8068 Federal Register / Vol. 76, No. 29 / Friday, February 11, 2011 / Proposed Rules 

1 7 U.S.C. 1a. 

2 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 would be 

published. In addition, in this Release, when we 

refer to the ‘‘Advisers Act,’’ we refer to the Advisers 

Act as in effect on July 21, 2011. 

3Public Law 111–203, 124 Stat. 1376 (2010). 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 4 

RIN 3038–AD03 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 275 and 279 

[Release No. IA–3145; 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 proposed rule. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘CFTC’’) and the 

Securities and Exchange Commission 

(‘‘SEC’’) (collectively, ‘‘we’’ or the 

‘‘Commissions’’) are proposing 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 proposed 

SEC rule would require investment 

advisers registered with the SEC that 

advise one or more private funds to file 

Form PF with the SEC. The proposed 

CFTC rule would require commodity 

pool operators (‘‘CPOs’’) and commodity 

trading advisors (‘‘CTAs’’) registered 

with the CFTC to satisfy certain 

proposed CFTC filing 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 advise one or more private 

funds. 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. These advisers would file these 

reports electronically, on a confidential 

basis. 

DATES: Comments should be received on 

or before April 12, 2011. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

CFTC 

• Agency Web site, via its Comments 

Online process: http:// 

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Web site. 

• Mail: David A. Stawick, Secretary, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

• Hand Delivery/Courier: Same as 

mail above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

‘‘Form PF’’ must be in the subject field 

of comments submitted via e-mail, and 

clearly indicated on written 

submissions. All comments must be 

submitted in English, or if not, 

accompanied by an English translation. 

Comments will be posted as received to 

http://www.cftc.gov. You should submit 

only information that you wish to make 

available publicly. If you wish the CFTC 

to consider information that may be 

exempt from disclosure under the 

Freedom of Information Act, a petition 

for confidential treatment of the exempt 

information may be submitted according 

to the established procedures in 17 CFR 

145.9. 

The CFTC reserves the right, but shall 

have no obligation, to review, prescreen, 

filter, redact, refuse, or remove any or 

all of your submission from http:// 

www.cftc.gov that it may deem to be 

inappropriate for publication, including, 

but not limited to, obscene language. All 

submissions that have been redacted or 

removed that contain comments on the 

merits of the rulemaking will be 

retained in the public comment file and 

will be considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under the Freedom of Information Act, 

5 U.S.C. 552, et seq. (‘‘FOIA’’). 

SEC 

Electronic Comments 

• Use the SEC’s Internet comment 

form (http://www.sec.gov/rules/ 

proposed.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–05–11 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–05–11. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The SEC 

will post all comments on the SEC’s 

Web site (http://www.sec.gov/rules/ 

proposed.shtml). Comments are also 

available for Web site viewing and 

printing in the SEC’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549 on official business days 

between the hours of 10 a.m. and 3 p.m. 

All comments received will be posted 

without change; we do not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. 

FOR FURTHER INFORMATION CONTACT: 

CFTC: Daniel S. Konar II, AttorneyAdvisor, Telephone: (202) 418–5405, 

E-mail: dkonar@cftc.gov, Amanda L. 

Olear, Special Counsel, Telephone: 

(202) 418–5283, E-mail: aolear@cftc.gov, 

or Kevin P. Walek, Assistant Director, 

Telephone: (202) 418–5405, E-mail: 

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, Attorney-Adviser, Sarah G. ten 

Siethoff, Senior Special Counsel, or 

David A. Vaughan, Attorney Fellow, 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 requesting public comment on 

proposed rule 4.27(d) [17 CFR 4.27(d)] 

under the Commodity Exchange Act 

(‘‘CEA’’) 1 and proposed Form PF. The 

SEC is requesting public comment on 

proposed rule 204(b)–1 [17 CFR 

275.204(b)–1] and proposed Form PF 

[17 CFR 279.9] under the Investment 

Advisers Act of 1940 [15 U.S.C. 80b] 

(‘‘Advisers Act’’).2

I. Background 

A. The Dodd-Frank Act 

On July 21, 2010, President Obama 

signed into law the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (‘‘Dodd-Frank Act’’).3 While the 

Dodd-Frank Act provides for wideranging reform of financial regulation, 

one stated focus of this legislation is to 


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Federal Register / Vol. 76, No. 29 / Friday, February 11, 2011 / Proposed Rules 8069 

4See S. Conf. Rep. No. 111–176, at 2–3 (2010) 

(‘‘Senate Committee Report’’). 

5Section 111 of the Dodd-Frank Act provides that 

the voting members of FSOC will be the Secretary 

of the Treasury, the Chairman of the FRB, the 

Comptroller of the Currency, the Director of the 

Bureau of Consumer Financial Protection, the 

Chairman of the SEC, the Chairperson of the 

Federal Deposit Insurance Corporation, the 

Chairperson of the CFTC, the Director of the Federal 

Housing Finance Agency, the Chairman of the 

National Credit Union Administration Board and an 

independent member appointed by the President 

having insurance expertise. FSOC will also have 

five nonvoting members, which are the Director of 

the Office of Financial Research, the Director of the 

Federal Insurance Office, a state insurance 

commissioner, a state banking supervisor and a 

state securities commissioner. 

6Section 112 of the Dodd-Frank Act. 

7 Id. 

8Section 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 of 1940 (15 U.S.C. 

80a–3) (‘‘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. 

9The Dodd-Frank Act requires such private fund 

adviser registration by amending section 203(b)(3) 

of the Advisers Act to repeal the exemption from 

registration for any adviser that during the course 

of the preceding 12 months had fewer than 15 

clients and neither held itself out to the public as 

an investment adviser nor advised any registered 

investment company or business development 

company. See section 403 of the Dodd-Frank Act. 

See also infra note 11 for the definition of ‘‘private 

fund adviser.’’ There are exemptions from the 

registration requirement, including exemptions for 

advisers to venture capital funds and advisers to 

private funds with less than $150 million in assets 

under management in the United States. There also 

is an exemption for ‘‘foreign private advisers,’’ 

which are investment advisers with no place of 

business in the United States, fewer than 15 clients 

in the United States and investors in the United 

States in private funds advised by the adviser, and 

less than $25 million in assets under management 

from such clients and investors. See sections 402, 

407 and 408 of the Dodd-Frank Act. 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– 

3111 (Nov. 19, 2010), 75 FR 77,190 (Dec. 10, 2010) 

(‘‘Private Fund Exemption Release’’); Rules 

Implementing Amendments to the Investment 

Advisers Act of 1940, Investment Advisers Act 

Release No. IA–3110 (Nov. 19, 2010), 75 FR 77,052 

(Dec. 10, 2010) (‘‘Implementing Release’’). 

References in this Release to Form ADV or terms 

defined in Form ADV or its glossary are to the form 

and glossary as they are proposed to be amended 

in the Implementing Release. 

10See Senate Committee Report, supra note 4, at 

38. 

11Throughout 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. We are not proposing that 

advisers solely to venture capital funds or advisers 

to private funds that in the aggregate have less than 

$150 million in assets under management in the 

United States (‘‘exempt reporting advisers’’) be 

required to file Form PF. 

12While Advisers Act section 204(b)(1) could be 

read in isolation to imply that the SEC requiring 

private fund systemic risk reporting is 

discretionary, other amendments to the Advisers 

Act made by the Dodd-Frank Act (such as Advisers 

Act section 204(b)(5) and 211(e) suggest that 

Congress intended such rulemaking to be 

mandatory. See also Senate Committee Report, 

supra note 4, at 39 (‘‘this title requires private fund 

advisers * * * to disclose information regarding 

their investment positions and strategies.’’). 

13See section 404 of the Dodd-Frank Act. 

14See section 406 of the Dodd-Frank Act. 

15For 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, all private fund 

advisers that are also registered as CPOs and CTAs 

with the CFTC would be required to file Schedule 

A of proposed Form CPO–PQR (for CPOs) or 

Schedule A of proposed Form CTA–PR (for CTAs). 

Additionally, to the extent that they operate or 

advise commodity pools that do not satisfy the 

definition of ‘‘private fund’’ under the Dodd-Frank 

Act, private fund advisers that are also registered 

as CPOs or CTAs would still be required to file 

proposed Form CPO–PQR (for CPOs) and proposed 

Form CTA–PR (for CTAs), as applicable. 

16The information reported through the various 

reporting forms is designed to be complementary, 

and not duplicative. Information reported on Form 

ADV would be publicly available, while 

information reported on Form PF and proposed 

Forms CPO–PQR and CTA–PR would be 

confidential to the extent permitted under 

applicable law. Form ADV and Form PF also have 

different principal purposes. Form ADV primarily 

aims at providing the SEC and investors with basic 

information about advisers (including private fund 

advisers) and the funds they manage for investor 

protection purposes, although Form ADV 

information also will be available to FSOC. 

Continued 

‘‘promote the financial stability of the 

United States’’ by, among other 

measures, establishing better monitoring 

of emerging risks using a system-wide 

perspective.4 To further this goal, Title 

I of the Dodd-Frank Act establishes the 

Financial Stability Oversight Council 

(‘‘FSOC’’), which is comprised of the 

leaders of various financial regulators 

(including the Commissions’ Chairmen) 

and other participants.5 The DoddFrank Act directs FSOC to monitor 

emerging risks to U.S. financial stability 

and to require that the Board of 

Governors of the Federal Reserve 

System (‘‘FRB’’) supervise designated 

nonbank financial companies that may 

pose risks to U.S. financial stability in 

the event of their material financial 

distress or failure or because of their 

activities.6 In addition, the Dodd-Frank 

Act directs FSOC to recommend to the 

FRB heightened prudential standards 

for designated nonbank financial 

companies.7

The Dodd-Frank Act anticipates that 

FSOC will be supported in these 

responsibilities by various regulatory 

agencies, including the Commissions. 

To that end, the Dodd-Frank Act 

amends certain statutes, including the 

Advisers Act, to authorize or direct 

certain Federal agencies to support 

FSOC. Title IV of the Dodd-Frank Act 

amends the Advisers Act to generally 

require that advisers to hedge funds and 

other private funds 8 register with the 

SEC.9 Congress required this registration 

in part because it believed that 

‘‘information regarding [the] size, 

strategies and positions [of large private 

funds] could be crucial to regulatory 

attempts to deal with a future crisis.’’ 10

To that end, Section 404 of the DoddFrank Act, which amends section 204(b) 

of the Advisers Act, directs the SEC to 

require private fund advisers 11 to 

maintain records and 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 by FSOC.12 The records 

and reports must 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.13 The SEC must issue jointly 

with the CFTC, after consultation with 

FSOC, rules establishing the form and 

content of any such reports required to 

be filed with respect to private fund 

advisers also registered with the 

CFTC.14

This joint proposal is designed to 

fulfill this statutory mandate. Under 

proposed Advisers Act rule 204(b)–1, 

private fund advisers would be required 

to file Form PF with the SEC. Private 

fund advisers that also are registered as 

CPOs or CTAs with the CFTC would file 

Form PF to satisfy certain CFTC 

systemic risk reporting requirements.15

Information collected about private 

funds on Form PF, together with 

information the SEC collects on Form 

ADV and the information the CFTC 

separately has proposed CPOs file on 

Form CPO–PQR and CTAs file on Form 

CTA–PR, will provide FSOC and the 

Commissions with important 

information about the basic operations 

and strategies of private funds and will 

be important in FSOC obtaining a 

baseline picture of potential systemic 

risk across both the entire private fund 

industry and in particular kinds of 

private funds, such as hedge funds.16


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Information on Form ADV is designed to provide 

the SEC with information necessary to its 

administration of the Advisers Act and to efficiently 

allocate its examination resources based on the 

risks the SEC discerns or the identification of 

common business activities from information 

provided by advisers. See Implementing Release, 

supra note 9. In contrast, the Commissions intend 

to use Form PF primarily as a confidential systemic 

risk disclosure tool to assist FSOC in monitoring 

and assessing systemic risk, although it also would 

be available to assist the Commissions in their 

regulatory programs, including examinations and 

investigations and investor protection efforts 

relating to private fund advisers. 

17See section 404 of the Dodd-Frank Act; infra 

note 39 and accompanying text. 

18See, e.g., Authority to Require Supervision and 

Regulation of Certain Nonbank Financial 

Companies, Financial Stability Oversight Council 

Release (Jan. 18, 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) (‘‘FSOC Designation ANPR’’). 

19See section 175 of the Dodd-Frank Act. 

20See Damian Alexander, Global Hedge Fund 

Assets Rebound to Just Over $1.8 Trillion, Hedge 

Fund Intelligence (Apr. 7, 2010) (‘‘HFI’’). 

21 Group of Thirty, Financial Reform: A 

Framework for Financial Stability (Jan. 15, 2009). 

22See U.S. Department of the Treasury, Financial 

Regulatory Reform: A New Foundation (2009), at 8; 

and Equipping Financial Regulators with the Tools 

Necessary to Monitor Systemic Risk, Senate 

Banking Subcommittee on Security and 

International Trade and Finance, Feb. 12, 2010 

(testimony of Daniel K. Tarullo, member of the 

FRB). See also Group of 20 and the International 

Monetary Fund, The Global P Crisis for Fure 

Regulation of Financial Institutions and M arkets 

and for Liquidity Management (Feb. 4, 2009). 

23The 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. 

24Technical Committee of the International 

Organization of Securities Commissions, Hedge 

Funds O (June 2009), available at https:// 

www.iosco.org/library/pubdocs/pdf/ 

IOSCOPD293.pdf (‘‘IOSCO Report’’). 

25 Id. at 3. 

26See IOSCO Report, supra note 24, at 14; Press 

Release, International Regulators Publish Systemic 

Risk Data Requirements for Hedge Funds (Feb. 25, 

2010), available at https://www.iosco.org/news/pdf/ 

IOSCONEWS179.pdf. The IOSCO Report states that 

systemic risk information that hedge fund advisers 

should provide to regulators should include, for 

example: (1) Information on their prime brokers, 

custodian, and background information on the 

persons managing the assets; (2) information on the 

manager’s larger funds including the net asset 

value, predominant strategy/regional focus and 

performance; (3) leverage and risk information, 

including concentration risk of the hedge fund 

adviser’s larger funds; (4) asset and liability 

information for the manager’s larger funds; (5) 

counterparty risk, including the biggest sources of 

credit; (6) product exposure for all of the manager’s 

assets; and (7) investment activity known to 

represent a significant proportion of such activity 

in important markets or products. Some of this 

information would be collected through the revised 

Form ADV, as proposed by the SEC in the 

Implementing Release, rather than Form PF. 

27The survey canvasses approximately 50 FSAauthorized investment managers. See, e.g., 

Financial Services Authority, Assessing Possible 

Sources of Systemic Risk from Hedge Funds: A 

Report on the Findings of the Hedge Fund as 

Counterparty Survey and the Hedge Fund Survey 

(Jul. 2010), available at http://www.fsa.gov.uk/ 

pubs/other/hf_report.pdf (‘‘FSA Survey’’). 

28According to Hedge Fund Intelligence, U.K.- 

based advisers manage approximately 16% of global 

hedge fund assets. This concentration of hedge fund 

advisers is second only to the United States 

(managing approximately 76% of global hedge fund 

assets). See HFI, supra note 20. 

29FSA Survey, supra note 27. 

30 Id. 

31According to Hedge Fund Intelligence, Hong 

Kong-based advisers manage approximately 0.54% 

of global hedge fund assets, which is the largest 

concentration of hedge fund advisers in Asia. See 

HFI, supra note 20. 

