71128 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 

1 7 U.S.C. 1a. 

2Form 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 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. 

4Public Law 111–203, 124 Stat. 1376 (2010). 

5S. Rep. No. 111–176, at 2–3 (2010) (‘‘Senate 

Committee Report’’). 

6See 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 

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 

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: The effective date for the 

addition of 17 CFR 4.27 (rule 4.27 under 

the Commodity Exchange Act), 17 CFR 

275.204(b)–1 (rule 204(b)–1 under the 

Investment Advisers Act of 1940) and 

17 CFR 279.9 (Form PF), as well as the 

revision to the authority citation for 17 

CFR part 4, is March 31, 2012. See 

section III of this Release for compliance 

dates. 

FOR FURTHER INFORMATION CONTACT: 

CFTC: Amanda L. Olear, Special 

Counsel, Telephone: (202) 418–5283, 

Email: aolear@cftc.gov, or Kevin P. 

Walek, Assistant Director, Telephone: 

(202) 418–5463, Email: kwalek@cftc.gov, 

Division of Clearing and Intermediary 

Oversight, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street NW., 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 The SEC is 

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 

A. The Dodd-Frank Act and the Financial 

Stability Oversight Council 

B. International Coordination 

II. Discussion 

A. Who Must File Form PF 

1. ‘‘Hedge Fund’’ Definition 

2. ‘‘Liquidity Fund’’ Definition 

3. ‘‘Private Equity Fund’’ Definition 

4. Large Private Fund Adviser Thresholds 

5. Aggregation of Assets Under 

Management 

6. Reporting for Affiliated and SubAdvised Funds 

7. Exempt Reporting Advisers 

B. Frequency of Reporting 

1. Annual and Quarterly Reporting 

2. Reporting Deadlines 

3. Initial Reports 

4. Transition Filings, Final Filings and 

Temporary Hardship Exemptions 

C. Information Required on Form PF 

1. Section 1 of Form PF 

2. Section 2 of Form PF 

3. Section 3 of Form PF 

4. Section 4 of Form PF 

5. Aggregation of Master-Feeder 

Arrangements, Parallel Fund Structures, 

and Parallel Managed Accounts 

D. Confidentiality of Form PF Data 

E. Filing Fees and Format for Reporting 

III. Effective and Compliance Dates 

IV. Paperwork Reduction Act 

A. Burden Estimates for Annual Reporting 

by Smaller Private Fund Advisers 

B. Burden Estimates for Large Hedge Fund 

Advisers 

C. Burden Estimates for Large Liquidity 

Fund Advisers 

D. Burden Estimates for Large Private 

Equity Advisers 

E. Burden Estimates for Transition Filings, 

Final Filings, and Temporary Hardship 

Exemption Requests 

F. Aggregate Hour Burden Estimates 

G. Cost Burden 

V. Economic Analysis 

A. Benefits 

B. Costs 

C. CFTC Statutory Findings 

1. General Costs and Benefits 

2. Section 15(a) Determination 

VI. Final Regulatory Flexibility Analysis 

A. Need for and Objectives of the New Rule 

B. Significant Issues Raised by Public 

Comment 

C. Small Entities Subject to the Rule 

D. Projected Reporting, Recordkeeping and 

Other Compliance Requirements 

E. Agency Action To Minimize Effect on 

Small Entities 

VII. Statutory Authority 

Text of Final Rules 

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 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 also gives FSOC a 

number of tools to carry out this 

mission.6 For instance, FSOC may 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71129 

Financial Companies, Financial Stability Oversight 

Counsel Release (Oct. 11, 2011) (‘‘FSOC Second 

Notice’’). 

7Section 113 of the Dodd-Frank Act. The DoddFrank 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. 

8Section 120 of the Dodd-Frank Act. 

9See, 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). 

10Section 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 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. 

11See sections 402, 403, 407 and 408 of the DoddFrank 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 42950 

(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 39646 (July 6, 

2011) (‘‘Exemptions Adopting Release’’). 

12The 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 

8068 (February 11, 2011) (‘‘Proposing Release’’) at 

n. 13 and accompanying text. 

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

14As 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. 

15Throughout 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. 

16Because 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. 

17For 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. 

18See 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. 

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 many of which must also 

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 In the release, 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

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 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 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. 

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 


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71130 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 

19See 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. 

20See, 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 4555 (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 

61653 (Oct. 6, 2010). 

21See 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 wellmeasured by the quantitative thresholds approach. 

* * * Using [Form PF] and other data, [FSOC] will 

consider whether to establish an additional set of 

metrics and thresholds tailored to evaluate hedge 

funds and private equity firms and their advisers.’’). 

22See, 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). 

23See 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). 

24See, 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’’). 

25See, 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’’). 

26See section 175(b) of the Dodd-Frank Act. See 

also Proposing Release, supra note 12, at nn. 19– 

22 and accompanying text. 

27See Proposing Release, supra note 12, at section 

I.B. 

28See, 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’’). 

29See, 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. 

30See, 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’’). 

31These consultations began prior to issuance of 

the Form PF proposal and have continued during 

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. 

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

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 A number of these 

commenters generally supported the 

systemic risk monitoring goals of the 

Dodd-Frank Act or the broad framework 

of the proposal but argued that specific 

aspects of the proposal were impractical 

or burdensome.25 We respond to these 

comments in section II of this Release. 

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. 

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

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 

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 The FSA 


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the development of the final rules and Form. See 

also Proposing Release, supra note 12, at nn. 24– 

32 and accompanying text. 32See, 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 12, at nn. 

27–30 and accompanying text. 

33See 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). 

34For 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. 

35See, e.g., infra notes 227, 231, 244–246, 258, 

279, 283 and 297 and accompanying text. 

36See Advisers Act rule 204(b)–1. 

37As 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. 

38See supra note 16. 

39See 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 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. 

40 Id. 

41Form 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. 

42See Proposing Release, supra note 12, at section 

II.A and at n. 49. 

43See supra note 6. 

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

and accompanying text. 

45See 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. 

46See 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 

Continued 

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 United Kingdom.32 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. 

