 12a, and 23.

* * * * *

2. Add §4.27 to read as follows:
188

§4.27 Additional reporting by advisors of commodity pools.

* * * * *

Investment advisers to private funds. Except as otherwise expressly provided in 

this section, CPOs and CTAs that are dually registered with the Securities and Exchange 

Commission and are required to file Form PF pursuant to the rules promulgated under the 

Investment Advisers Act of 1940, shall file Form PF with the Securities and Exchange 

Commission in lieu of filing such other reports with respect to private funds as may be 

required under this section. In addition, except as otherwise expressly provided in this 

section, CPOs and CTAs that are dually registered with the Securities and Exchange 

Commission and are required to file Form PF pursuant to the rules promulgated under the 

Investment Advisers Act of 1940, may file Form PF with the Securities and Exchange 

Commission in lieu of filing such other reports with respect to commodity pools that are 

not private funds as may be required under this section. Dually registered CPOs and 

CTAs that file Form PF with the Securities and Exchange Commission will be deemed to 

have filed Form PF with the Commission for purposes of any enforcement action 

regarding any false or misleading statement of a material fact in Form PF. 

* * * * * 

Securities and Exchange Commission

For the reasons set out in the preamble, the SEC is amending Title 17, Chapter II 

of the Code of Federal Regulations as follows:
189

PART 275 – RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 

1940

3. The authority citation for Part 275 continues to read in part as follows:

Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(17), 80b-3, 80b-4, 80b-4a, 80b6(4), 80b-6a, and 80b-11, unless otherwise noted.

* * * * *

4. Section 275.204(b)-1 is added to read as follows:

§ 275.204(b)-1 Reporting by investment advisers to private funds.

(a) Reporting by investment advisers to private funds on Form PF. If you are an 

investment adviser registered or required to be registered under section 203 of the Act (15 

U.S.C. 80b-3), you act as an investment adviser to one or more private funds and, as of 

the end of your most recently completed fiscal year, you managed private fund assets of 

at least $150 million, you must complete and file a report on Form PF (17 CFR 279.9) by 

following the instructions in the Form, which specify the information that an investment 

adviser must provide. Your initial report on Form PF is due no later than the last day on 

which your next update would be timely in accordance with paragraph (e) if you had 

previously filed the Form; provided that you are not required to file Form PF with respect 

to any fiscal quarter or fiscal year ending prior to the date on which your registration 

becomes effective.

(b) Electronic filing. You must file Form PF electronically with the Form PF

filing system on the Investment Adviser Registration Depository (IARD). 

Note to paragraph (b): Information on how to file Form PF is available on the 

Commission’s website at http://www.sec.gov/iard.
190

(c) When filed. Each Form PF is considered filed with the Commission upon 

acceptance by the Form PF filing system.

(d) Filing fees. You must pay the operator of the Form PF filing system a filing 

fee as required by the instructions to Form PF. The Commission has approved the 

amount of the filing fee. No portion of the filing fee is refundable. Your completed 

Form PF will not be accepted by the operator of the Form PF filing system, and thus will 

not be considered filed with the Commission, until you have paid the filing fee.

(e) Updates to Form PF. You must file an updated Form PF:

(1) At least annually, no later than the date specified in the instructions 

to Form PF; and

(2) More frequently, if required by the instructions to Form PF. You 

must file all updated reports electronically with the Form PF filing system. 

(f) Temporary hardship exemption.

(1) If you have unanticipated technical difficulties that prevent you 

from submitting Form PF on a timely basis through the Form PF filing system, you may 

request a temporary hardship exemption from the requirements of this section to file 

electronically.

(2) To request a temporary hardship exemption, you must:

(i) Complete and file in paper format, in accordance with the 

instructions to Form PF, Item A of Section 1a and Section 5 of Form PF, checking the 

box in Section 1a indicating that you are requesting a temporary hardship exemption, no 

later than one business day after the electronic Form PF filing was due; and 
191

(ii) Submit the filing that is the subject of the Form PF paper 

filing in electronic format with the Form PF filing system no later than seven business 

days after the filing was due.

(3) The temporary hardship exemption will be granted when you file 

Item A of Section 1a and Section 5 of Form PF, checking the box in Section 1a indicating 

that you are requesting a temporary hardship exemption.

(4) The hardship exemptions available under § 275.203-3 do not apply 

to Form PF. 

(g) Definitions. For purposes of this section:

(1) Assets under management means the regulatory assets under 

management as determined under Item 5.F of Form ADV (§ 279.1 of this chapter).

(2) Private fund assets means the investment adviser’s assets under 

management attributable to private funds.

PART 279 – FORMS PRESCRIBED UNDER THE INVESTMENT ADVISERS 

ACT OF 1940

5. The authority citation for Part 279 continues to read as follows:

Authority: 15 U.S.C. 80b-1, et seq.

6. Section 279.9 is amended to read as follows:
192

§ 279.9 Form PF, reporting by investment advisers to private funds.

This form shall be filed pursuant to Rule 204(b)-1 (§ 275.204(b)-1 of this chapter) 

by certain investment advisers registered or required to register under section 203 of the 

Act (15 U.S.C. 80b-3) that act as an investment adviser to one or more private funds. 

Note: The text of the following Form PF will not appear in the Code of Federal 

Regulations.

[Insert Form PF]

By the Commodity Futures Trading Commission. 

David A. Stawick

Secretary 

Date: October 31, 2011

By the Securities and Exchange Commission. 

Elizabeth M. Murphy

Secretary 

Date: October 31, 2011