Information the SEC obtains through 

reporting under section 404 of the 

Dodd-Frank Act is to be shared with 

FSOC as FSOC considers necessary for 

purposes of assessing the systemic risk 

posed by private funds and generally is 

to remain confidential.17 Our staffs have 

consulted with staff representing 

FSOC’s members in developing this 

proposal. We note that simultaneous 

with our staffs’ FSOC consultations 

relating to this rulemaking, FSOC has 

been building out its standards for 

assessing systemic risk across different 

kinds of financial firms and has recently 

proposed standards for determining 

which nonbank financial companies 

should be designated as subject to FRB 

supervision.18

B. International Coordination 

In assessing systemic risk, the DoddFrank Act requires that FSOC 

coordinate with foreign financial 

regulators.19 This coordination may be 

particularly important in assessing 

systemic risk associated with hedge 

funds and other private funds because 

they often operate globally and make 

significant investments in firms and 

markets around the world.20 As others 

have recognized, ‘‘[g]iven the global 

nature of the markets in which [private 

fund] managers and funds operate, it is 

imperative that a regulatory framework 

be applied on an internationally 

consistent basis.’’ 21 International 

regulatory coordination also has been 

cited as a critical element in facilitating 

financial regulators’ formulation of a 

comprehensive and effective response to 

future financial crises.22 Collecting 

consistent and comparable information 

is of added value in private fund 

systemic risk reporting because it would 

aid in the assessment of systemic risk on 

a global basis and thus enhance the 

utility of information sharing among 

U.S. and foreign financial regulators.23

Recognizing this benefit, our staffs 

participated in the International 

Organization of Securities Commissions’ 

(‘‘IOSCO’’) preparation of a report 

regarding hedge fund oversight.24

Among other matters, this report 

recommended that hedge fund advisers 

provide to their national regulators 

information for the identification, 

analysis, and mitigation of systemic 

risk. It also recommended that 

regulators cooperate and share 

information where appropriate in order 

to facilitate efficient and effective 

oversight of globally active hedge funds 

and to help identify systemic risks, risks 

to market integrity, and other risks 

arising from the activities or exposures 

of hedge funds.25 The types of 

information that IOSCO recommended 

regulators gather from hedge fund 

advisers is consistent with and 

comparable to the types of information 

we propose to collect from hedge funds 

through Form PF, as described in 

further detail below.26

In addition, our staffs have consulted 

with the United Kingdom’s Financial 

Services Authority (the ‘‘FSA’’), which 

has conducted a voluntary semi-annual 

survey since October 2009 by sampling 

the largest hedge fund groups based in 

the United Kingdom.27 Because many 

hedge fund advisers are located in the 

United Kingdom and subject to the 

jurisdiction of the FSA, this 

coordination has been particularly 

important.28 UK hedge fund advisers 

complete this survey on a voluntary 

basis, and the survey collects 

information regarding all funds 

managed by the particular hedge fund 

adviser as well as for individual funds 

with at least $500 million in assets. The 

information the survey collects is 

designed to help the FSA better 

understand hedge funds’ use of 

leverage, ‘‘footprints’’ in various asset 

classes (including concentration and 

liquidity issues), the scale of asset/ 

liability mismatches, and counterparty 

credit risks.29 In addition, for more than 

five years the FSA has been conducting 

a semi-annual survey of hedge fund 

counterparties to assist it in assessing 

trends in counterparty credit risk, 

margin requirements, and other 

matters.30 Our staffs’ consultation with 

the FSA as they designed and 

conducted their hedge fund surveys has 

been very informative, and we have 

incorporated into proposed Form PF 

many of the types of information 

collected through the FSA surveys. 

SEC staff also has consulted with 

Hong Kong’s Securities and Futures 

Commission regarding hedge fund 

oversight and data collection because 

Hong Kong is an important jurisdiction 

for hedge funds in Asia.31 This 

consultation also has proven helpful in 

designing proposed Form PF. 


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32See HFI, supra note 20. 

33See Ana Carvajal et al., The Perimeter of 

Financial Regulation, IMF Staff Position Note SPN/ 

09/07 (Mar. 26, 2009), available at http:// 

www.imf.org/external/pubs/ft/spn/2009/ 

spn0907.pdf. 

34 Id., at 8. 

35See, e.g., Lorenzo Bini Smaghi, Member of the 

Executive Board of the European Central Bank, 

Going Forward—Regulation and Supervision after 

the Financial Turmoil, Speech by at the 4th 

International Conference of Financial Regulation 

and Supervision (Jun. 19, 2009), available at 

http://www.bis.org/review/r090623e.pdf (stating 

‘‘macro-prudential analysis needs to capture all 

components of financial systems and how they 

interact. This includes all intermediaries, markets 

and infrastructures underpinning them. In this 

respect, it is important to consider that at present 

some of these components, such as hedge funds, 

private equity firms or over-the-counter (OTC) 

financial markets, are not subject to microprudential supervision. But they need to be part of 

macro-prudential analysis and risk assessments, as 

they influence the overall behaviour of the financial 

system. To gain a truly ‘‘systemic’’ perspective on 

the financial system, no material element should be 

left out.’’); Private Equity and Leveraged Finance 

Markets, Bank for International Settlements 

Committee on the Global Financial System Working 

Paper No. 30 (Jul. 2008), available at http:// 

www.bis.org/publ/cgfs30.pdf (‘‘BIS Private Equity 

Paper’’) (‘‘Going forward, the Working Group 

believes that enhancing transparency and 

strengthening risk management practices [relating 

to private equity and leveraged finance markets] 

require special attention. * * * The recent market 

turmoil has demonstrated that a number of the risks 

in the leveraged finance market are likely to 

materialise in combination with other financial 

market risks in stressed market conditions. * * * 

In the public sector, there is a stronger case for 

developing early warning indicators and devoting 

more research efforts to modelling the dynamic 

relationships between risk factors with a view to 

understanding the interrelationships across markets 

and their impact on the financial sector.’’). See also 

Macroeconomic Assessment Group established by 

the Financial Stability Board and the Basel 

Committee on Banking Supervision, Interim Report: 

Assessing the Macroeconomic Impact of the 

Transition to Stronger Capital and Liquidity 

Requirements (Aug. 2010), at section 5.2, available 

at http://www.financialstabilityboard.org/ 

publications/r_100818b.pdf. 

36See proposed Advisers Act rule 204(b)–1. 

37See proposed Commodity Exchange Act rule 

4.27(d), which provides that these CPOs and CTAs 

would need to file other reports as required under 

rule 4.27 with respect to pools that are not private 

funds. For purposes of this proposed rule, it is the 

CFTC’s position that any false or misleading 

statement of a material fact or material omission in 

the jointly proposed sections (sections 1 and 2) of 

proposed Form PF that is filed by these CPOs and 

CTAs shall constitute a violation of section 6(c)(2) 

of the Commodity Exchange Act. Proposed Form PF 

contains an oath consistent with this position. 

38Thus, private fund advisers that also are CPOs 

or CTAs would be obligated to complete only 

section 1 and, if they met the applicable threshold, 

section 2 of Form PF. Accordingly, Form PF is a 

joint form between the SEC and the CFTC only with 

respect to sections 1 and 2 of the form. 

39See section 404 of the Dodd-Frank Act stating 

that ‘‘[n]otwithstanding any other provision of law, 

the Commission [SEC] may not be compelled to 

disclose any report or information contained 

therein required to be filed with the Commission 

[SEC] under this subsection’’ except to Congress 

upon agreement of confidentiality. Section 404 also 

provides that nothing prevents the SEC from 

complying with a request for information from any 

other federal department or agency or any selfregulatory organization requesting the report or 

information for purposes within the scope of its 

jurisdiction or an order of a court of the U.S. in an 

action brought by the U.S. or the SEC. Section 404 

of the Dodd-Frank Act also states that the SEC shall 

make available to FSOC copies of all reports, 

documents, records, and information filed with or 

provided to the SEC by an investment adviser under 

section 404 of the Dodd-Frank Act as FSOC may 

consider necessary for the purpose of assessing the 

systemic risk posed by a private fund and that 

FSOC shall maintain the confidentiality of that 

information consistent with the level of 

confidentiality established for the SEC in section 

404 of the Dodd-Frank Act. 

40See section 404 of the Dodd-Frank Act. 

Collectively, hedge fund advisers based 

in the United States, the United 

Kingdom, and Hong Kong represent 

over 92 percent of global hedge fund 

assets, and thus a broad consistency 

among these jurisdictions’ hedge fund 

information collections, including our 

own, will facilitate the sharing of 

consistent and comparable information 

for systemic risk assessment purposes 

for most global hedge fund assets under 

management.32 Finally, in connection 

with the IOSCO report, IOSCO members 

(including the SEC and CFTC) agreed, 

on a ‘‘best efforts’’ basis, to conduct a 

survey of hedge fund reporting data as 

of the end of September 2010 based on 

the guidelines established in the IOSCO 

report and the FSA survey. This 

internationally coordinated survey effort 

has also informed our proposed 

reporting. 

International efforts also have focused 

on potential systemic considerations 

arising out of other types of private 

funds, such as private equity funds. For 

example, an International Monetary 

Fund (‘‘IMF’’) staff paper has focused on 

‘‘extending the perimeter’’ of effective 

regulatory oversight to capture all 

financial activities that may pose 

systemic risks, regardless of the type of 

institution in which they occur.33 The 

IMF paper proposed that these financial 

activities be subject to reporting 

obligations so that regulators may assess 

potential systemic risk and emphasized 

the need to capture all financial 

activities conducted on a leveraged 

basis, including activities of leveraged 

private equity vehicles.34 Others also 

have recognized a need for monitoring 

the private equity sector because having 

information on its potentially 

systemically important interactions with 

the financial system are an important 

part of regulators’ obtaining the 

complete picture of the broader 

financial system that is so vital to 

effective systemic risk monitoring.35 We 

have taken these international efforts 

relating to systemic risk monitoring in 

private equity funds into account in the 

proposed reporting discussed below. 

II. Discussion 

The SEC is proposing a new rule 

204(b)–1 under the Advisers Act to 

require that SEC-registered investment 

advisers report systemic risk 

information to the SEC on Form PF if 

they advise one or more private funds.36

For registered CPOs and CTAs that are 

also registered as investment advisers 

with the SEC and advise a private fund, 

this report also would serve as 

substitute compliance for a portion of 

the CFTC’s proposed systemic risk 

reporting requirements under proposed 

Commodity Exchange Act rule 

4.27(d).37 Because commodity pools 

that meet the definition of a private 

fund are categorized as hedge funds for 

purposes of Form PF as discussed 

below, CPOs and CTAs filing Form PF 

would need to complete only the 

sections applicable to hedge fund 

advisers, and the form would be a joint 

form only with respect to those 

sections.38

Form PF would elicit non-public 

information about private funds and 

their trading strategies the public 

disclosure of which, in many cases, 

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. Amendments to the Advisers Act 

added by the Dodd-Frank Act preclude 

the SEC from being compelled to reveal 

the information except in very limited 

circumstances.39 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 404 of the DoddFrank Act. The Commissions would 

make information collected through 

Form PF available to FSOC, as is 

required by the Dodd-Frank Act, subject 

to the confidentiality provisions of the 

Dodd-Frank Act.40

We propose that each private fund 

adviser report basic information about 

the operations of its private funds on 

Form PF once each year. We propose 

that a relatively small number of Large 

Private Fund Advisers (described in 

section II.B below) instead be required 

to submit this basic information each 

quarter along with additional systemic 

risk related information required by 

Form PF concerning certain of their 


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41See proposed Instructions to Form PF. Our 

proposed reporting thus complies with the DoddFrank Act directive that, in formulating systemic 

risk reporting and recordkeeping for investment 

advisers to mid-sized private funds, the 

Commission take into account the size, governance, 

and investment strategy of such funds to determine 

whether they pose systemic risk. See section 408 of 

the Dodd-Frank Act. The Dodd-Frank Act also 

states that the SEC may establish different reporting 

requirements for different classes of fund advisers, 

based on the type or size of private fund being 

advised. See section 404 of the Dodd-Frank Act. 

42See section 112(a)(2)(C) of the Dodd-Frank Act. 

43See section 112(d)(1) of the Dodd-Frank Act. 

44Section 404 of the Dodd-Frank Act requires that 

reports and records that the SEC mandates be 

maintained for these purposes include a description 

of certain categories of information, such as assets 

under management, use of leverage, counterparty 

credit risk exposure, and trading and investment 

positions for each private fund advised by the 

adviser. 

45See sections 153 and 154 of the Dodd-Frank 

Act. 

46We note that the SEC has proposed 

amendments to Form ADV that also would require 

private funds to report certain basic information, 

such as the fund’s prime broker and its gross and 

net asset values. See Implementing Release, supra 

note 9. 

47See section II.A.3 of this Release for a 

discussion of liquidity funds and their potential 

risks. 

48See SEC section VI.A of this Release for a 

discussion of how the SEC could use proposed 

Form PF data for its regulatory activities and 

investor protection efforts. 

49 Industry participants (in response to FSOC 

Designation ANPR, supra note 18) acknowledged 

the potentially important function that such 

reporting may play in allowing FSOC to monitor the 

private fund industry more generally and to assess 

the extent to which any private funds may pose 

systemic risk more specifically. See, e.g., Comment 

Letter of the Managed Funds Association (Nov. 5, 

2010) (‘‘the enhanced regulation of hedge fund 

managers and the markets in which they participate 

following the passage of the Dodd-Frank Act 

ensures that regulators will have a timely and 

complete picture of hedge funds and their 

activities’’), Comment Letter of the Coalition of 

Private Investment Companies (Nov. 5, 2010) (‘‘the 

registration and reporting structure for private 

funds subject to SEC oversight will result in an 

unprecedented range and depth of data to the 

Council, its constituent members and the newly 

created Office of Financial Research. From this 

information, in addition to the information gathered 

by the Council, the Council should be able to 

assemble a clear picture of the overall U.S. financial 

network and how private investment funds fit into 

it, both on an individual and overall basis’’), 

Comment Letter of the Private Equity Growth 

Council (Nov. 5, 2010) (‘‘regulators also now have 

the authority to require all private equity firms and 

private equity funds to provide any additional data 

needed to assess systemic risk’’) (‘‘PE Council 

Letter’’). Comment letters in response to the FSOC 

Designation ANPR are available at http:// 

www.regulations.gov. 

50See 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 shall be supervised by the FRB 

and subject to prudential standards. 51Recordkeeping requirements specific to private 

fund advisers for systemic risk assessment purposes 

will be addressed in a future release pursuant to our 

authority under section 404 of the Dodd-Frank Act. 52We discuss the information we propose 

requiring smaller private fund advisers report in 

section II.D.1 of this Release. 53Congress recognized this need as well. See 

supra note 41. 54See Senate Committee Report, supra note 4, at 

38 (‘‘While hedge funds are generally not thought 

private funds.41 In the sections below, 

we describe the principal reasons we 

believe that FSOC needs this 

information in order to monitor the 

systemic risk that may be associated 

with the operation of private funds. 