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).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 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 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, SECregistered 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 The 

CFTC has revised the 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 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 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 three-stage process for 

determinations, at least in nonemergency 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


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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. 

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. 

48See 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). 

49See supra note 10 for the definition of ‘‘private 

fund.’’ 

50See 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 CPO–PQR 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. 

51See Advisers Act rule 204(b)–1. 

52See section 203A of the Advisers Act. See also 

Implementing Adopting Release, supra note 11, at 

section II.A. 

53See 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. 

54See, 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 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. 

55See IAA Letter. 

56See 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 

Similarly, in determining whether to 

exercise its other authorities for 

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 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 

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 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 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. 

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.54 One 

commenter proposed setting the 

threshold at $150 million to match the 

new private fund adviser exemption 

under section 203(m) of the Advisers 

Act.55 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. 

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. 

As discussed below, however, certain 

larger private fund advisers must 

complete additional sections of Form 

PF, which require more detailed 

information.56 Specifically, three types 


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

Advisers Act. 

57See 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 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). 

58See 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. 

59See 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. 

60As 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 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. 

61See 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. 

62Several 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 evidencebased 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. 

63See 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. 

64See, e.g., AFL–CIO Letter. 

65See, 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’’). 

66See 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. 

67The ‘‘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 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. 

68Specifically, 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. 

69See TCW Letter. 

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 and 

• 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.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 The 

information each of these 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

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 selling.63 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. 

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.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

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 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. 

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 


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70See TCW Letter. 

71Some 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 industrywide 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. 

72See PEGCC Letter. 

73See IAA Letter; PEGCC Letter; SIFMA Letter; 

TCW Letter. 

74We 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. 

75ABA Committees Letter. See also AIMA 

General Letter; IAA Letter; Seward Letter. 

76See AFL–CIO Letter; AFR Letter. 

77For 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’’). 

78See, e.g., AIMA General Letter; IAA Letter; 

PEGCC Letter; SIFMA Letter; TCW Letter. 

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

Letter. 

commenter pointed out that even 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 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 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 whether a particular 

fund is a hedge fund,’’ were not 

persuasive.75 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. 

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.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 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. 

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 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 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. 

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).79 The definition is designed to 

identify funds that are an appropriate 

subject for the higher level of reporting 

to which hedge funds will be subject 


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80Form 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. 

81See 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. 

82Form 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. 

83See 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. 

84See 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.’’). 

85Some 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. 

86See 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 of the changes we are making to the ‘‘hedge 

fund’’ definition are designed to address these 

concerns. 

87As 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. 

88See 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 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 non-U.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 non-U.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 underrepresent 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. 

89Preqin. 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. 

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 Commenters 

did not address the ‘‘liquidity fund’’ 

definition, which the SEC is adopting as 

proposed. 

3. ‘‘Private Equity Fund’’ Definition 

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, 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

Therefore, we 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 Similarly, 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, 


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90See AIMA AUM Letter. 

91We 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 assetweighted 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. 

92Similar 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. 

93See 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. 

94See AFL–CIO Letter; AFR Letter. 

95For 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). 

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. 

97See, e.g., comment letter of Coalition of Private 

Investment Companies (Mar. 31, 2011) (‘‘CPIC 

Letter’’) and MFA Letter. 

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 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 We believe this revised 

threshold strikes an appropriate balance 

between obtaining 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 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 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 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 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. 

Commenters expressed support for a 

tiered reporting system based on size.97


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98Compare 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). 

99See 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 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. 

100See, 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’’). 

101See, 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. 

102See 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 of industry assets 

represented by advisers with between, for instance, 

$1 billion and $5 billion. 

104See supra note 89. 

105See supra note 89. 

106See, e.g., ABA Committees Letter; BlackRock 

Letter; MFA Letter; Seward Letter. 

107See ABA Committees Letter. 

108See BlackRock Letter; MFA Letter. 

109See ABA Committees Letter; AIMA General 

Letter; IAA Letter. 

110See Seward Letter. 

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 In 

contrast, a number of 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 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

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 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. 

b. Frequency of Testing 

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 

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, 


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111See Instruction 3 to Form PF. 

112 Id. See also supra note 108. 

113See 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). 

114See section II.B of this Release. 

115See Instruction 3 to Form PF. 

116See 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. 

117See 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. 

118See supra note 116. 

119See IAA Letter; TCW Letter. 

120An 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. 

121Commenters 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 restructure 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.) 

122See 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. 

123See supra note 117. See also Proposing 

Release, supra note 12, for the proposed version of 

Instructions 3, 5 and 6 to Form PF. 

124See, e.g., Merkl February Letter. 

125TCW Letter. See also IAA Letter. 

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 We 

did not adopt an 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’’) 

unless the value of those accounts 

exceeds the value of the private funds 

with which they are managed; 116 and 

• Assets of private funds advised by 

any of the adviser’s ‘‘related persons’’ 

other than related persons that are 

separately operated.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 We believe 

this approach is consistent with section 

204(b) of the Advisers Act, the focus of 

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

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 


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126One 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. 

127See 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.’’ 

128See 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. 

129See 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 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 

134; Exemptions Adopting Release, supra note 11, 

at n.294 and accompanying text. 

130See 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). 

131See, 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. 

133See 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 197. 

134See 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 nonU.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. 

135See Instruction 2 to Form PF. See supra note 

117 for the definition of ‘‘related person.’’ 

person.126 Although the Item 7.A 

standard was adopted for a somewhat 

different regulatory 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 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 In light of the purpose 

for which 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 nonprivate 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 This 

approach is designed to reduce the 

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. 

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 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 


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136Each 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. 

137See 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 adviser or does not meet the 

new minimum reporting threshold of $150 million 

in private fund assets under management. 

138See Instruction 4 to Form PF. See supra note 

48 and accompanying text. 

139See Advisers Act rule 204(b)–1. 

140See supra note 53 and accompanying text. 

141See 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 that may occur do not ripple 

throughout world markets but are borne by fund 

investors alone.’’). See also Exemptions Adopting 

Release, supra note 11. 