A. Purposes of Form PF 

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.42 It also 

requires FSOC to collect information 

from member agencies to support its 

functions.43 Section 404 of the DoddFrank Act directs the SEC to support 

this effort by collecting from investment 

advisers to private funds such 

information as the SEC deems necessary 

and appropriate in the public interest 

and for the protection of investors or for 

the assessment of systemic risk.44 FSOC 

may, if it deems necessary, direct the 

Office of Financial Research (‘‘OFR’’) to 

collect additional information from 

nonbank financial companies.45

The Commissions are jointly 

proposing sections 1 and 2 of Form PF, 

and the SEC is proposing sections 3 and 

4 of Form PF, to collect information 

necessary to permit FSOC to monitor 

private funds in order to identify any 

potential systemic threats arising from 

their activities. The information we 

currently collect about private funds 

and their activities is very limited and 

is not designed for the purpose of 

monitoring systemic risk.46 We do not 

currently collect information, for 

example, about hedge funds’ primary 

trading counterparties or significant 

market positions. The SEC also does not 

currently collect data to assess the risk 

of a run on a private liquidity fund, a 

risk that could transfer into registered 

money market funds and into the 

broader short term funding markets and 

those that rely on those markets.47

While we are proposing to collect 

information on Form PF to assist FSOC 

in its monitoring obligations under the 

Dodd-Frank Act, the information 

collected on Form PF would be 

available to assist the Commissions in 

their regulatory programs, including 

examinations and investigations and 

investor protection efforts relating to 

private fund advisers.48

We have designed Form PF, in 

consultation with staff representing 

FSOC’s members, to provide FSOC with 

such information so that it may carry 

out its monitoring obligations.49 Based 

upon the information we propose to 

obtain from advisers about the private 

funds they advise, together with market 

data it collects from other sources, 

FSOC should be able to identify 

whether any private funds merit further 

analysis or whether OFR should collect 

additional information. We have not 

sought to design a form that would 

provide FSOC in all cases with all the 

information it may need to make a 

determination that a particular entity 

should be designated for supervision by 

the FRB.50 Such a form, if feasible, 

likely would require substantial 

additional and more detailed data 

addressing a wider range of possible 

fund profiles, since it could not be 

tailored to a particular adviser, and 

would impose correspondingly greater 

burdens on private fund advisers. This 

type of information gathering may be 

better accomplished by OFR through 

targeted information requests to specific 

private fund advisers identified through 

Form PF, rather than through a general 

reporting form.51

The amount of information a private 

fund adviser would be required to 

report on the proposed form would vary 

based on both the size of the adviser and 

the type of funds it advises. This 

approach reflects our initial view after 

consulting with staff representing 

FSOC’s members that a smaller private 

fund adviser may present less risk to the 

stability of the U.S. financial system and 

thus merit reporting of less 

information.52 It also reflects our 

understanding that different types of 

private funds could present different 

implications for systemic risk and that 

reporting requirements should be 

appropriately calibrated.53 As discussed 

in more detail below, Form PF would 

require more detailed information from 

advisers managing a large amount of 

hedge fund or liquidity fund assets. Less 

information would be required 

regarding advisers managing a large 

amount of private equity fund assets 

because, after a review of available 

literature and consultation with staff 

representing FSOC’s members, it 

appears that private equity funds may 

present less potential risk to U.S. 

financial stability. The principal reasons 

for Form PF’s proposed reporting 

specific to hedge funds, liquidity funds, 

and private equity funds are discussed 

below. 

1. Hedge Funds 

We believe that Congress expected 

hedge fund advisers would be required 

to report information to the 

Commissions under Title IV of the 

Dodd-Frank Act.54 After consulting with 


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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. The case of Long-Term 

Capital Management, a hedge fund that was rescued 

through Federal Reserve intervention in 1998 

because of concerns that it was ‘‘too-interconnectedto-fail,’’ shows that the activities of even a single 

hedge fund may have systemic consequences.’’). 

55See section II.B of this Release for a discussion 

of the definition of ‘‘hedge fund’’ in proposed Form 

PF. To prevent duplicative reporting, commodity 

pools that meet the definition of a private fund 

would be treated as hedge funds for purposes of 

Form PF. CPOs and CTAs that are not also 

registered as an investment adviser with the SEC 

would be required to file proposed Form CPO–PQR 

(for CPOs) and proposed Form CTA–PR (for CTAs) 

reporting similar information as Form PF requires 

for private fund advisers that advise one or more 

hedge funds. See Commodity Pool Operators and 

Commodity Trading Advisors: Amendments to 

Compliance Obligations, CFTC Release (Jan. l, 

2011). Deeming commodity pools that meet the 

definition of a private fund to be hedge funds for 

purposes of Form PF, therefore, is designed to 

ensure that the CFTC obtains similar reporting 

regarding commodity pools that satisfy CFTC 

reporting obligations by the CPO or CTA filing 

proposed Form PF. 

56See President’s Working Group on Financial 

Markets, Hedge Funds, Leverage, and the Lessons 

of Long Term Capital Management (Apr. 1999), at 

23, available at http://www.ustreas.gov/press/ 

releases/reports/hedgfund.pdf (‘‘PWG LTCM 

Report’’). 

57See FSA Survey, supra note 27, at 5 (showing 

borrowings as a multiple of net equity ranging from 

100% in strategies such as managed futures to 

1400% in the fixed income arbitrage hedge fund 

strategy). 

58See, e.g., Id.; Ben S. Bernanke, Hedge Funds 

and Systemic Risk, Speech at the Federal Reserve 

Bank of Atlanta’s 2006 Financial Market’s 

Conference (May 16, 2006), available at http:// 

www.federalreserve.gov/newsevents/speech/ 

bernanke20060516a.htm (‘‘Bernanke’’); Nicholas 

Chan et al., Systemic Risk and Hedge Funds, 

National Bureau of Economic Research Working 

Paper 11200 (Mar. 2005), available at http:// 

www.nber.org/papers/w11200.pdf; Andrew Lo, 

Regulatory Reform in the Wake of the Financial 

Crisis of 2007–2008, 1 J. Fin. Econ. P. 4 (2009); and 

John Kambhu et al., Hedge Funds, Financial 

Intermediation, and Systemic Risk, FRBNY Econ. P. 

Rev. (Dec. 2007) (‘‘Kambhu’’). 

59 Kambhu, supra note 58; Financial Stability 

Forum, Update of the FSF Report on Highly 

Leveraged Institutions (May 19, 2007). 

60See Bernanke, supra note 58; David Stowell, 

An Introduction to Investment Banks, Hedge Funds 

& Private Equity: The New Paradigm 259–261 

(2010). 

61See PWG LTCM Report, supra note 56. 

62See section II.D.2 of this Release. 

63Form 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 would 

require more specific reporting regarding liquidity 

funds, would only be required by the SEC. 

64See section II.B of this Release for a discussion 

of the definition of ‘‘liquidity fund’’ in proposed 

Form PF. 

65Under the amortized cost method, securities are 

valued at acquisition cost, with adjustments for 

amortization of premium or accretion of discount, 

instead of at fair market value. To prevent 

substantial deviations between the amortized cost 

share price and the mark-to-market per-share value 

of the fund’s assets (its ‘‘shadow NAV’’), a money 

market fund must periodically compare the two. If 

there is a difference of more than one-half of 1 

percent (typically, $0.005 per share), the fund must 

re-price its shares, an event colloquially known as 

‘‘breaking the buck.’’ See Money Market Fund 

Reform, Investment Company Act Release No. 

28807 (June 30, 2009), 74 FR 32688 (July 8, 2009), 

at section III (‘‘MMF Reform Proposing Release’’). 

66Report of the President’s Working Group on 

Financial Markets: Money Market Fund Reform 

Options (Oct. 2010), available at http://treas.gov/ 

press/releases/docs/ 

10.21%20PWG%20Report%20Final.pdf. The PWG 

MMF Report states that the work of the President’s 

Working Group on Financial Reform relating to 

money market funds is now being taken over by 

FSOC. The SEC has discussed previously registered 

money market funds’ susceptibility to runs. See 

MMF Reform Proposing Release, supra note 65, at 

section III. 

staff representing FSOC’s members, our 

initial view is that the investment 

activities of hedge funds 55 may have the 

potential to pose systemic risk for 

several reasons and, accordingly, that 

advisers to these hedge funds should 

provide targeted information on Form 

PF to allow FSOC to gain a better 

picture of the potential systemic risks 

posed by the hedge fund industry. 

Hedge funds may be important sources, 

and users, of liquidity in certain 

markets. Hedge funds often use 

financial institutions that may have 

systemic importance to obtain leverage 

and enter into other types of 

transactions. Hedge funds employ 

investment strategies that may use 

leverage, derivatives, complex 

structured products, and short selling in 

an effort to generate returns. Hedge 

funds also may employ strategies 

involving high volumes of trading and 

concentrated investments. These 

strategies, and in particular high levels 

of leverage, can increase the likelihood 

that the fund will experience stress or 

fail, and amplify the effects on financial 

markets.56 While many hedge funds are 

not highly leveraged, certain hedge fund 

strategies employ substantial amounts of 

leverage.57 Significant hedge fund 

failures (whether caused by their 

investment positions or use of leverage 

or both) could result in material losses 

at the financial institutions that lend to 

them if collateral securing this lending 

is inadequate.58 These losses could have 

systemic implications if they require 

these financial institutions to scale back 

their lending efforts or other financing 

activities generally.59 The simultaneous 

failure of several similarly positioned 

hedge funds could create contagion 

through the financial markets if the 

failing funds liquidate their investment 

positions in parallel at firesale prices, 

thereby depressing the mark-to-market 

valuations of securities that may be 

widely held by other financial 

institutions and investors.60 Many of 

these concerns were raised in 

September 1998 by the near collapse of 

Long Term Capital Management, a 

highly leveraged hedge fund that 

experienced significant losses stemming 

from the 1997 Russian financial crisis.61

Accordingly, proposed Form PF 

would include questions about large 

hedge funds’ investments, use of 

leverage and collateral practices, 

counterparty exposures, and market 

positions that are designed to assist 

FSOC in monitoring and assessing the 

extent to which stresses at those hedge 

funds could have systemic implications 

by spreading to prime brokers, credit or 

trading counterparties, or financial 

markets.62 This information also is 

designed to help FSOC observe how 

hedge funds behave in response to 

certain stresses in the markets or 

economy. We request comment on this 

analysis of the potential systemic risk 

posed by hedge funds. Does it 

adequately identify the ways in which 

hedge funds might generate systemic 

risk? Are there other ways that hedge 

funds could create systemic risk? Are 

hedge funds not a potential source of 

systemic risk? Please explain your views 

and discuss their implications for the 

reporting we propose on Form PF. 

2. Liquidity Funds 

‘‘Liquidity funds’’ also may be 

important to FSOC’s monitoring and 

assessment of potential systemic risks, 

and the SEC believes information 

concerning them, therefore, should be 

included on Form PF.63 The proposed 

Form PF would define a liquidity fund 

as a 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.64 Liquidity funds thus can 

resemble money market funds, which 

are registered under the Investment 

Company Act of 1940 and seek to 

maintain a ‘‘stable’’ net asset value per 

share, typically $1, through the use of 

the ‘‘amortized cost’’ method of 

valuation.65

A report recently released by the 

President’s Working Group on Financial 

Markets (the ‘‘PWG MMF Report’’) 

discussed in detail how certain features 

of registered money market funds, many 

of which are shared by liquidity funds, 

may make them susceptible to runs and 

thus create the potential for systemic 

risk.66 The PWG MMF Report describes 

how some investors may consider 

liquidity funds to function as substitutes 

for registered money market funds and 

the potential for systemic risk that 


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67PWG MMF Report, supra note 66, at section 3.h 

(‘‘These vehicles typically invest in the same types 

of short-term instruments that MMFs hold and 

share many of the features that make MMFs 

vulnerable to runs, so growth of unregulated MMF 

substitutes would likely increase systemic risks. 

However, such funds need not comply with rule 

2a–7 or other [Investment Company Act] 

protections and in general are subject to little or no 

regulatory oversight. In addition, the risks posed by 

MMF substitutes are difficult to monitor, since they 

provide far less market transparency than MMFs.’’). 

68See, e.g., Sree Vidya Bhaktavatsalam, 

BlackRock Earnings Beat Estimates on Hedge-Fund 

Fees, Bloomberg (Jan. 17, 2008) (‘‘During the fourth 

quarter, BlackRock spent $18 million to support the 

net asset value of two enhanced cash funds whose 

values fell as the credit markets got squeezed’’); Sree 

Vidya Bhaktavatsalam & Christopher Condon, 

Federated Investors Bails Out Cash Fund After 

Losses, Bloomberg (Nov. 20, 2007). 

69See 17 CFR 270.2a–7. 

70See section II.B of this Release for a discussion 

of the definition of ‘‘private equity fund’’ in 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 4 of the form, which would 

require more specific reporting regarding private 

equity funds, would only be required by the SEC. 

71See Steven M. Davidoff, The Failure of Private 

Equity, 82 S. Cal. L. Rev. 481, 494 (2009) 

(‘‘Davidoff’’). 

72See Senior Supervisors Group, Observations on 

Risk Management Practices during the Recent 

Market Turbulence, at 2 (Mar. 6, 2008), available at 

http://www.occ.gov/publications/publications-bytype/other-publications/pub-other-risk-mgtpractices-2008.pdf (‘‘Firms likewise found that they 

could neither syndicate to external investors their 

leveraged loan commitments to corporate borrowers 

nor cancel their commitments to fund those loans 

despite material and adverse changes in the 

availability of funding from other investors in the 

market’’); BIS Private Equity Paper, supra note 35, 

at 1–2 (‘‘Conditions in the leveraged loan market 

deteriorated in the second half of 2007, and demand 

for leveraged finance declined sharply. An initial 

temporary adverse investor reaction to loose 

lending terms and low credit spreads prevailing in 

early 2007 became more protracted over the course 

of the second half of the year as the turbulence in 

financial markets deepened and contraction in 

demand for leveraged loans became more severe. 

Global primary market leveraged loan volumes 

shrank by more than 50% in the second half of 

2007. The contraction in demand for leveraged 

loans revealed substantial exposure of arranger 

banks to warehouse risk. Undistributed loans will 

contribute to increased funding costs and capital 

requirements for banks in 2008, on top of other 

offbalance sheet products that they have been 

forced to bring on-balance sheet. Moreover, with 

leveraged loan indices trading close to 90 cents on 

a dollar in March 2008, realisation of warehouse 

risks has resulted in significant mark to market 

losses to banks’’); Bank of England, Financial 

Stability Report, at 19 (Oct. 2007), available at 

http://www.bankofengland.co.uk/publications/fsr/ 

2007/fsrfull0710.pdf (‘‘Bank of England’’) (‘‘The near 

closure of primary issuance markets for 

collateralised loan obligations, and an increase in 

risk aversion among investors, left banks unable to 

distribute leveraged loans that they had originated 

earlier in the year. This exacerbated a problem 

banks already faced, as debt used to finance a 

number of high-profile private-equity sponsored 

leveraged buyouts (LBOs) had remained on their 

balance sheets.’’). 

73See Davidoff, supra note 71, at 495–496 (noting 

the trend in private equity transaction agreements 

signed prior to the financial crisis to have no 

financing condition and to have limited ‘‘market 

outs’’ and ‘‘lender outs’’ in the debt commitment 

letters and further noting that ‘‘by agreeing to a more 

certain debt commitment letter and providing 

bridge financing, the banks now took on the risk of 

market deterioration between the time of signing 

and closing.’’). Bank regulators and industry 

observers also noted the trend in private equity 

financing prior to the financial crisis for banks to 

enter into ‘‘covenant lite’’ loans, which did not 

require borrowers to meet certain performance 

metrics for cash flow or profits. See The Economics 

of Private Equity Investments: Symposium 

Summary, FRBSF Economic Letter (Feb. 29, 2008), 

available at http://www.frbsf.org/publications/ 

economics/letter/2008/el2008-08.html (noting 

growth in the first half of 2007 in such ‘‘covenant 

lite’’ loans); Financial Stability Forum, Report of the 

Financial Stability Forum on Enhancing Market and 

Institutional Resilience, at 7 (Apr. 7, 2008), 

available at http://www.financialstabilityboard.org/ 

publications/r_0804.pdf (‘‘Another segment that saw 

rapid growth in volume accompanied by a decline 

in standards was the corporate leveraged loan 

market, where lenders agreed to weakened loan 

covenants to obtain the business of private equity 

funds.’’); Bank of England, supra note 73, at 27 

(‘‘Market intelligence suggested that private equity 

sponsors had considerable market power to impose 

aggressive capital structures, tight spreads and weak 

covenants because investor demand was so strong. 

But in August, the flow of new LBOs came to a 

virtual standstill and the debt of a sequence of highprofile companies could not be sold [by banks].’’). 74See, e.g., Paying the Price, The Economist (Jul. 

31, 2010) (‘‘Pension funds could decide to make a 

geared bet on equities by borrowing money and 

investing in the S&P 500 index. But they would 

understandably regard such a strategy as highly 

risky. Giving money to private-equity managers, 

who then use debt to acquire quoted companies, is 

viewed in an entirely different light but amounts to 

the same gamble’’). See also BIS Private Equity 

Paper, supra note 35, at 24–25. 

results.67 During the financial crisis, 

several sponsors of ‘‘enhanced cash 

funds,’’ a type of liquidity fund, 

committed capital to those funds to 

prevent investors from realizing losses 

in the funds.68 The fact that sponsors of 

certain liquidity funds felt the need to 

support the stable value of those funds 

suggests that they may be susceptible to 

runs like registered money market 

funds. 

Registered money market funds are 

subject to extensive regulation under 

Investment Company Act rule 2a–7, 

which imposes credit-quality, maturity, 

and diversification requirements on 

money market fund portfolios designed 

to ensure that the funds’ investing 

remains consistent with the objective of 

maintaining a stable net asset value.69

While liquidity funds are not required 

to comply with rule 2a–7, we 

understand that many liquidity funds 

can suspend redemptions or impose 

gates on shareholder redemptions upon 

indications of stress at the fund. As a 

result, the risk of runs at liquidity funds 

may be mitigated. The information that 

the SEC is proposing to require advisers 

to liquidity funds report is designed to 

allow FSOC to assess liquidity funds’ 

susceptibility to runs and ability to 

otherwise pose systemic risk. 

The SEC requests comment on this 

analysis of the potential systemic risk 

posed by liquidity funds. Does it 

adequately identify the ways in which 

liquidity funds might generate systemic 

risk? Are there other ways that liquidity 

funds could create systemic risk? Do 

liquidity funds lack any potential to 

create systemic risk? Please explain 

your views and discuss their 

implications for the reporting proposed 

on Form PF. 

3. Private Equity Funds 

It is the SEC’s initial view, after 

consultation with staff representing 

FSOC’s members, that the activities of 

private equity funds, certain of their 

portfolio companies, or creditors 

involved in financing private equity 

transactions also may be important to 

the assessment of systemic risk and, 

therefore, that large advisers to these 

funds should provide targeted 

information on Form PF to allow FSOC 

to conduct basic systemic risk 

monitoring.70

One aspect of the private equity 

business model that some have 

identified as potentially having systemic 

implications is its method of financing 

buyouts of companies. Leveraged 

private equity transactions often rely on 

banks to provide bridge financing until 

the permanent debt financing for the 

transaction is completed, whether 

through a syndicated bank loan or 

issuance of high yield bonds by the 

portfolio company or both.71 When 

market conditions suddenly turn, these 

institutions can be left holding this 

potentially risky bridge financing (or 

committed to provide the final bank 

financing, but no longer able to 

syndicate or securitize it and thus 

forced to hold it) at precisely the time 

when credit market conditions, and 

therefore the institutions’ own general 

exposure to private equity transactions 

and other committed financings, have 

worsened.72 For example, prior to the 

recent financial crisis, a trend in private 

equity transactions was for private 

equity firms to enter into buyout 

transactions with seller-favorable 

financing conditions and terms that 

placed much of the risk of market 

deterioration after the transaction 

agreement was signed on the financing 

institutions and the private equity 

adviser.73

In addition, some industry observers 

have noted that the leveraged buyout 

investment model of imposing 

significant amounts of leverage on their 

portfolio companies in an effort to meet 

investment return objectives subjects 

those portfolio companies to greater risk 

in the event of economic stress.74 If 

private equity funds conduct a 


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75For example, some noted the role of private 

equity investments in companies that the 

government ultimately bailed out during the 

financial crisis. See, e.g., Casey Ross, Cerberus’ 

Success Hurt by a Pair of Gambles, The Boston 

Globe (Mar. 25, 2010) (discussing private equity 

investments in GMAC and Chrysler Corp., both of 

which received government bailouts); and Louise 

Story, For Private Equity, A Very Public Disaster, 

N.Y. Times (Aug. 8, 2009) (same). 

76See section II.D.4 of this Release for a 

discussion of the information we propose requiring 

certain private equity fund advisers report on Form 

PF. 

77See, e.g., PE Council Letter, supra note 49; 

Testimony of Mark Tresnowksi, General Counsel, 

Madison Dearborn Partners, before the Senate 

Banking Subcommittee on Securities, Insurance and 

Investment, July 15, 2009. 

78Proposed Advisers Act rule 204(b)–1. 

79Proposed CEA rule 4.27(d). 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 proposed 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. 

80See proposed Instruction 3 to Form PF. 

81See proposed Glossary of Terms to Form PF. 

This definition also is the same as the SEC has 

proposed in amendments to Form ADV. See 

Implementing Release, supra note 9. For purposes 

of the definition, the fund should not net long and 

short positions in calculating its borrowings but 

should include any borrowings or notional 

exposure of another person that are guaranteed by 

the fund or that the fund may otherwise be 

obligated to satisfy. In addition, a commodity pool 

that meets the definition of a private fund is treated 

as a hedge fund for purposes of Form PF. 

82See proposed Glossary of Terms to Form PF. 

83See proposed Glossary of Terms to Form PF. 

Proposed Form PF would define ‘‘real estate fund’’ 

as any private fund that is not a hedge fund, that 

does not provide investors with redemption rights 

in the ordinary course and that invests primarily in 

real estate and real estate-related assets. Proposed 

Form PF would define ‘‘securitized asset fund’’ as 

any private fund that is not a hedge fund and that 

issues asset backed securities and whose investors 

are primarily debt-holders. These definitions are 

designed to encompass entities that we believe are 

typically considered real estate or securitized asset 

funds, respectively, and 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. Proposed Form PF would define ‘‘venture 

capital fund’’ as any private fund meeting the 

definition of venture capital fund in rule 203(l)-1 

of the Advisers Act for consistency. See proposed 

Glossary of Terms to Form PF. See also Private 

Fund Exemption Release, supra note 9, for a 

discussion of proposed Advisers Act rule 203(l)–1. 

84See, e.g. Goldstein v. SEC, 451 F.3d 873 (DC 

Cir. 2006) (‘‘ ‘Hedge funds’ are notoriously difficult 

to define. The term appears nowhere in the federal 

securities laws, and even industry participants do 

not agree upon a single definition.’’) 

leveraged buyout of an entity that could 

be systemically important, information 

about that investment could be 

important in FSOC monitoring and 

assessing potential systemic risk.75

For these reasons, the SEC believes 

certain information on the activities of 

private equity funds and their portfolio 

companies is relevant for purposes of 

monitoring potential systemic risk.76 In 

addition, based on the SEC’s 

consultations with staff representing 

FSOC’s members, private equity 

transaction financings, and their 

interconnected impact on the lending 

institutions, could be a useful area for 

FSOC to monitor in fulfilling its duty to 

gain a comprehensive picture of the 

financial services marketplace in order 

to identify potential threats to the 

stability of the U.S. financial system. 

The SEC requests comment on this 

analysis of the potential systemic risk 

posed by the activities of private equity 

funds. Does it identify the ways in 

which private equity fund activities 

might generate systemic risk? Are there 

other ways that private equity funds or 

their activities could create systemic 

risk? Is the preliminary view that 

private equity fund activities may have 

less potential to create systemic risk 

than hedge funds and liquidity funds 

correct? Many advisers to private equity 

funds have noted that certain features of 

the private equity business model, such 

as its reliance on long-term capital 

commitments from investors, lack of 

substantial debt at the private equity 

fund level, and investment primarily in 

the equity of a diverse range of private 

companies, mitigate its potential to pose 

systemic risk.77 Do private equity funds 

not have any potential to create 

systemic risk? Is the monitoring of 

private equity fund activities 

unnecessary to assess systemic risk 

generally? Please explain your views 

and discuss their implications for the 

reporting proposed on Form PF. 

B. Who Must File Form PF 

We propose that any investment 

adviser registered or required to register 

with the SEC that advises one or more 

private funds must file a Form PF with 

the SEC.78 A CPO or CTA that also is 

a registered investment adviser that 

advises one or more private funds 

would be required to file Form PF with 

respect to any advised commodity pool 

that is a ‘‘private fund.’’ By filing Form 

PF with respect to these private funds, 

a CPO will be deemed to have satisfied 

certain of its filing requirements for 

these funds.79 Under these rules, most 

private fund advisers would be required 

to complete only section 1 of Form PF, 

providing certain basic information 

regarding any hedge funds they advise 

in addition to information about their 

private fund assets under management 

and more generally about their funds’ 

performance and use of leverage. The 

information collected under section 1 of 

Form PF is described in further detail in 

section II.D.1 of this Release. Certain 

larger private fund advisers would be 

required to complete additional sections 

of Form PF, which require more 

detailed information. 

Three types of ‘‘Large Private Fund 

Advisers’’ would be required to 

complete certain additional sections of 

Form PF: 80

• Advisers managing hedge funds 

that collectively have at least $1 billion 

in assets as of the close of business on 

any day during the reporting period for 

the required report; 

• Advisers managing a liquidity fund 

and having combined liquidity fund and 

registered money market fund assets of 

at least $1 billion as of the close of 

business on any day during the 

reporting period for the required report; 

and 

• Advisers managing private equity 

funds that collectively have at least $1 

billion in assets as of the close of 

business on the last day of the quarterly 

reporting period for the required report. 

1. Types of Funds 

Proposed Form PF would define 

‘‘hedge fund’’ as any private fund that (1) 

has a performance fee or allocation 

calculated by taking into account 

unrealized gains; (2) may borrow an 

amount in excess of one-half of its net 

asset value (including any committed 

capital) or may have gross notional 

exposure in excess of twice its net asset 

value (including any committed 

capital); or (3) may sell securities or 

other assets short.81 As noted above, 

‘‘liquidity fund’’ would be defined as 

any private fund that seeks to generate 

income by investing in a portfolio of 

short term obligations in order to 

maintain a stable net asset value per 

unit or minimize principal volatility for 

investors.82 ‘‘Private equity fund’’ would 

be defined 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

Our proposed definition of hedge 

fund would cover any private fund that 

has any one of three common 

characteristics of a hedge fund: A 

performance fee using market value 

(instead of only realized gains), high 

leverage or short selling. We are not 

aware of any standard definition of a 

hedge fund,84 although we note that our 

proposed definition is broadly based on 

those used in the FSA survey and in the 

IOSCO report described in section I.B 

above and thus generally would 

promote international consistency in 


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85The FSA survey is voluntary and does not 

proscriptively define a hedge fund, but states that 

if a fund generally satisfies a number of the 

following criteria, it should be deemed to fall 

within the scope of the FSA hedge fund survey: 

(1) Employs investment management techniques 

that can include the use of short selling, derivatives, 

and leverage; (2) takes in external investor money; 

(3) are not UCITS funds; (4) pursue absolute 

returns; (5) charge performance-based fees; (6) have 

broader mandates than traditional funds which give 

managers more flexibility to shift strategy; (7) have 

higher trading volumes/fund turnover; and (8) 

frequently set a high minimum investment limit. 

The IOSCO Report generally considered as a hedge 

fund all investment schemes displaying a 

combination of some of the following 

characteristics: (1) Borrowing and leverage 

restrictions are not applied; (2) significant 

performance fees are paid to the manager in 

addition to an annual management fee; (3) investors 

are typically permitted to redeem their interests 

periodically, e.g., quarterly, semi-annually or 

annually; (4) often significant ‘own’ funds are 

invested by the manager; (5) derivatives are used, 

often for speculative purposes, and there is an 

ability to short sell securities; and (6) more diverse 

risks or complex underlying products are involved. 

See IOSCO Report, supra note 24, at 4–5. 

86The SEC previously defined private fund for 

purposes of registration of advisers to hedge funds 

by focusing on the structure of the fund to 

differentiate it from other pooled investment 

vehicles, while the definition of hedge fund we 

propose today for purposes of Form PF reporting 

focuses on the strategy of the fund in order to 

monitor trading strategies and behaviors which 

could contribute to systemic risk. See Registration 

under the Advisers Act of Certain Hedge Fund 

Advisers, Investment Advisers Act Release No. 2333 

(Dec. 2, 2004), 69 FR 72054 (Dec. 10, 2004) 

(rulemaking vacated, Goldstein, 451 F.3d at 884). 87See HFI, supra note 20. 

88Preqin. The Preqin data relating to private 

equity fund committed capital is available in File 

No. S7–05–11. 

89See, e.g., iMoneyNet, Enhanced Cash Report 

(3rd quarter 2009). 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. 

90We note that the SEC has proposed to collect 

information regarding the governance of private 

fund advisers through Form ADV. See 

Implementing Release, supra note 9. 

hedge fund reporting.85 Moreover, we 

believe that any fund meeting this 

definition is an appropriate subject for 

this higher level of reporting even if the 

fund would not otherwise be considered 

a hedge fund. 

The Commissions request comment 

on the hedge fund definition proposed 

in Form PF.86 Does this proposed 

definition capture the appropriate 

features of funds that should be subject 

to more detailed reporting as ‘‘hedge 

funds’’? Many private funds sell short. Is 

the bright line of classifying any private 

fund that engages in short selling as a 

hedge fund appropriate? Is the proposed 

leverage threshold for hedge funds set at 

the appropriate level? One alternative 

approach we could take is to not define 

a hedge fund in Form PF and simply 

require that all advisers managing in 

excess of $1 billion in private fund 

assets (regardless of strategy) complete 

section 2 of Form PF. Would this be a 

more effective approach? For purposes 

of Form PF, a commodity pool satisfying 

the definition of a ‘‘private fund’’ is 

categorized as a hedge fund. Is this 

treatment appropriate? 

The proposed definition of liquidity 

fund is designed to capture all potential 

substitutes for money market funds 

because we believe these funds may be 

susceptible to runs and otherwise pose 

systemic risk that FSOC will want to 

monitor. The SEC recognizes that its 

proposed definition of liquidity fund 

potentially could capture some shortterm bond funds. Are there ways that 

the SEC could define a liquidity fund to 

capture all potential substitutes for 

money market funds, but not short-term 

bond funds? The SEC requests comment 

on the liquidity fund definition 

proposed in Form PF. 