142See Implementing Adopting Release, supra 

note 11, for a discussion of the information exempt 

reporting advisers are required to provide on Form 

ADV. 

143See 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. 

144See Instruction 9 to Form PF. 

145Even 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. 

146See 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. 

147The 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). 

148See CPIC Letter (supporting the proposal with 

respect to large private funds advisers); AFL–CIO 

Letter and AFR Letter (arguing for more frequent 

reporting). 

149See, 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. 

this aspect of the proposal, which we 

are adopting as proposed. 

With respect to sub-advised funds, to 

prevent duplicative reporting, only one 

adviser should report information on 

Form PF with respect to that fund.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

However, if the adviser that completes 

information on Schedule 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 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. 

7. Exempt Reporting Advisers 

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 After consultation with staff 

representing FSOC’s members and in 

light of the 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

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 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

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 semiVerDate Mar<15>2010 17:49 Nov 15, 2011 Jkt 226001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 E:\FR\FM\16NOR2.SGM 16NOR2

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150See, e.g., ABA Committees Letter; Kleinberg 

General Letter. 

151See PEGCC Letter. 

152Moreover, we believe that quarterly reporting 

helps to discourage ‘‘window-dressing’’ around the 

reporting dates. See infra notes 285–292 and 

accompanying text. 

153See supra note 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. 

154ESMA’s proposed reporting template would 

impose quarterly reporting requirements on private 

fund advisers. See ESMA Proposal, supra note 33. 

155See supra note 151. 

156See Instruction 9 to Form PF. 

157See AIMA General Letter. 

158See AFL–CIO Letter; AFR Letter. See also 

MFA Letter (arguing that all advisers, large and 

small, should report on a semi-annual basis). 

159See Instruction 9 to Form PF; Advisers Act 

rule 204(b)–1(a). 

160See 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. 

161We 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 

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. 

162See, e.g., ABA Committees Letter; AIMA 

General Letter; BlackRock Letter; IAA Letter; MFA 

Letter; USCC Letter. 

163See, 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. 

164See, e.g., AIMA General Letter; IAA Letter. 

165See, e.g., Kleinberg General Letter. 

166See, 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. 

167See, 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). 

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

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 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 Again, 

although we acknowledge the potential 

value of more frequent reporting from 

smaller private fund advisers, we are 

concerned about the 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. 

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

The deadlines we are adopting for large 

hedge fund advisers, large private equity 

advisers and smaller advisers are longer 

than the deadlines we 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

and (5) the more current the information 

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 


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168 Id. 169We 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. 

170See supra note 167. 

171See AIMA General Letter. 

172See, e.g., BlackRock Letter (120 days); MFA 

Letter (120 days); PEGCC Letter (150 days for 

private equity fund data). 

173See, e.g., BlackRock Letter; MFA Letter; USCC 

Letter. See also Advisers Act rule 206(4)–2(b)(4). 

174See Advisers Act rule 204(b)-1(a); supra 

section II.B.2 of this Release. 

175Whether 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. 

176See AIMA General Letter. 

177See Instruction 9 to Form PF. 

178See 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. 

179See supra section I.B of this Release. 

180See, 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. 

181See, e.g., AIMA General Letter; IAA Letter; 

Olympus Letter; PEGCC Letter. See infra note 309 

and accompanying text. 

182See IAA Letter; MFA Letter; Seward Letter. 

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 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. 

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 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 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. 

Fewer commenters addressed the 

proposed reporting deadline of 90 days 

for smaller advisers. One commenter 

supported the proposal,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 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. 

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

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. 

4. Transition Filings, Final Filings and 

Temporary Hardship Exemptions 

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 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

No commenters addressed the proposed 

transition filings, final filings or 

temporary hardship exemption, and we 

are adopting them as proposed. 

C. Information Required on Form PF 

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 included in 

ESMA’s reporting template.179 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. 

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.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

Although this would expand the Form, 

these commenters believed that these 


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183See 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. 

184See, 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. 

185We 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. 

186See 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. 

187BlackRock Letter. See also IAA Letter; MFA 

Letter; PEGCC Letter; SIFMA Letter; TCW Letter. 

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. 

189See Question 1 on Form PF. 

190See 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 

Continued 

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. 

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 

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 In consideration 

of the nature of the information required 

on Form PF, we are persuaded that a 

certification is unnecessary and that a 

signature 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

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 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 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 


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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. 

191Question 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. 

192See section 113(a) of the Dodd-Frank Act; 

FSOC Second Notice, supra note 6. 

193However, 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. 

194See 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. 

195See 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 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. 

196See 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. 

197See 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. 

198See infra notes 199 and 200. 

199See, 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). 

200See, e.g., ABA Committees Letter; IAA Letter; 

Merkl February Letter; MFA Letter; PEGCC Letter; 

SIFMA Letter; TCW Letter. 

201See supra text accompanying note 156. 

202See Question 17 on Form PF. See also 

Proposing Release, supra note 12, at text 

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 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 

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 Advisers must 

also report the percentage of the 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

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 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, 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


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accompanying n. 115 for a discussion of potential 

uses for this data. 

203See Questions 14 and 16 on Form PF. 

204Advisers 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. 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. 

205See the Implementing Proposing Release for 

the proposed version of Form ADV, Part 1A, section 

7.B.(1)A. of Schedule D, question 17. 

206See 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) Web 

site. 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. 

208Comment 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 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. 

209See, 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. 

210The 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 ‘‘cost-based’’ 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 re-entered on Form PF. 

213See supra note 204 for a discussion of 

potential uses for this data. 

214Comment letter of Debevoise & Plimpton, LLP 

(Jan. 24, 2011) (commenting on the Implementing 

Proposing Release, supra note 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 

Continued 

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 The second, 

Question 16, requires that 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 nonU.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 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 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 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

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, 


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for funds established before the adoption of the 

reporting requirement. 

215See IAA General Implementing Proposal Letter 

(stating that the reporting would require 

‘‘significant system enhancements’’). 

216 15 U.S.C. 77a. 