Our proposed definition of a private 

equity fund is intended to distinguish 

private equity funds from other private 

funds based upon the lack of 

redemption rights and their not being 

engaged in certain investment strategies 

(such as securitization, real estate or 

venture capital), while these funds 

would typically have performance fees 

based on realized gains. Has the SEC 

appropriately distinguished private 

equity funds from other types of private 

funds in its proposed definition? Should 

others be excluded? The SEC requests 

comment on the private equity fund 

definition proposed in Form PF. 

2. Large Private Fund Adviser 

Thresholds 

As noted above, we are proposing $1 

billion in hedge fund assets under 

management as the threshold for large 

hedge fund adviser reporting, $1 billion 

in combined liquidity fund and 

registered money market fund assets 

under management as the threshold for 

large liquidity fund adviser reporting, 

and $1 billion in private equity fund 

assets under management as the 

threshold for large private equity fund 

adviser reporting. Advisers would be 

required to measure whether these 

thresholds have been crossed daily for 

hedge funds and liquidity funds and 

quarterly for private equity funds based 

on our belief 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. 

We designed these thresholds so that 

the group of Large Private Fund 

Advisers that would be included based 

on the proposed thresholds is relatively 

small in number but represents the large 

majority of their respective industries 

based on assets under management. For 

example, we understand that the 

approximately 200 U.S.-based advisers 

managing at least $1 billion in hedge 

fund assets represent over 80 percent of 

the U.S. hedge fund industry based on 

assets under management.87 Similarly, 

SEC staff estimates that the 

approximately 250 U.S.-based advisers 

managing over $1 billion in private 

equity fund assets represent 

approximately 85 percent of the U.S. 

private equity fund industry based on 

committed capital.88

The SEC is proposing that private 

fund advisers combine liquidity fund 

and registered money market fund 

assets for purposes of determining 

whether the adviser meets the threshold 

for more extensive reporting regarding 

its liquidity funds because it 

understands that an adviser’s liquidity 

funds and registered money market 

funds often pursue similar strategies 

and invest in the same securities and 

thus are subject to many of the same 

risks. Historically, most advisers of 

enhanced cash funds or other 

unregistered money market funds also 

advised a substantial amount of 

registered money market fund assets, 

and so the SEC’s criteria for liquidity 

fund reporting is expected to encompass 

most significant managers of liquidity 

funds, which it estimates number 

around 80 advisers.89

We believe that requiring basic 

information from all advisers about all 

private funds but more extensive and 

detailed information only from advisers 

with these amounts of assets under 

management in hedge funds, private 

equity funds, and liquidity funds would 

allow FSOC to effectively conduct basic 

monitoring for potential systemic risk in 

these private fund industries and to 

identify areas where OFR may want to 

obtain additional information. In 

addition, requiring that only these Large 

Private Fund Advisers complete 

additional reporting requirements under 

Form PF would provide systemic risk 

information for most private fund assets 

while minimizing burdens on smaller 

private fund advisers that are less likely 

to pose systemic risk concerns. The 

proposed approach thus incorporates 

Congress’ directive in section 408 of the 

Dodd-Frank Act to take into account the 

size, governance, and investment 

strategy of advisers to mid-sized private 

funds in determining whether they pose 

systemic risk and formulating systemic 

risk reporting and recordkeeping 

requirements for private funds.90


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91See proposed Instructions 3, 5, and 6 to Form 

PF; and proposed Glossary of Terms to Form PF. 

See also definitions of ‘‘hedge fund assets under 

management,’’ ‘‘liquidity fund assets under 

management,’’ and ‘‘private equity fund assets under 

management’’ in the proposed Glossary of Terms to 

Form PF. 

92See proposed 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). See proposed Glossary of Terms 

to Form PF and Glossary of Terms to Form ADV. 

The adviser would be permitted, but not required, 

to file one consolidated Form PF for itself and its 

related persons. See section II.B.4 of this Release 

below. 

93See proposed Instruction 7 to Form PF. 

94See proposed Instruction 1 to Form PF. ‘‘United 

States person’’ would have the meaning provided in 

proposed rule 203(m)-1 of the Advisers Act, and 

‘‘principal office and place of business’’ would have 

the same meaning as in Form ADV. See Private 

Fund Exemption Release, supra note 9. 

95See proposed Instruction 2 to Form PF. See 

supra note 92 for the definition of ‘‘related person.’’ 

96See proposed Instruction 4 to Form PF. 

97See proposed Advisers Act rule 204(b)–1. 

98See Private Fund Exemption Release, supra 

note 9; Implementing Release, supra note 9. 

99To the extent an exempt reporting adviser is 

registered with the CFTC as a CPO or CTA, that 

adviser would be obligated to file either proposed 

Form CPO–PQR or CTA–PR, respectively. 

100See Senate Committee Report, supra note 4, at 

74 (‘‘The Committee believes that venture capital 

Continued 

We request comment on the proposed 

thresholds. Are there more appropriate 

dividing lines as to when a private fund 

adviser should be required to report 

more information? Should any of the 

assets under management thresholds be 

lower or higher? Are the daily (for hedge 

fund and liquidity fund managers) and 

quarterly (for private equity fund 

managers) measurement periods for the 

assets under management thresholds set 

appropriately? Should we, as proposed, 

base the threshold on the amount of 

assets under management? If not, what 

should we base it on? 

We request comment on our proposed 

approach of only requiring these Large 

Private Fund Advisers to report 

additional information on Form PF. Will 

collecting the information required by 

sections 2, 3, and 4 of Form PF only 

from advisers managing in excess of 

these asset thresholds provide adequate 

information about potential systemic 

risk in these industries? Should we 

instead require that all private fund 

advisers registered with the SEC 

complete all of the information on Form 

PF appropriate to the type of private 

funds they advise regardless of fund size 

or assets under management? Are there 

advisers to other types of private funds 

that should be required to report more 

information on Form PF? For example, 

should advisers to other types of private 

fund report more information if they 

manage in excess of a certain threshold 

of that type of private fund assets? 

3. Aggregation of Assets Under 

Management 

For purposes of determining whether 

an adviser is a Large Private Fund 

Adviser for purposes of Form PF, each 

adviser would have to 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 the private fund (‘‘parallel 

managed accounts’’); 91 and 

• Assets of that type of private fund 

advised by any of the adviser’s ‘‘related 

persons.’’ 92

These proposed aggregation 

requirements are designed to prevent an 

adviser from avoiding the proposed 

Large Private Fund Adviser reporting 

requirements by re-structuring the 

manner of providing private fund advice 

internally within the private fund 

manager group. The adviser also would 

be required to exclude any assets in any 

account that are solely invested in other 

funds (i.e., internal or external fund of 

funds) in order to avoid duplicative 

reporting.93 We request comment on 

these proposed aggregation 

requirements. Would these proposed 

aggregation rules appropriately meet our 

goal of preventing improper avoidance 

of the reporting requirements while 

giving a complete picture of private 

fund assets managed by a particular 

private fund adviser group? Would 

aggregating in a different manner be 

more effective at meeting our goal? 

Should funds that invest most (e.g., 95 

percent), but not all, of their assets in 

other funds be excluded from Form PF 

reporting? Would excluding such funds 

still provide FSOC with a complete 

enough picture of private fund activities 

to have an adequate baseline for 

systemic risk monitoring purposes? 

If the adviser’s principal office and 

place of business is outside the United 

States, the adviser could exclude any 

private fund that during the last fiscal 

year was neither a United States person 

nor offered to, or beneficially owned by, 

any United States person.94 This aspect 

of the proposed form is designed to 

allow an adviser to report with respect 

to only those private funds that are more 

likely to implicate U.S. regulatory 

interests. We request comment on this 

aspect of the proposed form. Should we 

require different reporting relating to 

foreign advisers or foreign private 

funds? 

4. Reporting for Affiliated and 

Subadvised Funds 

To provide private fund advisers with 

reporting flexibility and convenience, 

the adviser could, 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.95 This would allow affiliated 

entities that share reporting and risk 

management systems to report jointly 

while also permitting affiliated entities 

that operate separately to report 

separately. With respect to sub-advised 

funds, to prevent duplicative reporting, 

only one adviser would report 

information on Form PF with respect to 

that fund. For reporting efficiency and 

to prevent duplicative reporting, we are 

proposing that if an adviser completes 

information on Schedule D of Form 

ADV with respect to any private fund, 

the same adviser would be responsible 

for reporting on Form PF with respect 

to that fund.96 We request comment on 

this approach. Should we not allow 

advisers to file a consolidated form with 

its related persons? Are there other 

persons related to a private fund adviser 

that should also be able to report on 

Form PF on a consolidated basis? For 

example, should we adjust Form PF to 

permit consolidated reporting with 

related persons that are exempt 

reporting advisers in the event an 

adviser chooses to voluntarily report 

exempt reporting adviser information? 

Should we allow a different 

arrangement on reporting of sub-advised 

funds? If so, what would those 

arrangements be? 

5. Exempt Reporting Advisers and Other 

Advisers Not Registered With the SEC 

We are proposing that only private 

fund advisers registered with the SEC 

(including those that are also registered 

with the CFTC as CPOs or CTAs) file 

Form PF.97 The Dodd-Frank Act created 

exemptions from SEC registration under 

the Advisers Act for advisers solely to 

venture capital funds or for advisers to 

private funds that in the aggregate have 

less than $150 million in assets under 

management in the United States 

(‘‘exempt reporting advisers’’).98 We are 

not proposing that exempt reporting 

advisers be required to file Form PF.99

We believe that Congress’ determination 

to exempt these advisers from SEC 

registration indicates Congress’ belief 

that they are sufficiently unlikely to 

pose systemic risk that regular reporting 

of detailed information may not be 

necessary.100 Based on consultation 


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8078 Federal Register / Vol. 76, No. 29 / Friday, February 11, 2011 / Proposed Rules 

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 Private Fund Exemption 

Release, supra note 9. 

101Section 404 of the Dodd-Frank Act states that 

the SEC ‘‘shall issue rules requiring each investment 

adviser to a private fund to file reports containing 

such information as the [SEC] deems necessary and 

appropriate in the public interest and for the 

protection of investors or for the assessment of 

systemic risk,’’ (emphasis added). 

102See proposed rule 204(b)–1(a). 

103See proposed Advisers Act rule 204(b)–1(e). 

104See proposed Instruction 7 to Form PF. 

105See Report of the Asset Manager’s Committee 

to the President’s Working Group on Financial 

Markets, Best Practices for the Hedge Fund Industry 

(Jan. 15, 2009), available at http:// 

www.amaicmte.org/Public/AMC%20Report%20- 

%20Final.pdf (discussing best practices on 

disclosing to investors performance data, assets 

under management, risk management practices 

(including on asset types, geography, leverage, and 

concentrations of positions) with which SEC staff 

understands many hedge funds comply). 

106See proposed Instruction 8 to Form PF. 

107See proposed rule 204(b) 1(f). The adviser 

would check the box in Section 1a of Form PF 

indicating that it was requesting a temporary 

hardship exemption and complete Section 5 of 

Form PF no later than one business day after the 

electronic Form PF filing was due and 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. 

108The SEC will work closely with the firm it 

selects to create and program a system for Form PF 

with staff representing FSOC’s members 

and on the basic information that the 

SEC has proposed requiring exempt 

reporting advisers report to the SEC on 

Form ADV, the SEC is not proposing to 

extend Form PF reporting to these 

advisers. 

Our proposed rules, however, would 

require some advisers managing less 

than $150 million in private fund assets 

to report limited information on Form 

PF. While Congress exempted from 

registration with the SEC advisers solely 

to private funds that in the aggregate 

have less than $150 million in assets 

under management, it provided no such 

exemption for advisers with less than 

$150 million in private fund assets 

under management that also, for 

example, advise individual clients with 

over $100 million in assets under 

management. Because this latter group 

of advisers is registered with the SEC 

and thus is subject to the full range of 

investor protection efforts that 

accompany registration, and because of 

the limited burden of the basic 

reporting, we believe it is appropriate to 

require these advisers to complete and 

file section 1 of Form PF. We request 

comment on this approach. Should we 

require that exempt reporting advisers 

file Form PF? 101 Why or why not? If so, 

which portions of Form PF should we 

require that exempt reporting advisers 

complete? 

C. Frequency of Reporting 

The Commissions propose to require 

that all private fund advisers other than 

the Large Private Fund Advisers 

discussed above complete and file a 

Form PF on an annual basis. A newly 

registering adviser’s initial Form PF 

filing would be submitted within 15 

days of the end of its next occurring 

calendar quarter after registering with 

the SEC so that FSOC can begin 

including this data in its analysis as 

soon as possible.102 Annual updates 

would be due no later than the last day 

on which the adviser may timely file its 

annual updating amendment to Form 

ADV (currently, 90 days after the end of 

the adviser’s fiscal year).103 This 

frequency of reporting would allow the 

Commissions and FSOC to periodically 

monitor certain key information 

relevant to assessing systemic risk posed 

by these private funds on an aggregate 

basis. It also 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. Finally, this timing will 

facilitate FSOC’s compilation and 

analysis of Form PF and Form ADV data 

for these filers since both sets of data 

will be reported as of the same date. 

Large Private Fund Advisers would be 

required to complete and file a Form PF 

no later than 15 days after the end of 

each calendar quarter.104 Our 

preliminary view is that, unlike for 

smaller private fund advisers, quarterly 

reporting for Large Private Fund 

Advisers is necessary in order to 

provide FSOC with timely data to 

identify emerging trends in systemic 

risk. We understand that hedge fund 

advisers already collect and calculate 

much of the information that would be 

required by Form PF relating to hedge 

funds on a quarterly basis.105 As a 

result, quarterly reporting on Form PF 

would coincide with most hedge fund 

advisers’ internal reporting cycles and 

leverage data collection systems and 

processes already existing at these 

advisers. In addition, we believe that 

most liquidity fund advisers collect on 

a monthly basis much of the 

information that we are proposing be 

reported in section 3 of Form PF and 

thus quarterly reporting should be 

relatively efficient for these advisers. 

We anticipate that Large Private Fund 

Advisers would be able to collect and 

file this information within 15 days after 

the end of each quarter, which is 

sufficiently timely for FSOC’s use in 

conducting systemic risk monitoring. 

Advisers would be required to file 

Form PF to report that they are 

transitioning to only filing Form PF 

annually with the Commissions or to 

report that they no longer meet the 

requirements for filing Form PF no later 

than the last day on which the adviser’s 

next Form PF update would be 

timely.106 This would allow 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 also would be able to avail 

themselves of a temporary hardship 

exemption in a similar manner as with 

other Commission filings if they are 

unable to file Form PF electronically in 

a timely manner due to unanticipated 

technical difficulties.107

We request comment on our proposed 

filing frequency. Are the filing 

requirements for private fund advisers 

frequent enough to assess high-level 

systemic risk posed by private funds? 

Should smaller private fund advisers 

have to file more frequently or less 

frequently? Should Large Private Fund 

Advisers be required to file Form PF 

more frequently (such as monthly) or 

less frequently (such as annually or 

semiannually)? Is 90 days for an annual 

update or 15 days for a quarterly update 

too long to ensure reporting of timely 

information? Would more or less time 

be more appropriate? Specifically, 

would 15 days be enough time for Large 

Private Fund Advisers to prepare and 

file quarterly reports? Is there 

information in the form that should be 

amended promptly if it becomes 

inaccurate? Should Large Private Fund 

Advisers be required to file Form PF as 

of the end of each calendar quarter or 

as of the end of each fiscal quarter? 

Currently, we anticipate that the 

proposed rules requiring filing of Form 

PF would have a compliance date of 

December 15, 2011, at which time Large 

Private Fund Advisers would begin 

filing 15 days after the end of each 

quarter (i.e., Large Private Fund 

Advisers would need to make their 

initial Form PF filing by January 15, 

2012). This timing should allow 

sufficient time for Large Private Fund 

Advisers to develop systems for 

collecting the information required on 

Form PF and prepare for filing. We 

currently anticipate that this timeframe 

also would give the SEC sufficient time 

to create and program a system to accept 

filings of Form PF.108 We are proposing 


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filings and will monitor whether it could do so on 

this timeframe. 

109See proposed Advisers Act rule 204(b)–1(g). 

110See supra note 24. 

111Section 1 would require the adviser to indicate 

the adviser’s total ‘‘regulatory assets under 

management,’’ using the same proposed definition 

of that term as used on proposed amendments to 

Part 1 of Form ADV, and its net assets under 

management, which subtracts out any liabilities of 

the private funds. See Implementing Release, supra 

note 9. Form PF, however, would require the 

adviser to aggregate parallel managed accounts with 

related private funds in reporting its assets under 

management (even if the accounts are not 

‘‘securities portfolios’’ within the meaning of 

proposed Instruction 5.b, Instructions to Part 1A of 

Form ADV), and thus the total and net assets under 

management figures reported in section 1a of Form 

PF may differ from what the adviser reports on 

Form ADV. Proposed question 2 would require the 

adviser to report what portion of these assets under 

management 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. See section II.B.1 of this 

Release for a discussion of these different types of 

funds and their proposed definitions for purposes 

of Form PF. 

112See proposed Instructions 5 and 6 to Form PF. 

When providing responses in Form PF with respect 

to a private fund, the adviser also must include any 

parallel managed accounts related to the private 

fund. Id. 

113The form would require the adviser to report 

the total gross notional value of its funds’ derivative 

positions, except that options would be reported 

using their delta adjusted notional value. Long and 

short positions would not be netted. See proposed 

Form PF, instructions to question 11. 

114See proposed question 12 on Form PF. 

115This information also would be useful for 

advancing the Commissions’ investor protection 

goals. 

116Specifically, proposed questions 19 and 20 on 

Form PF would require the adviser to identify the 

five trading counterparties to which the fund has 

the greatest net counterparty credit exposure 

(measured as a percentage of the fund’s net asset 

value) and that have the greatest net counterparty 

credit exposure to the fund (measured in U.S. 

dollars). 

117More specifically, proposed question 21 on 

Form PF would require estimated breakdowns of 

percentages of the hedge fund’s securities and 

derivatives traded on a regulated exchange versus 

over the counter and percentages of the hedge 

fund’s securities, derivatives, and repos cleared by 

a central clearing counterparty (‘‘CCP’’) versus 

bilaterally (or, in the case of repos, that constitute 

a tri-party repo). 

that the rules allow smaller private fund 

advisers until 90 days after the end of 

their first fiscal year occurring on or 

after the compliance date of the 

proposed rule to file their first Form PF 

(with the expectation that this would 

result in smaller private fund advisers 

with a December 31 fiscal year end 

filing their first Form PF by March 31, 

2012) because we anticipate that some 

of these advisers may require more time 

to prepare for their initial Form PF filing 

and so that the first group of private 

fund advisers filing Form PF would all 

be reporting based generally on 

information as of December 31, 2011.109

Under this proposed compliance date 

and transition rule, smaller private fund 

advisers would have at least eight 

months after adoption of the proposed 

form, depending on their fiscal year 

end, to file their first Form PF. We 

request comment on when advisers 

should be required to comply with the 

proposed rules and file Form PF. Do the 

compliance dates and transition times 

that we have proposed provide 

sufficient time for smaller advisers and 

Large Private Fund Advisers to prepare 

for filing? 

D. Information Required on Form PF 

The questions contained in proposed 

Form PF reflect relevant requirements 

and considerations under the DoddFrank 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 we propose 

requiring registered advisers to file on 

Form PF also is broadly based on the 

guidelines discussed in the IOSCO 

Report with many of the more detailed 

items generally tracking questions 

contained in the surveys of large hedge 

fund advisers conducted by the FSA 

and other IOSCO members.110 We 

expect that the information collected on 

Form PF would assist FSOC in 

monitoring and assessing any systemic 

risk, as discussed in section II.A above, 

that may be posed by private funds. We 

discuss below the information that Form 

PF would require. 

1. Section 1 

Section 1 would apply to all 

investment advisers required to file 

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. Section 1a also 

would require reporting of basic 

aggregate information about the private 

funds managed by the adviser, such as 

total and net assets under management, 

and the amount of those assets that are 

attributable to certain types of private 

funds.111 This identifying information 

would 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. 

Section 1b of Form PF would elicit 

certain identifying and other basic 

information about each private fund 

advised by the investment adviser. The 

adviser generally would need to 

complete a separate section 1b for each 

private fund it advised. However, 

because feeder funds typically invest 

substantially all their assets in a master 

fund, to prevent duplicative reporting 

the adviser must report information in 

section 1b on an aggregated basis for 

private funds that are part of a masterfeeder arrangement and so would not 

file a separate section 1b for any feeder 

fund.112

Section 1b would require reporting of 

each private fund’s gross and net assets 

and the aggregate notional value of its 

derivative positions.113 It also would 

require basic information about the 

fund’s borrowings, including a 

breakdown of the fund’s borrowing 

based on whether the creditor is a U.S. 

financial institution, foreign financial 

institution or non-financial institution 

as well as 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. This 

section would require reporting of 

certain basic information about how 

concentrated the fund’s investor base is, 

such as the number of beneficial owners 

of the fund’s equity and the percentage 

of the fund’s equity held by the five 

largest equity holders.114 Finally, 

section 1b would require monthly and 

quarterly performance information 

about each fund. 

The information required by section 

1b would 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.115 It would 

allow FSOC to monitor borrowing 

practices for the broader private fund 

industry, which may have 

interconnected impacts on banks 

(including specific banks) and thus the 

broader financial system. We believe 

that collecting both monthly and 

quarterly performance data also would 

allow FSOC to monitor the data at 

sufficient granularity to track trends. 

Finally, section 1c would require 

reporting of certain information only 

about hedge funds managed by the 

adviser, such as their investment 

strategies, percentage of the fund’s 

assets managed using computer-driven 

trading algorithms, significant trading 

counterparty exposures (including 

identity of counterparties),116 and 

trading and clearing practices.117 This 

information will enable FSOC to 


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8080 Federal Register / Vol. 76, No. 29 / Friday, February 11, 2011 / Proposed Rules 

118For example, the FSA survey asks for 

identification of the hedge fund’s top five 

counterparties in terms of net credit exposure. It 

also asks 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 CCP versus bilaterally. 

119See section II.B of this Release. 

120For example, we are proposing that in some 

cases the data be broken down between issuers that 

are financial institutions and those that are not. The 

FRB publishes flow of funds data, which is 

available at http://www.federalreserve.gov/releases/ 

z1/. 

121See proposed Instruction 3 to Form PF. 

Advisers should not complete section 2 with 

respect to assets managed by a fund of hedge funds. 

See proposed Instruction 7 to Form PF. 

122See proposed Instructions 5 and 6 to Form PF. 

Parallel funds are 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 proposed Glossary of 

Terms to Form PF. 

monitor systemic risk that could be 

transmitted through counterparty 

exposure, track how different strategies 

are affected by and correlated with 

different market stresses, and follow the 

extent of private fund activities 

conducted away from regulated 

exchanges and clearing systems. We 

have based some of this information, 

such as information about significant 

trading counterparty exposures and 

trading and clearing practices, on the 

FSA surveys, which would promote 

international consistency in hedge fund 

reporting.118

We request comment on section 1 of 

proposed Form PF. Is there additional 

basic information that we should 

require from all advisers filing Form PF 

or regarding all of the hedge funds or 

other private funds that they manage? 

For example, should we require any of 

the more detailed information about 

their borrowing practices that we 

require regarding large hedge funds in 

Item B of section 2b? Is a creditor 

providing 5 percent of the fund’s 

borrowings an appropriate threshold for 

significant creditors of whose identity 

FSOC may want to be aware for 

purposes of assessing the fund’s 

interconnectedness in the financial 

system? Should the threshold be more 

or less? Are the top five equity holders 

in the fund an appropriate threshold for 

significant investors in the fund? 

Should the threshold be more or less? 

Should we require assets under 

management information for other 

private fund categories than those 

specified in question 4? Should we 

request that performance data be 

reported on a different basis than 

monthly and quarterly? Are there other 

primary investment strategies that hedge 

funds use that should be included in 

question 17? Is the information we have 

proposed requiring on the fund’s 

borrowings necessary given that other 

questions in section 1b ask for 

information on the fund’s gross and net 

assets? Will asking for the amount and 

identity of the five trading 

counterparties to which the fund has the 

greatest net counterparty credit 

exposure and that have the greatest net 

counterparty credit exposure to the fund 

appropriately track significant 

exposures for systemic risk assessment 

purposes? Have we requested 

appropriate information on trading and 

clearing practices sufficient to allow 

FSOC to examine systemic risks relating 

to trading and clearing outside of 

regulated exchanges and central clearing 

systems? Is there information in section 

1 that we should not require, or that we 

should only require of large hedge fund 

advisers and why? With respect to the 

aggregation of master-feeder 

arrangements for reporting purposes, are 

there common situations in which an 

adviser will not have sufficient access to 

a feeder fund’s information to report 

accurately on Form PF? If so, how 

should the form address those 

situations? We also request comment 

more generally on the definitions of 

terms we have proposed in the glossary 

of terms for Form PF. 

2. Section 2 

Form PF would require private fund 

advisers who had at least $1 billion in 

hedge fund assets under management as 

of the close of business on any day 

during the reporting period to complete 

section 2.119 Section 2a would require 

certain aggregate information about the 

hedge funds advised by Large Private 

Fund Advisers, such as the market 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). It 

also would require the adviser to report 

the duration of fixed income portfolio 

holdings (including asset backed 

securities), to indicate the assets’ 

interest rate sensitivity, as well as the 

turnover rate of the adviser’s aggregate 

portfolios during the reporting period to 

provide an indication of the adviser’s 

frequency of trading. Finally, the 

adviser would be required to report a 

geographic breakdown of investments 

held by the hedge funds it advises. 

This information would assist FSOC 

in monitoring asset classes in which 

hedge funds may be significant 

investors and trends in hedge funds’ 

exposures to allow FSOC to identify 

concentrations in particular asset 

classes (or in particular geographic 

regions) that are building or 

transitioning over time. It would aid 

FSOC in examining large hedge fund 

advisers’ role as a source of liquidity in 

different asset classes. In some cases, we 

are proposing that the information be 

broken down into categories that would 

facilitate FSOC’s use of flow of funds 

information, which is an important tool 

for evaluating trends in and risks to the 

U.S. financial system.120 This 

information also is designed to address 

requirements under section 404 of the 

Dodd-Frank Act specifying certain 

mandatory contents for records and 

reports that must be maintained and 

filed by advisers to private funds. For 

example, it would provide information 

about the types of assets held and 

trading and investment positions and 

practices. 

Section 2b of Form PF would require 

large hedge fund advisers to report 

certain additional information about any 

hedge fund they advise with a net asset 

value of at least $500 million as of the 

close of business on any day during the 

reporting period (a ‘‘qualifying hedge 

fund’’).121 For purposes of determining 

whether a private fund is a qualifying 

hedge fund, the adviser would have to 

aggregate any parallel managed 

accounts, parallel funds, and funds that 

are part of the same master-feeder 

arrangement, and would have to treat 

any private funds managed by its related 

person as if they were managed by the 

filing adviser.122 We are proposing this 

aggregation to prevent an adviser from 

structuring its activities to avoid the 

reporting requirement. We have selected 

$500 million as a threshold for more 

extensive individual hedge fund 

reporting because we believe that a $500 

million hedge fund is a substantial fund 

the activities of which could have an 

impact on particular markets in which 

it invests or on its particular 

counterparties. We also believe that 

setting this threshold at this level would 

minimize reporting burdens on advisers 

to smaller or start up hedge funds that 

are less likely to have a systemic impact. 

Finally, this threshold is the same 

threshold used by the FSA in its hedge 

fund surveys and thus would create a 

certain level of consistency in reported 

data. 

We request comment on the 

qualifying hedge fund threshold. Should 

it be lower or higher? If so, why? Should 

large hedge fund advisers have to report 

the information for all their hedge 

funds? Could all of such advisers’ hedge 

funds, in the aggregate, potentially have 

a systemic impact that would merit such 


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123See proposed question 26 on Form PF. 

124See proposed questions 27–34 on Form PF. 

For example, question 28 would require reporting 

of the percentage of the fund’s portfolio capable of 

being liquidated within different time periods. 

Question 31 would require 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. Questions 

32 and 33 would require reporting of initial and 

variation margin for collateral securing exposure to 

the fund’s top five counterparty groups as well as 

the face amount of letters of credit posted and 

certain information on rehypothecation of such 

collateral. 

125For example, the FSA survey asks for the 

percentage of the hedge fund’s portfolio that can be 

liquidated within different time periods and the 

identity of the fund’s top three CCPs in terms of net 

credit exposure. 

126 If VaR was calculated, the adviser would have 

to report the confidence interval, time horizon, 

whether any weighting was used, and the method 

used to calculate VaR (historical simulation, Monte 

Carlo simulation, parametric, or other). If 

applicable, the adviser would have to report the 

historical lookback period used. The adviser would 

also have to report if it did not regularly calculate 

VaR. See proposed question 35 on Form PF. 

127The market factors are changes in: equity 

prices, risk free interest rates, credit spreads, 

currency rates, commodity prices, option implied 

volatilities, ABS default rates, and corporate bond 

default rates. Advisers are permitted to omit a 

response with respect to any market factor that it 

did not regularly consider in the reporting fund’s 

risk management. However, to be ‘‘regularly 

considered’’ in the fund’s risk management does not 

require that the adviser have conducted stress 

testing on that market factor (it could simply mean, 

for example, that the fund’s risk managers 

recognized that such a market factor could have an 

impact on the fund’s portfolio). See proposed 

question 36 on Form PF and related instructions. 

128A side pocket is a type of account used by 

private funds to separate illiquid assets from other 

more liquid fund investments. Only investors in the 

hedge fund at the time the asset is put in the side 

pocket (and not future investors) will be entitled to 

a share of proceeds from that investment. A gate is 

a restriction imposed by the manager of a private 

fund on permissible redemptions from the fund 

during a certain period of time. The standards for 

imposing suspensions and gates may vary among 

funds, so in responding to these questions, an 

adviser would be expected to make a good faith 

determination as to which provisions of the 

reporting fund’s governing documents would likely 

be triggered during conditions that it views as 

significant market stress. 

reporting? Should Form PF have 

different requirements regarding 

aggregating parallel managed accounts, 

parallel funds, or feeder funds or 

aggregating hedge funds managed by 

affiliates? 