217An 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. 

218See infra note 475. See also Flow of Funds 

Accounts of the United States, available at http:// 

www.federalreserve.gov/releases/z1/. 

219See supra note 204. 

220See supra note 218 and accompanying text. 

221See 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 percentage of net asset value because we 

believe this will provide valuable information 

regarding leverage. 

222See 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. 

223See Questions 22 and 23 on Form PF. 

224See 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. 

225See AFL–CIO Letter; AFR Letter. 

226See MFA Letter. 

227See ESMA Proposal, supra note 33. 

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 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. 

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 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 

strategies 221 and the percentage of the 

fund’s assets managed using highfrequency 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 In 

response, we have simplified this 

question by requiring a less detailed 

breakdown, removing the sub-classes 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 


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228See section 113(a) of the Dodd-Frank Act; 

FSOC Second Notice, supra note 6. 

229See AFL–CIO Letter; AFR Letter; MSCI Letter. 

230See MSCI Letter; infra note 274. 

231For 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. 

232See Instruction 3 to Form PF; supra section 

II.A.4 of this Release. 

233MSCI Letter. 234See, e.g., ABA Committees Letter; MFA Letter. 235See MSCI Letter. 236This 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. 

237See Proposing Release, supra note 12, at text 

accompanying n. 120 for a discussion of potential 

uses for this data. 

238See 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). 

239We 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. 

240See FSA Survey; ESMA Proposal, supra note 

33. 

241See ABA Committees Letter; MFA Letter. 

242See 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). 

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 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 

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 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. 

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. 

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 We 

continue 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 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 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 


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243See 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. 

244See FSA Survey, supra note 32; ESMA 

Proposal, supra note 33. 

245This is generally consistent with the 

international standards, though, unlike the FSA 

Survey and ESMA’s proposed reporting template, 

we do not include derivatives (other 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. 

246See the Proposing Release, supra note 12, for 

the proposed definition of ‘‘turnover rate’’ in the 

Glossary of Terms to Form PF. 

247See Question 28 on Form PF. 

248See 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. 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. 

249See 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. 

250See ABA Committees Letter. 

251See 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. 

252See infra sections IV.B and V of this Release 

(discussing increases in our burden and cost 

estimates in response to comments received). 

253See 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 purposes. This aggregation 

is intended to prevent an adviser from structuring 

its activities to avoid the reporting requirements. 

254See AFL–CIO Letter; AFR Letter. 

255See 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 

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

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 We anticipate that the 

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 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. 

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 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 The revised 

approach to the information required in 

section 2a strikes an appropriate balance 

between the burden imposed and need 

for the information. 

b. Section 2b of Form PF 

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 Two 

commenters disagreed with limiting 

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 


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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. 

257See supra notes 233–242 and accompanying 

text for a discussion of those changes. 

258See 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 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). 

259See 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. 

260See 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. 

261See also Question 30, regarding reporting fund 

exposures, and Question 42, regarding the effect of 

changes in certain market factors on the fund’s 

portfolio. 

262Questions 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. 

263MSCI Letter. 

264See MFA Letter; MSCI Letter. 

265MFA Letter; see also AIMA General Letter. 

266See section 113(a) of the Dodd-Frank Act; 

FSOC Second Notice, supra note 6. 

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

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 cash 259 and 

concentration of positions.260 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 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-bycounterparty 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 We anticipate that these 

changes will reduce the burden of 

responding to these questions. 

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 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 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. 

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 making a determination to 

designate a nonbank financial company 

for FRB supervision under the DoddFrank 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 


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267See 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. 

268For 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. 

269See IAA Letter; MFA Letter. 

270These 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. 

271For 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. 

272See, 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). 

273See IAA Letter; TCW Letter. 

274See Proposing Release, supra note 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. 

275See supra note 264 and accompanying text. 

276See MFA Letter. 

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 is not prudently managing 

risk.269 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. 

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.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 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 

question.272 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. 

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.273 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 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 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 

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 


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277See MFA Letter. 

278See supra notes 262–264 and accompanying 

text. 

279To 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. 

280See MFA Letter. 

281But 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. 

282See section 113(a) of the Dodd-Frank Act; 

FSOC Second Notice, supra note 6. 

283See ESMA Proposal, supra note 33. 

284See section 113(a) of the Dodd-Frank Act; 

FSOC Second Notice, supra note 6. 

285See, e.g., Questions 27, 28, 31, 33, 34, 43, 44, 

45, and 56 on Form PF. 

286See AFL–CIO Letter; AFR Letter. See also CII 

Letter. 

287See, 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). 

288See BlackRock Letter. 

289See, e.g., Fidelity Letter; MFA Letter. 

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 We anticipate that these 

changes will, on net, reduce the burden 

of responding to Questions 44 and 45 

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 DoddFrank Act.282

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 side-pocket 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

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 One commenter, 

while conceding that some funds 

already report certain data to investors 

on a 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 


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290See supra note 188 and text accompanying. 291See Question 17 on Form PF; supra section 

II.C.1.b of this Release. 292See supra nn. 198–202 and accompanying 

text. 293See 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. 

294See 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. 

295See 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. 

296See 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. 

297See 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. 80a–3(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. 

298See section 113(a) of the Dodd-Frank Act; 

FSOC Second Notice, supra note 6. 

299The 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 shortterm 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 297. 

300See 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. 

301See Proposing Release, supra note 12, at 

section II.A.3. 

302See Proposing Release, supra note 12, at nn. 

71–73 and accompanying text. 

303See Proposing Release, supra note 12, at nn. 

74–75 and accompanying text. 

304See, 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). 

305See, 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. 

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

Accordingly, 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 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, 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 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 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 and (2) 

the 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 


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306See, 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. 

307One 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). 

308See Proposing Release, supra note 12, at 

section II.A.3. 

309See PEGCC Letter. 

310The 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. 

311See 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’’). 

312See Victoria Ivashina & Anna Kovner, The 

Private Equity Advantage: Leveraged Buyout Firms 

and Relationship Banking, 24 Rev. of Fin. Studies 

7 (July 2011). 

313See FSB Shadow Banking Report, supra note 

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). 

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 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

Staff representing FSOC’s members has 

explained to the SEC’s staff, however, 

that collecting leverage data from 

private 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 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 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 

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. 


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314Following 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 

also the Proposing Release, supra note 12, for the 

proposed version of Question 57 on Form PF. 

315A ‘‘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. 

316See the Proposing Release, supra note 12, 

(discussing the proposed version of Question 62 on 

Form PF). 

317See IAA Letter. 

318See 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. 

319See 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. 

320A ‘‘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 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 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. 

321The 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. 

322See Merkl February Letter; PEGCC Letter. 

323See section 113(a) of the Dodd-Frank Act. 

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

Questions 67 through 70 require the 

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 This 

change has been made in response to 

commenter concerns regarding the 

burden of gathering the data that would 

have been required to respond to the 

question as proposed.317 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. 

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,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

Question 79 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 Regulators, 

however, will be able to use this 

information to monitor global and 

industry 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 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. 

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. 


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324See, 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.)’’ 

325Advisers 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 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. 

326See supra note 317 and accompanying text. 

327The 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. 

328See AFL–CIO Letter; AFR Letter. 

329See 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’’). 

330See also supra note 193 and accompanying 

text. 

331See Instructions 5 and 6 to Form PF. See also 

supra note 197. 

332MFA Letter. 

333See, 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. 

334 IAA Letter. See also MFA Letter. 

335See 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. 

336See question 12 of Form PF. 

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.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 In 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 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. 

5. Aggregation of Master-Feeder 

Arrangements, Parallel Fund Structures 

and Parallel Managed Accounts 

For purposes of reporting information 

on Form PF, an adviser may provide 

information regarding master-feeder 

arrangements and parallel fund 

structures in the 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 We are persuaded that 

requiring advisers to aggregate or 

disaggregate funds in a manner 

inconsistent with 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 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. 

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 


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337See Proposing Release, supra note 12, at n.39. 

338Form 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. 

339See section 204(b) of the Advisers Act. 

340See section 204(b)(8)(B)(i) of the Advisers Act. 

341See sections 204(b)(9) and (10) of the Advisers 

Act. 

342This 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. 

343Questions 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. 

344See supra section II.B.2 of this Release 

(discussing filing deadlines). 

345See infra note 351 and accompanying text. 

346See infra section II.E of this Release. 

347See, e.g., ABA Committees Letter; AIMA 

General Letter; CPIC Letter; MFA Letter; SIFMA 

Letter. 

348ABA Committees Letter; Kleinberg General 

Letter; Seward Letter. 

349ABA Committees Letter. 

350 Id. 

351AIMA General Letter; Kleinberg General 

Letter. 

352AIMA General Letter; Seward Letter. 

353See supra notes 344–345 and accompanying 

text. 

354See infra section III of this Release (discussing 

the compliance date for Form PF). 

355See 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). 

356See Advisers Act rule 204(b)–1(d); section 

204(c) of the Advisers Act. 

357See Order Approving Filing Fees for Exempt 

Reporting Advisers and Private Fund Advisers, 

Investment Advisers Act Release No. IA–3305 (Oct. 

24, 2011). 

circumstances.337 Similarly, the DoddFrank 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 DoddFrank 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 In each 

case, any such department, agency or 

self-regulatory organization would be 

exempt from being 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 Some commenters 

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 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. 

Several commenters confirmed that 

the information collected on Form PF is 

competitively sensitive or proprietary 

and emphasized the importance of 

controls for safekeeping.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 and (5) sharing the data 

with other regulators only in aggregated 

and anonymous form.352 As discussed 

above, the deadlines for filing Form PF 

have, in most cases, been significantly 

extended from the proposal.353 SEC staff 

is also carefully considering the other 

recommendations of commenters in 

designing controls and systems for Form 

PF. 

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.354

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. 

E. Filing Fees and Format for Reporting 

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 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. 

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 Web site 

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. 


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358See 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. 

359AIMA General Letter. See also Kleinberg 

General Letter. 

360For 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. 

362 Id. 

363This 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. 

364This assumes the adviser does not also exceed 

the $5 billion threshold for hedge fund or liquidity 

fund advisers. 

365The 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. 

366MFA Letter. See also infra note 367. 

367See, 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). 

368See AIMA General Letter; Kleinberg General 

Letter. 

369 44 U.S.C. 3501–3521. 

370See supra section I.A of this Release; see also 

of the Proposing Release, supra note 12, at section 

II.A. 

Commenters who addressed this 

aspect of the proposal supported having 

FINRA develop the reporting system as 

an extension of the IARD platform.358

Commenters also supported a batch 

filing capability, with one specifically 

agreeing that ‘‘[a]utomated 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 twostage 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 and 

• 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 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 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 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 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. 

Form PF is intended to provide FSOC 

with information that will assist it in 

fulfilling its obligations under the DoddFrank Act relating to nonbank financial 

companies and systemic risk 

monitoring.370 The SEC may also use 

the information in connection with its 

regulatory and examination programs. 


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371The 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. 

372See 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). 

373The 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 146. 

374See section II.E of this Release. 

375See section II.D. of this Release. 

376Specifically, 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 (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 

over-estimate the total number of private fund 

advisers. 

377Based 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. 

379Based 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.) 

380The 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. 

381See supra section II.C.1. 

382These 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. 

383See, e.g., AIMA General Letter; IAA Letter; 

SIFMA Letter. 

The respondents to Form PF are private 

fund advisers.371 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. 

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.372 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 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 SECregistered 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 The SEC 

estimates that approximately 700 of 

these advisers 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

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 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. 

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.382 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. 

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 


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384See, e.g., MFA Letter. 

385See infra section IV.B of this Release. 

386Several 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. 

387One commenter suggested the question we 

removed would have been ‘‘very burdensome.’’ See 

PEGCC Letter. 

388See, e.g., supra section II.C.5 of this Release 

and notes 183–188 and accompanying text. 

389See 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 sub-group 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. 