Section 2b would require reporting of 

the same information as that requested 

in section 2a regarding exposure to 

different types of assets.123 In this 

section, however, this information 

would be reported separately for each 

qualifying hedge fund the adviser 

manages. Section 2b also would require 

on a per fund basis data not requested 

in section 2a. The adviser would be 

required to report information regarding 

the qualifying hedge fund’s portfolio 

liquidity, concentration of positions, 

collateral practices with significant 

counterparties, and the identity of, and 

clearing relationships with, the three 

central clearing counterparties to which 

the fund has the greatest net 

counterparty credit exposure.124 This 

information is designed to assist FSOC 

in monitoring the composition of hedge 

fund exposures over time as well as the 

liquidity of those exposures. The 

information also would 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 and 

interconnectedness with central clearing 

counterparties. Finally, some of this 

information, such as information about 

the identity of three central clearing 

counterparties to which the fund has the 

greatest net counterparty credit 

exposure and fund asset liquidity 

information, was broadly based on 

information requested by the FSA 

survey, which would promote 

international consistency in hedge fund 

reporting.125

Section 2b also would require for each 

qualifying hedge fund data regarding 

certain hedge fund risk metrics, 

financing information, and investor 

information. If during the reporting 

period the adviser regularly calculated a 

value at risk (‘‘VaR’’) metric for the 

qualifying hedge fund, the adviser 

would have to report VaR for each 

month of the reporting period.126 The 

form also would require the adviser to 

report the impact on the fund’s portfolio 

from specified changes to certain 

identified market factors, if regularly 

considered in the fund’s risk 

management, broken down by the long 

and short components of the qualifying 

hedge fund’s portfolio.127 This 

information is designed to allow FSOC 

to track basic sensitivities of the hedge 

fund to common market sensitivities, 

correlations in those factor sensitivities, 

and trends in those factor sensitivities 

among large hedge funds. 

Item D of Section 2b would require 

reporting of certain financing 

information for each qualifying hedge 

fund, including a monthly breakdown of 

its secured and unsecured borrowing 

and its derivatives exposures as well as 

information about the value of the 

collateral and letters of credit 

supporting the secured borrowing and 

derivatives exposures and the types of 

creditors. It also would require a 

breakdown of the term of the fund’s 

committed financing. This information 

would assist FSOC in monitoring 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. Collecting financing 

data broken down on a monthly basis 

should provide FSOC with sufficient 

granularity to identify trends. 

Finally, Item E of section 2b would 

require the private fund adviser to 

report information about each qualifying 

hedge fund’s investor composition and 

liquidity. For example, it contains 

questions about the fund’s side pocket 

and gating arrangements and provides 

for a breakdown of the percentage of the 

fund’s net asset value that is locked in 

for different periods of time.128 We 

believe this information may be 

important in allowing 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. 

The information in proposed section 

2b also is designed to address 

requirements under section 404 of the 

Dodd-Frank Act for records and reports 

that the SEC requires of private fund 

advisers, such as monitoring the amount 

of assets under management and the use 

of leverage, counterparty credit risk 

exposure, trading and investment 

positions, and the types of assets held. 

We request comment on the information 

that we propose requiring large hedge 

fund advisers to report under section 2. 

Is there additional information with 

respect to the types of their investments, 

use of leverage, or counterparties that 

we should require and why? Have we 

asked for appropriate time period 

breakdowns of the fund’s liquidity in 

terms of asset liquidity, financing 

liquidity, and investor liquidity? Is there 

other information we could ask to assess 

hedge funds’ potential impact on 

liquidity in particular markets? Would 

the threshold in the proposed form 

capture significant central clearing 

counterparties? Does the proposed form 

ask sufficient questions regarding the 

fund’s collateral practices to ensure that 

FSOC will be able to monitor the fund’s 

unsecured exposure to significant 

counterparties? Should the form require 

reporting of hedge funds’ investment in 

different types of instruments or 

commodities than those proposed in 

questions 23 and 27? 

Are there risk metrics or additional 

market factors that we should require? 

Should we require the proposed market 

factors but with different specified 

changes? Stress testing is an important 

metric for FSOC’s assessment of 

potential systemic risk posed by hedge 

funds, but we understand that the type 

of stress testing conducted varies 


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8082 Federal Register / Vol. 76, No. 29 / Friday, February 11, 2011 / Proposed Rules 

129See Implementing Release, supra note 9, for a 

discussion of the SEC’s proposed amendments to 

Form ADV. 

130See Short-Term Borrowings Disclosure, 

Securities Act Release No. 9143 (Sept. 17, 2010), at 

section II.A [75 Fed. Reg. 59866 (Sept. 28, 2010)]. 

131See sections II.A.2 and II.B of this Release for 

a discussion of this reporting threshold and the 

definition of liquidity fund. For purposes of the $1 

billion threshold, an adviser would have to treat 

any liquidity funds managed by any of the adviser’s 

related persons as though they were advised by the 

adviser. See proposed Instruction 3 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 would require 

more specific reporting regarding liquidity funds, 

would only be required by the SEC. 

132See section II.A.2 of this Release. The SEC also 

notes that institutional investors—the principal 

investors in liquidity funds—were the primary 

participants in the run on money market funds in 

September 2008, rather than retail investors. See 

MMF Reform Proposing Release, supra note 65. 

133See proposed questions 43 and 44 of Form PF. 

134See proposed question 45 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 rule 2a–7 even 

though that rule does not apply to liquidity funds. 

135See proposed question 46 of Form PF. WAM, 

WAL, daily liquid assets, and weekly liquid assets 

are to be calculated in accordance with rule 2a–7 

under the Investment Company Act. The 7-day 

gross yield is to be calculated consistent with the 

methodology required under Form N–MFP, which 

must be filed by money market funds registered 

with the SEC. See 17 CFR 274.201. 

136See proposed question 47 of Form PF. 

Proposed question 48 of Form PF would require 

reporting for each month of the reporting period, for 

each of the fund’s positions representing 5% or 

more of its net asset value, of the position’s portion 

of the fund’s net asset value and sub-asset class. 

substantially depending on the strategy 

of the particular hedge fund and among 

hedge funds pursuing the same strategy. 

Is there a better way for the form to 

assess the effects of stresses on hedge 

funds than the stress testing questions 

included in the proposed form? Should 

we request the geographic breakdown of 

the hedge fund’s investments for 

different geographic regions or 

countries? Are there existing collections 

of data broken down by geographic 

regions or countries with which we 

should be consistent? Should we require 

more or less detailed information 

regarding the types of assets in which 

the fund invests? 

Is there information that we should 

not require and why? Is there 

information that we should require large 

hedge fund advisers to report regarding 

all of the hedge funds they manage that 

we only propose requiring qualifying 

hedge funds to report? Is there 

information in proposed Form PF that is 

unlikely to be reported in a comparable 

or meaningful fashion such that FSOC 

would be unable to draw any useful 

conclusions or insights for purposes of 

assessing systemic risk? If so, how could 

changes to the question or instructions 

to the question improve the utility of the 

information the form seeks? Are there 

any disclosure requirements in the 

SEC’s proposed amendments to Form 

ADV (which will be publicly available) 

that should instead be reported through 

Form PF (which will not be publicly 

available) or vice versa? 129

We request comment more generally 

on the information we propose requiring 

in Form PF with respect to hedge funds 

and their advisers. Is there additional 

information that would be helpful to 

FSOC in monitoring for systemic risk 

with respect to hedge funds? 

We note that certain data in the 

proposed form, while filed with the 

Commissions on an annual or quarterly 

basis, would have to be reported on a 

monthly basis. In addition to providing 

more granular data to allow FSOC to 

better identify trends, this aspect of the 

proposal is designed to mitigate the 

ability of an adviser to ‘‘window dress,’’ 

or manipulate certain reported data to 

mask activities or risks undertaken by 

the private funds it manages. 

Is there information that should be 

broken down further and reported as of 

smaller time increments, such as 

weekly, or as of larger time increments? 

Is there information that should be 

reported to show ranges, averages, high 

points, or low points during the 

reporting period, rather than as of the 

last day of the month or quarter? If so 

what time period should the range or 

average cover and how should it be 

calculated? We note that we have 

considered in other contexts different 

ways of disclosing information that can 

fluctuate during a reporting period.130

Are there approaches in these other 

contexts that should be used in Form 

PF? What would be the best method of 

avoiding ‘‘window dressing’’ in the form 

and why? Is there information that 

should not be reported on a monthly 

basis or, in contrast, information that 

should be reported on a monthly basis 

(in each case, when the information is 

filed with the Commissions quarterly or 

annually)? Please explain your 

response. 

3. Section 3 

Form PF would require private fund 

advisers advising a liquidity fund and 

managing at least $1 billion in 

combined liquidity fund and registered 

money market fund assets as of the close 

of business on any day in the reporting 

period to complete and file the 

information on section 3.131 As 

discussed above, to the extent that 

liquidity funds function as unregistered 

substitutes for money market funds or 

otherwise share certain basic 

characteristics of money market funds, 

they may be susceptible to runs and 

thus have the potential to pose systemic 

risk.132

Section 3 would require that these 

private fund advisers report certain 

information for each liquidity fund they 

manage. The section includes questions 

on whether the fund uses the amortized 

cost method of valuation and/or the 

penny rounding method of pricing in 

computing its net asset value per share 

to help determine how the fund might 

try to maintain a stable net asset value 

that could make the fund more 

susceptible to runs.133 It asks whether 

the fund as a matter of policy is 

managed in compliance with certain 

provisions of rule 2a–7 under the 

Investment Company Act of 1940, 

which is the principal rule through 

which the SEC regulates registered 

money market funds.134 This 

information would 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. 

Section 3 also would require reporting 

of certain information regarding the 

liquidity fund’s portfolio. For example, 

it would ask, for each month of the 

reporting period, for the fund’s net asset 

value, net asset value per share, marketbased net asset value per share, 

weighted average maturity (‘‘WAM’’), 

weighted average life (‘‘WAL’’), 7-day 

gross yield, amount of daily and weekly 

liquid assets, and amount of assets with 

a maturity greater than 397 days.135 It 

also would require the fund to report 

the amount of its assets invested in 

different types of instruments, broken 

down by the maturity of those 

instruments, as well as information for 

each open position of the fund that 

represents 5 percent or more of the 

fund’s net asset value.136 This 

information would 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. 

Item C of Section 3 would require 

reporting of any secured or unsecured 

borrowing of the liquidity fund, broken 

down by creditor type and the maturity 

profile of that borrowing, and of 

whether the fund has in place a 

committed liquidity facility. This 

information would aid FSOC in 

monitoring leverage practices among 


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137For example, question 52 would require 

reporting of the percentage of the reporting fund’s 

equity that is beneficially owned by the beneficial 

owner having the largest equity interest in the fund 

and of how many investors beneficially own 5% or 

more of the fund’s equity. 

138See section II.B of this Release for a discussion 

of this reporting threshold and the definition of 

‘‘private equity fund.’’ 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 would require more specific reporting 

regarding private equity funds, would only be 

required by the SEC. 

139See proposed questions 57 and 58. 

140See proposed questions 59–61. A ‘‘controlled 

portfolio company’’ is defined as a portfolio 

company that is controlled by the private equity 

fund, either alone or together with the private 

equity fund’s related persons or other persons that 

are 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 proposed Glossary of Terms to Form 

PF; Glossary of Terms to Form ADV. 

141See proposed questions 62–64. 

142See proposed question 65. 

143See proposed question 66. A ‘‘financial 

industry portfolio company’’ generally is defined as 

a nonbank financial company, as defined by section 

102(a)(4) of the Dodd-Frank Act, bank or savings 

association, bank holding company or financial 

holding company, savings and loan holding 

company, credit union, or Farm Credit System 

institution. See proposed Glossary of Terms to Form 

PF. 

144See proposed question 69. 

145See proposed questions 67 and 68. Industries 

would be identified using NAICS codes. ‘‘NAICS’’ 

stands for the ‘‘North American Industry 

Classification System,’’ and is a system of industry 

classifications commonly used in the financial 

industry. 

liquidity funds and their potential to 

magnify risks undertaken by the fund. 

Finally, Item D of Section 3 would ask 

for certain information regarding the 

concentration of the fund’s investor 

base, gating and redemption policies, 

and investor liquidity.137 It also would 

require reporting of a good faith 

estimate of the percentage of the fund 

purchased using securities lending 

collateral. The SEC believes this 

information would be important in 

allowing FSOC to monitor the 

susceptibility of the liquidity fund to a 

run in the event the fund comes under 

stress and its interconnectedness to 

securities lending programs. 

The SEC requests comment on the 

information that it proposes requiring in 

section 3. Is there additional 

information that the SEC should 

require? For example, is there 

information that the SEC requires to be 

reported for registered money market 

funds on Form N–MFP that the SEC also 

should require to be reported on Form 

PF for liquidity funds? Should the SEC 

require reporting of more specific 

information about the holdings or types 

of holdings of these liquidity funds? Is 

the threshold for when the private fund 

adviser is required to report information 

in section 3 for an individual liquidity 

fund appropriate for purposes of FSOC 

to be able to monitor for potential 

systemic risk in this sector? Is five 

percent an appropriate threshold for 

considering a liquidity fund investment 

or investor to be significant for purposes 

of Form PF reporting? Is our proposed 

breakdown of the liquidity fund’s asset 

maturity and investor liquidity 

appropriate? 

4. Section 4 

The SEC is proposing that section 4 of 

Form PF require private fund advisers 

managing at least $1 billion in private 

equity fund assets as of the close of 

business on the last day of the reporting 

period to report certain information 

about each private equity fund they 

manage.138 Section 4 would require 

reporting of certain information about 

the fund’s borrowings and guarantees 

and the leverage of the portfolio 

companies in which the fund invests. 

Specifically, section 4 would require 

information about the outstanding 

balance of the fund’s borrowings and 

guarantees.139 It also would require the 

adviser to report the weighted average 

debt-to-equity ratio of controlled 

portfolio companies in which the fund 

invests and the range of that debt to 

equity ratio among these portfolio 

companies.140 It asks for the maturity 

profile of its portfolio companies’ debt, 

for the portion of that debt that is 

payment-in-kind or zero coupon, and 

whether the fund or any of its portfolio 

companies experienced an event of 

default on any of its debt during the 

reporting period.141 It also asks for the 

identity of the institutions providing 

bridge financing to the adviser’s 

portfolio companies and the amount of 

that financing.142 The SEC believes that 

this information would allow FSOC to 

assess to what extent private equity 

funds use leverage and the potential 

exposure of banks and other lending 

providers to the larger private equity 

funds and their portfolio companies and 

leverage among portfolio companies of 

the larger private equity funds to 

monitor whether trends in those areas 

could pose systemic implications for the 

portfolio companies’ lenders. 

Section 4 also would require reporting 

of certain information if the fund invests 

in any financial industry portfolio 

company, such as its name, its debt-toequity ratio, and the percentage of the 

portfolio company beneficially owned 

by the fund.143 This information would 

allow FSOC to monitor large private 

equity funds’ investments in companies 

that may be particularly important to 

the stability of the financial system. 

Section 4 also would ask whether any 

of the adviser’s related persons co-invest 

in any of the fund’s portfolio 

companies.144 Finally, the form would 

require a breakdown of the fund’s 

investments by industry and by 

geography, which should provide FSOC 

with basic information about global and 

industry concentrations that may be 

relevant to monitoring risk exposures in 

the financial system.145

The SEC requests comment on the 

information it proposes requiring 

regarding private equity funds in section 

4. Is there additional information that 

the SEC should request and why? For 

example, are their additional lending 

practices used in leveraged buyouts 

about which the form should collect 

information? Are there particular 

industries in which private equity funds 

might invest that could be systemically 

important? Should the Form ask 

additional questions specific to those 

industries? Should the form track 

private equity fund investments in 

different geographic and/or industry 

concentrations than those we have 

proposed? Should the SEC request less 

information and why? Should the SEC 

not require any reporting on Form PF 

specific to private equity funds? Why or 

why not? 