390The 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 × 40 hours + 2 subsequent filings 

× 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. 

392See supra note 88. 

393The 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. 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 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. 

394See, e.g., AIMA Letter; IAA Letter; Kleinberg 

General Letter; MFA Letter; TCW Letter. 

395MFA 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 

Continued 

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 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. 

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.386 In addition, 

we have removed from section 1b a 

question requiring identification of 

significant creditors and 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 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 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. 

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.393

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 The SEC has revised its 


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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. 

396See supra note 394 and accompanying text. 397See supra section II.C.1 and II.C.2 of this 

Release. 398See, e.g., supra sections II.B.1 and II.C.5 of this 

Release and notes 129 and 183–188 and 

accompanying text. 399See supra section II.C.1. 

400The 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 × 300 hours + 11 subsequent 

filings × 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 startup burdens applicable to the first filing. 

401 610 burden hours on average per year × 250 

large hedge fund advisers = 153,000 hours. 

402See supra note 88. 

403The 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 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. 

404See, 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. 

405See, e.g., MFA Letter. 

406See supra section IV.B of this Release. 

407See supra section II.C.1 of this Release. One 

commenter suggested the question we removed 

would have been ‘‘very burdensome.’’ See PEGCC 

Letter. 

408See, e.g., supra sections II.B.1 and II.C.5 of this 

Release and notes 129 and 183–188 and 

accompanying text. 

estimates in this PRA analysis based on 

the top end of 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 The SEC 

believes, however, that the increased 

burden attributable to these new 

questions is less than the 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 

hours for 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 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. 

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 Commenters did not provide 

alternative estimates for these burdens. 

However, commenters addressing the 

large hedge fund adviser burdens did 

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 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. 

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.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 We have also 


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409See supra section II.C.1 of this Release. 

410The 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 × 140 hours + 11 subsequent 

filings × 65 hours = 855 hours; and 855 hours ÷ 3 

years = approximately 290 hours). After the first 

three years, filers generally will not incur the startup burdens applicable to the first filing. 

411 290 burden hours on average per year × 80 

large hedge fund advisers = 23,200 hours. 

412See supra note 89. 

413The 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 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. 

414See, e.g., Atlas Letter; PEGCC Letter; USCC 

Letter. 

415See, e.g., MFA Letter. 

416See supra section IV.B of this Release. 

417See supra note 386. 

418See 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. 

419See, e.g., supra sections II.B.1 and II.C.5 of this 

Release and notes 129 and 183–188 and 

accompanying text. 

420See supra section II.C.1 of this Release. 

421The 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 × 100 hours + 2 subsequent filings 

× 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 × 170 

large private equity advisers = 11,400 hours. 

423This 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) × 0.09 × 

0.25 hours = 7 hours.) 

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.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 hours for 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 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. 

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 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 In the absence of specific 

commenter estimates for the large 

private equity 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. 

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 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.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 

hours for 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 No commenters 

addressed these estimates. The SEC has 

not changed its 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 


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424Under 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. 

425Estimate 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 × 0.08 × 0.25 hours = 71 hours.) 

426See supra section II.A of this Release. 

427See 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. 

428See Implementing Adopting Release, supra 

note 11, at section VI.F. 

429 3,570 private fund advisers × 1 request per 

1,000 advisers = approximately 4 advisers. 

430 4 advisers × 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. 

432See supra section II.E of this Release. 

433 ((3,070 smaller private fund advisers + 170 

large private equity advisers) × $150 per annual 

filing) + ((250 large hedge fund advisers + 80 large 

private equity advisers) × $150 per quarterly filing 

× 4 quarterly filings per year) = $684,000 per year. 

434See, e.g., BlackRock Letter; IAA Letter; 

Kleinberg General Letter; PEGCC Letter; SIFMA 

Letter. 

435See infra section V.B of this Release, 

especially nn. 511–515; Proposing Release, supra 

note 11, at section V.B. 

436See infra notes 511, 513 and 515. 

437The 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. 

438See supra note 272. 

439See supra note 382. 

440See supra notes 435–436 and accompanying 

text. 

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 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 

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 year 429 for a total of 4 burden 

hours.430 No commenters addressed 

these estimates, and they remain 

unchanged from the proposal. 

F. Aggregate Hour Burden Estimates 

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 We 

estimate that 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 third-party 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

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 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. 

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.440 The SEC 

estimates, based in part on these 

conversations and the factors discussed 

above, that these costs will fall across a 

broad 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 


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441 $50,000 × 500 Large Private Fund Advisers = 

$25,000,000. 

442 44 U.S.C. 3501–3521. 

443See section 211(e) of the Advisers Act. 

444See section 204(b)(1)(A) of the Advisers Act. 

445See 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. 

446See section 202(c) of the Advisers Act. 

447See, e.g., AFL–CIO Letter; AFR Letter. See also 

CII Letter; MSCI Letter. 

448See, 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. 

449See supra section II.B.2 of this Release. 

450See supra section II.B.1 of this Release. 

451See supra section II.C of this Release. 

452See supra section II.A of this Release. 

453See supra section II.C of this Release. 

454See, e.g., IAA Letter; MFA Letter; PEGCC 

Letter; SIFMA Letter. 

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

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 DoddFrank 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 DoddFrank 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 private 

fund adviser manages and the types of 

private fund to which those assets 

relate.445 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. 

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.446 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. 

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 permit large private equity 

advisers to file less 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 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 


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71164 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 

455The 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. 456See id., at xv–xvi. See also Senate Committee 

Report, supra note 5, at 39. 457 Id. 458See id., at 2. See also supra note 6 and 

accompanying text. 459See supra note 7 and accompanying text. 

460See supra note 8 and accompanying text. 461See Senate Committee Report, supra note 5, at 

38. 462See section II.C of this Release (describing the 

information that private fund advisers must report 

on Form PF). 463See 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 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. 

465See FSOC Second Notice, supra note 6. 

466See, e.g., supra notes 192, 228, 266, 282, 284, 

298 and 323 and accompanying text. 

467See, e.g., Proposing Release, supra note 12, at 

n. 120 and accompanying text. 

468See supra section II.B.1 of this Release 

(discussing reporting frequency and comments on 

the proposed reporting frequency). 

469See supra section II.B.2 of this Release 

(discussing reporting deadlines and comments on 

the proposed deadlines). 

470See 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). 

of providing it. These benefits and costs 

are discussed in greater detail below. 

A. Benefits 

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 The crisis 

imposed immense 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 The goal of this 

framework, in other words, is the 

avoidance of significant harm to the 

U.S. economy from future financial 

crises. 

Under the Dodd-Frank Act, FSOC 

must ‘‘monitor emerging risks to U.S. 

financial stability’’ and employ its 

regulatory tools to address those 

risks.458 For this purpose, the DoddFrank 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 DoddFrank 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

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 More 

specifically, the Dodd-Frank Act 

identifies certain 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 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. 

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 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 


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471 Id. 

472See supra notes 28–29 and accompanying text. 

473 Id. 

474See, 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). 

475Leonard Nakamura, Durable Financial 

Regulation: Monitoring Financial Instruments as a 

Counterpart to Regulating Financial Institutions, 

National Bureau of Economic Research (May 2011) 

at 1. 

476Stephen 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. 

477Carmen 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). 

478See 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.’’) 

479CII Letter. See also, e.g., AFL–CIO Letter; AFR 

Letter. 

480AFL–CIO Letter. 

481MSCI 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). 

482MFA Letter. 

483See, e.g., Fidelity Letter; PEGCC Letter; TCW 

Letter; USCC Letter. 

484CCMR 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. 

485See, e.g., PEGCC Letter. See also supra section 

II.C of this Release. 

486See supra notes 307–308 and accompanying 

text. 

487See supra section II of this Release (discussing 

changes from the proposal). 

488See supra note 457 and accompanying text. 

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 In 

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 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 Another commenter 

stated that Form PF data could aid in 

the assessment of ‘‘systemic 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 As 

discussed above, based on SEC staff’s 

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 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 


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71166 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 

489See 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. 

490AFL–CIO Letter. See also AFR Letter. 

491See, e.g., supra note 484. 

492See supra section II of this Release (discussing 

changes from the proposal). 

493See HedgeFund Intelligence Global Review 

2011, HFI (Spring 2011) (‘‘HFI 2011 Global 

Review’’). 

494See supra section II.D (discussing 

confidentiality of Form PF data). 

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. 

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 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 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. 

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. 

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 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 

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

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. 

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.493 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. 

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 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. 

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. 

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 


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495See supra note 29 and accompanying text. 

496See supra note 30 and accompanying text. 

497See supra note 35 and accompanying text. 

498See supra note 382; Proposing Release, supra 

note 12, at n.105; but see supra note 146. 

499See 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). 

500See, e.g., AIMA Letter; IAA Letter; Kleinberg 

General Letter; MFA Letter; PEGCC Letter; Seward 

Letter. 

501TCW Letter; but see also supra note 146. 

502See, e.g., Kleinberg General Letter; MFA 

Letter; PEGCC Letter. 

503See supra notes 383, 394–395, 404 and 414 

and accompanying text. 

504See supra section II.C of this Release. 

505See 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. 

506See MFA Letter. 

507See comment letter of The National 

Association of Real Estate Investment Managers 

(Mar. 24, 2011). 

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 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 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 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. 

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. 

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 fundby-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 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), 

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 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. 

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. 

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 Having considered 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. 


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508We understand that some advisers may 

outsource all or a portion of their Form PF reporting 

responsibilities to software consultants, vendors, 

filing agents or other third-party 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 

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. 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. 

509We 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 × 0.5 + $409/hour × 0.5) × 40 hours = 

approximately $13,600. 

510We 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 × 0.25 + $235/hour × 

0.25 + $409/hour × 0.25 + $192/hour × 0.25) × 15 

hours = approximately $4,200. 

511The 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 × 0.5 + $409/hour × 0.5) × 60 hours + 

($304/hour × 0.5 + $224/hour × 0.5) × 40 hours = 

approximately $31,000. 

512The 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 × 0.25 + 

$235/hour × 0.25 + $409/hour × 0.25 + $192/hour 

× 0.25) × 50 hours = approximately $13,900. 

513We 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 cost of $224 per hour. 

($273/hour × 0.5 + $409/hour × 0.5) × 180 hours + 

($304/hour × 0.5 + $224/hour × 0.5) × 120 hours = 

approximately $93,100. 

514We 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 × 0.25 + $235/hour × 0.25 + 

$409/hour × 0.25 + $192/hour × 0.25) × 140 hours 

= approximately $38,800. 

515The 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 × 0.5 + $409/hour × 0.5) × 85 hours + 

($304/hour × 0.5 + $224/hour × 0.5) × 55 hours = 

approximately $43,500. 

516The 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 × 0.25 + 

$235/hour × 0.25 + $409/hour × 0.25 + $192/hour 

× 0.25) × 65 hours = approximately $18,000. 

517 (3,070 smaller private fund advisers × $13,600 

per initial annual report) + (170 large private equity 

fund advisers × $31,000 per initial annual report) 

+ (250 large hedge fund advisers × $93,100 per 

initial quarterly report) + (250 large hedge fund 

advisers × 3 quarterly reports × $38,800 per 

subsequent quarterly report) + (80 large liquidity 

fund advisers × $43,500 per initial quarterly report) 

+ (80 large liquidity fund advisers × 3 quarterly 

reports × $18,000 per subsequent quarterly report) 

= approximately $107,000,000. 

518 (3,070 smaller private fund advisers × $4,200 

per subsequent annual report) + (170 large private 

equity fund advisers × $13,900 per subsequent 

annual report) + (250 large hedge fund advisers × 

4 quarterly reports × $38,800 per subsequent 

quarterly report) + (80 large liquidity fund advisers 

× 4 quarterly reports × $18,000 per subsequent 

quarterly report) = approximately $59,800,000. 

519See, e.g., Kleinberg General Letter; MFA 

Letter. 

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 

estimate 508 that the periodic filing 

requirements under Form PF (including 

configuring systems and compiling, 

automating, reviewing and 

electronically filing the report) will 

impose: 

(1) 40 burden hours at a cost of 

$13,600 509 per smaller private fund 

adviser for the initial annual report; 

(2) 15 burden hours at a cost of 

$4,200 510 per smaller private fund 

adviser for each subsequent annual 

report; 

(3) 100 burden hours at a cost of 

$31,000 511 per large private equity fund 

adviser for the initial annual report; 

(4) 50 burden hours at a cost of 

$13,900 512 per large private equity fund 

adviser for each subsequent annual 

report; 

(5) 300 burden hours at a cost of 

$93,100 513 per large hedge fund adviser 

for the initial quarterly report; 

(6) 140 burden hours at a cost of 

$38,800 514 per large hedge fund adviser 

for each subsequent quarterly report; 

(7) 140 burden hours at a cost of 

$43,500 515 per large liquidity fund 

adviser for the initial quarterly report; 

and 

(8) 65 burden hours at a cost of 

$18,000 516 per large liquidity fund 

adviser for each subsequent quarterly 

report. 

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 foregoing estimates 

suggest an annual cost of 

$107,000,000 517 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 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71169 

520For 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 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. 

521The 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) × $67/ 

hour = approximately $5,200. 

522The 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 × 5⁄8 of an 

hour) + ($50 per hour × 3⁄8 of an hour)) × 4 hours 

= approximately $760. 

523See supra note 424. 

524See supra section IV.G of this Release. 

525See supra note 438 and accompanying text. 

526See supra notes 434–441 and accompanying 

text. 

527 Id. 

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. 

529See supra notes 440–441 and accompanying 

text. 

530CCMR Letter. 

531See supra section II.D of this Release. 

532See supra sections II.D and II.E of this Release. 

533See supra note 343. 

534See supra notes 351 and 344 and 

accompanying text. 

535See supra section II.D of this Release for a 

discussion of confidentiality of Form PF data. 

536See supra section II.D of this Release for a 

discussion of confidentiality of Form PF data. 

537See supra note 494 and accompanying text. 

would result in significantly different 

aggregate cost estimates.520

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 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 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 endpoints.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 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 nonpublic 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 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 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 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. 

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.535 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. 

Although Form PF data generally will 

be non-public, Form PF will increase 

transparency to regulators.536 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 

investments with a higher value to the 

economy as a whole.537 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. 

The SEC also recognizes that the 

direct costs of completing and filing 

Form PF may reduce the amount of 


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71170 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 

538One 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. 

539See infra notes 545 and 548 and 

accompanying text. 

540See Issa Letter. 

541See supra note 134 and accompanying text. 

542See Issa Letter. 

543According 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. 

545See Ibbotson, et al., supra note 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%. 

546See Issa Letter. 

547 Id. 

548The calculations assume a management fee of 

1.5% of assets under management and a 20% 

performance fee. See supra note 545. $93,100 for 

the initial quarterly report + $38,800 for each 

subsequent quarterly reporting × 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. 

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.538 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 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 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. 

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 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 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 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 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 $210,000 and 

$260,000 in the first year of reporting.548

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 


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549See supra section V.A of this Release. 

550See, 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.’’). 

551See 5 U.S.C. 801(a)(1)(B)(i). 

552See section 112(a)(2)(C) of the Dodd-Frank 

Act. 

553See section 112(d)(1) of the Dodd-Frank Act. 

554 7 U.S.C. 19(a). 

555See generally, CFTC Proposing Release, supra 

note 16, at 76 FR 8068, 8087 (for CFTC’s request 

for comment on the cost-benefit considerations). 556See generally, CFTC Proposing Release, supra 

note 16, at 76 FR 8068, 8087. 

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. 

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.549 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, 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 

systemic risk related information 

required by Form PF.551 As noted above, 

the Dodd-Frank 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 

Dodd-Frank Act also requires FSOC to 

collect information from member 

agencies—like the SEC and the CFTC— 

to support its functions.553 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. 

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.554

Accordingly, the CFTC could, in its 

discretion, give greater weight to 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 costbenefit 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 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. 

1. General Costs and Benefits 

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, 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 


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557 5 U.S.C. 603(a). 

558See Proposing Release, supra note 12, at 

section VI. 

559See 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. 

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 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 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 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 

Dodd-Frank 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 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 


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560See Advisers Act rule 0–7(a). 

561See supra note 56–59 and accompanying text. 

562See 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. 

563See Proposing Release, supra note 12, at n.212 

and accompanying text. 

564See supra notes 509–510 and accompanying 

text. 

565See supra note 432 and accompanying text. 

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. 

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 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 The SEC does not have 

a precise count of the number of 

advisers that may satisfy the minimum 

reporting 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 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. 

D. Projected Reporting, Recordkeeping 

and Other Compliance Requirements 

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 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 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, 

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 


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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: 

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 is 

revised 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 subpart B to read as 

follows: 

§ 4.27 Additional reporting by advisors of 

commodity pools. 

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: 

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, 80b–6(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 Web site at http://www.sec.

gov/iard. 

(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 

(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: 


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(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 added to read as 

follows: 

§ 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. 


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71188 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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71192 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71193 


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71194 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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71196 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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71198 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71199 


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71200 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71201 


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71202 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71203 


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71204 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71205 


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71206 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71207 


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71208 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71209 


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71210 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71211 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71213 


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71214 Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71215 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71217 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71221 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71223 


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Federal Register / Vol. 76, No. 221 / Wednesday, November 16, 2011 / Rules and Regulations 71239 

By the Commodity Futures Trading 

Commission. 

Dated: October 31, 2011. 

David A. Stawick, 

Secretary. 

By the Securities and Exchange 

Commission. 

Dated: October 31, 2011. 

Elizabeth M. Murphy, 

Secretary . 

[FR Doc. 2011–28549 Filed 11–15–11; 8:45 am] 

BILLING CODE 6351–01–P; 8011–01–P 


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