E. Filing Fees and Format for Reporting 

Under proposed Advisers Act rule 

204(b)–1(b), Form PF would need to be 

filed through an electronic system 

designated by the SEC for this purpose. 

There may be efficiencies realized if the 

current Investment Adviser Registration 

Depository (‘‘IARD’’) platform, which is 

operated by the Financial Industry 

Regulatory Authority, were expanded 

for this purpose, such as the possible 

interconnectivity of Form ADV filings 

and Form PF filings, and possible ease 

of filing with one password. The filing 

system would need to have certain 

features, including being programmed 

with special confidentiality protections 

designed to ensure the heightened 

confidentiality protections created for 

Form PF filing information under the 

Dodd-Frank Act but to allow for secure 

access by FSOC and other regulators as 

permitted under the Dodd-Frank Act. 

The SEC separately will decide on the 

system to be selected for the electronic 

filing of Form PF. That determination 

will be reflected in a separate notice. 

Under the proposed rule, advisers 

required to file Form PF would be 

required to pay to the operator of the 

Form PF filing system fees that have 


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146See proposed Advisers Act rule 204(b)–1(d). 

147See section 204(c) of the Advisers Act. 

148See, e.g., http://www.operastandards.org. 

149 44 U.S.C. 3501–3521. 

150 44 U.S.C. 3501–3521. 

151See sections I.A and II.A of this Release. 

152The requirement to file the form would apply 

to investment advisers registered, or required to 

register, with the SEC that advise one or more 

private funds. See proposed rule 204(b)–1(a). It 

would not apply to state-registered investment 

advisers or exempt reporting advisers. 

153See section II.B of this Release for a 

description of who would be required to file Form 

PF, section II.C of this Release for information 

regarding the frequency with which smaller private 

fund advisers would be required to file Form PF, 

and section II.D.1 of this Release for a description 

of the information that smaller private fund 

advisers would be required to report on Form PF. 

See also proposed Instruction 8 to Form PF for 

information regarding the frequency with which 

smaller private fund advisers would be required to 

file Form PF. 

154See section II.B of this Release for a 

description of who would be required to file Form 

PF, section II.C of this Release for information 

regarding the frequency with which Large Private 

Fund Advisers would be required to file Form PF, 

section II.D.2 of this Release for a description of the 

information that large hedge fund advisers would 

be required to report on Form PF, and sections 

II.D.3 and II.D.4 of this Release for a description of 

the information that large liquidity and private 

equity fund advisers would be required to report on 

Form PF. See also proposed Instruction 8 to Form 

PF for information regarding the frequency with 

which Large Private Fund Advisers would be 

required to file Form PF. 

been approved by the SEC.146 We 

anticipate that Large Private Fund 

Advisers’ filing fees would be set at a 

higher amount because their filings 

would be responsible for a larger 

proportion of system needs due to their 

more frequent and extensive filings. The 

SEC in a separate action would approve 

filing fees that reflect the reasonable 

costs associated with the filings and the 

establishment and maintenance of the 

filing system.147

While we are not requiring that the 

information be filed in eXtensible 

Markup Language (‘‘XML’’) tagged data 

format, we expect to look for a filing 

system that could accept information 

filed in XML format. We intend to 

establish data tags to allow Form PF to 

be submitted in XML format with the 

SEC. Accordingly, advisers would be 

able to file the information in Form PF 

in XML format if they choose. 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. 

We anticipate that we may eventually 

require Form PF filers to tag data 

submitted on Form PF using a refined, 

future taxonomy defined by us, working 

in collaboration with the industry. 

Thereafter, the usability of data 

contained in Form PF is expected to 

increase greatly because tagged data 

would be easier to sort and analyze. We 

note that private initiatives are 

underway to create such taxonomies.148

We request comment on our proposed 

system of electronic filing. Should we 

require that all filings be done in XML 

format? Should we allow or require the 

form to be provided in a format other 

than XML, such as eXtensible Business 

Reporting Language (‘‘XBRL’’)? Is there 

another format that is more widely used 

or would be more appropriate for the 

required data? Should smaller and/or 

Large Private Fund Advisers be charged 

different amounts than what we have 

anticipated charging? If so, why? 

III. General Request for Comment 

The Commissions request comment 

on the rules and form proposed in this 

Release and comment on other matters 

that might have an effect on the 

proposals contained in this Release. 

Commenters should provide empirical 

data to support their views. 

IV. Paperwork Reduction Act 

CFTC 

Proposed CEA rule 4.27(d) 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, and the CFTC is not imposing 

any additional burdens herein. 

Therefore, any burden imposed by Form 

PF through proposed CEA rule 4.27(d) 

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 Paperwork 

Reduction Act of 1995 (‘‘PRA’’).149

SEC 

Section 404 of the Dodd-Frank Act, 

which amends 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. Proposed rule 204(b)–1 

and Form PF under the Advisers Act, 

which would implement this 

requirement of the Dodd-Frank Act. 

Proposed Form PF contains a new 

‘‘collections of information’’ within the 

meaning of the PRA.150 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 proposed rule 204(b)–1 

is included in the collection of 

information burden associated with 

proposed 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. 

Proposed Form PF is intended to 

provide FSOC with information that 

would facilitate fulfillment of its 

obligations under the Dodd-Frank Act 

relating to nonbank financial companies 

and systemic risk monitoring.151 The 

SEC also may use the information in 

connection with its regulatory and 

examination programs. The respondents 

to Form PF would be private fund 

advisers.152 Compliance with proposed 

Form PF would be mandatory for any 

private fund adviser. Smaller private 

fund advisers would be required to file 

Form PF only on an annual basis. These 

smaller private fund advisers would 

provide a limited amount of basic 

information about the operations of the 

private funds they advise.153 Large 

Private Fund Advisers would be 

required to file Form PF on a quarterly 

basis reporting additional information 

regarding the private funds they advise. 

The PRA analysis set forth below takes 

into account the fact that the additional 

information proposed Form PF would 

require that large hedge fund advisers 

report would be more extensive than the 

additional information required from 

large liquidity fund advisers, which in 

turn would be more extensive than that 

required from large private equity fund 

advisers.154

As discussed in section II.B 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 designed the 

reporting frequency based on when it 

understands advisers to private funds 

are already collecting certain 

information that Form PF would 

require. In addition, the SEC has based 

certain more specific reporting items on 

information that it understands large 

hedge fund advisers frequently collect 


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155See Report of the Asset Manager’s Committee 

to the President’s Working Group on Financial 

Markets, Best Practices for the Hedge Fund Industry 

(Jan. 15, 2009), available at http:// 

www.amaicmte.org/Public/AMC%20Report%20- 

%20Final.pdf (discussing best practices on 

disclosing to investors performance data, assets 

under management, and risk management practices 

(including on asset types, geography, leverage, and 

concentrations of positions) with which we 

understand many hedge funds comply). 

156See supra note 39 and accompanying text. 

157See section V.B.2.a.ii of the Implementing 

Release. As proposed in the Implementing Release, 

advisers to private funds would be required to 

complete Item 7.B and Section 7.B of Schedule D 

to the amended Form ADV. 

158 Id. The 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 current version of Form ADV. Because these 

responses include funds advised by a related person 

rather than the adviser, these data may overestimate the total number of private fund advisers. 

159 3,500 currently registered advisers to private 

funds + 200 advisers to private funds registering as 

a result of normal growth + 750 newly registered 

advisers to private funds = 4,450 advisers. 

160 If a private fund is advised by both an adviser 

and one or more subadvisers, only one of these 

advisers would be required to complete Form PF. 

See section II.B.4 of this Release. As a result, it is 

likely that some portion of these advisers either 

would not be required to file Form PF or would 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. 

161Based on the estimated total number of 

registered private fund advisers that would not 

meet the thresholds to be considered Large Private 

Fund Advisers. (4,450 estimated registered private 

fund advisers ¥200 large hedge fund advisers ¥80 

large liquidity fund advisers ¥250 large private 

equity fund advisers = 3,920 smaller private fund 

advisers.) 

162See supra section II.D.1. 

163These estimates reflect the SEC’s 

understanding that much of the information in 

section 1 of Form PF is currently maintained by 

most private fund advisers in the ordinary course 

of business. In addition, the time required to 

determine a private fund adviser’s aggregate assets 

under management and the amount of assets under 

management that relate to private funds of various 

types largely is expected to be included in the 

approved burden associated with the SEC’s Form 

ADV (this information would only differ if the 

adviser managed parallel managed accounts). 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. 

164The SEC estimates that a smaller private fund 

adviser would make 3 annual filings in three years, 

for an amortized average annual burden of 5 hours 

(1 initial filing × 10 hours + 2 subsequent filings 

× 3 hours = 16 hours; and 16 hours ÷ 3 years = 

approximately 5 hours). After the first three years, 

filers generally would not incur the start-up 

burdens applicable to the first filing. 

165 5 burden hours on average per year × 3,920 

smaller private fund advisers = 19,600 burden 

hours per year. 

166See section II.B.2 of this Release for estimates 

of the numbers of large hedge fund advisers, large 

liquidity fund advisers, and large private equity 

fund advisers. (200 large hedge fund advisers + 80 

large liquidity fund advisers + 250 large private 

equity fund advisers = 530 Large Private Fund 

Advisers.) 

167See supra sections II.D.2, II.D.3 and II.D.4. 

168See supra section II.B.2. 

169The estimates of hour burdens and costs for 

Large Private Fund Advisers provided in the 

Paperwork Reduction Act and cost benefit analyses 

are based on burden data provided by advisers in 

response to the FSA hedge fund 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 would increase the burden 

of the initial filing but reduce the burden of 

Continued 

for purposes of reporting to investors in 

the funds.155

The information that Form PF would 

require would be filed through an 

electronic filing system expected to be 

operated by an entity designated by the 

SEC. Responses to the information 

collections would be kept confidential 

to the extent permitted by law.156

A. Burden Estimates for Annual 

Reporting by Smaller Private Fund 

Advisers 

In the Implementing Release, the SEC 

estimated that 3,500 currently registered 

advisers would become subject to the 

private fund reporting requirements 

included in the proposed amendments 

to Form ADV.157 The SEC further 

estimated that 200 advisers to private 

funds would register with the SEC as a 

result of normal growth in the 

population of registered advisers and 

that 750 advisers to private funds would 

register as a result of the Dodd-Frank 

Act’s elimination of the private adviser 

exemption.158 As a result, the SEC 

estimates that a total of approximately 

4,450 registered investment advisers 

would become subject to the proposed 

private fund reporting requirements in 

Form ADV.159 Because these advisers 

would also be required to report on 

Form PF, the SEC accordingly estimates 

that approximately 4,450 advisers 

would be required to file all or part of 

Form PF.160 Out of this total number, 

the SEC estimates that approximately 

3,920 would be smaller private fund 

advisers, not meeting the thresholds for 

reporting as Large Private Fund 

Advisers.161

Smaller private fund advisers would 

be required to complete all or portions 

of section 1 of Form PF and to file on 

an annual basis. As discussed in greater 

detail above, section 1 would require 

basic data regarding the reporting 

adviser’s identity and certain 

information about the private funds it 

manages, such as performance, leverage, 

and investor concentration data.162 If 

the reporting adviser advises any hedge 

funds, section 1 also would require 

basic information regarding those funds, 

including their investment strategies, 

trading counterparty exposures, and 

trading and clearing practices. 

Based on the SEC’s experience with 

other data filings, it estimates that 

smaller private fund advisers would 

require an average of approximately 10 

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 3 burden hours for 

subsequent filings.163 Accordingly, the 

amortized average annual burden of 

periodic filings would be 5 hours per 

smaller private fund adviser for each of 

the first three years,164 and the 

amortized aggregate annual burden of 

periodic filings for smaller private fund 

advisers would be 19,600 hours for each 

of the first three years.165

B. Burden Estimates for Quarterly 

Reporting by Large Private Fund 

Advisers 

The SEC estimates that 530 of the 

private fund advisers registered with the 

SEC would meet one or more of the 

thresholds for reporting as Large Private 

Fund Advisers.166 As discussed in 

section II.D above, Large Private Fund 

Advisers would be required to report 

more information on Form PF than 

smaller private fund advisers and would 

be required to report on a quarterly 

basis. The amount of additional 

information reported by a Large Private 

Fund Adviser would depend, in part, on 

whether it is a large hedge fund adviser, 

a large liquidity fund adviser, or large 

private equity fund adviser. A large 

hedge fund adviser would be required to 

report more information with respect to 

itself and the funds it advises than 

would a large liquidity fund adviser, 

which in turn would report more 

information than a large private equity 

fund adviser.167 Of the total number of 

Large Private Fund Advisers, the SEC 

estimates that 200 are large hedge fund 

advisers, 80 are large liquidity fund 

advisers, and 250 are large private 

equity fund advisers.168

Because the proposed reporting 

requirements on Form PF for large 

hedge fund advisers would be the most 

extensive of the Large Private Fund 

Advisers, the SEC estimates that these 

advisers would 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 would require 

an average of approximately 75 burden 

hours for an initial filing and 35 burden 

hours for each subsequent filing.169 In 


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subsequent filings, which has been taken into 

consideration in our burden estimates. 170The SEC estimates that a large hedge fund 

adviser would make 12 quarterly filings in three 

years, for an amortized average annual burden of 

153 hours (1 initial filing × 75 hours + 11 

subsequent filings × 35 hours = 460 hours; and 460 

hours ÷ 3 years = approximately 153 hours). After 

the first three years, filers generally would not incur 

the start-up burdens applicable to the first filing. 

171The SEC estimates that a large liquidity fund 

adviser would make 12 quarterly filings in three 

years, for an amortized average annual burden of 70 

hours (1 initial filing × 35 hours + 11 subsequent 

filings × 16 hours = 211 hours; and 211 hours ÷ 3 

years = approximately 70 hours). After the first 

three years, filers generally would not incur the 

start-up burdens applicable to the first filing. 

172The SEC estimates that a large private equity 

fund adviser would make 12 quarterly filings in 

three years, for an amortized average annual burden 

of 52 hours (1 initial filing × 25 hours + 11 

subsequent filings × 12 hours = 157 hours; and 157 

hours ÷ 3 years = approximately 52 hours). After the 

first three years, filers generally would not incur the 

start-up burdens applicable to the first filing. 

173 153 burden hours on average per year × 200 

large hedge fund advisers = 30,600 hours. 

174 70 burden hours on average per year × 80 large 

liquidity fund advisers = 5,600 hours. 

175 52 burden hours on average per year × 250 

large private equity fund advisers = 13,000 hours. 

176Estimate 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 Private Fund Advisers. 

(530 Large Private Fund Advisers × 0.09 × 0.25 

hours = 12 hours.) 

177Estimate is based on IARD data on the 

frequency of advisers to one or more private funds 

withdrawing from SEC registration. (4,450 private 

fund advisers × 0.08 × 0.25 hours = 89 hours.) 

178See proposed SEC rule 204(b)–1(f). The 

proposed rule would require 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. 

179See section V.F of the Implementing Release. 

180 4,450 private fund advisers × 1 request per 

1,000 advisers = approximately 4 advisers. 

181 4 advisers × 1 hour per response = 4 hours. 

182 19,600 hours for periodic filings by smaller 

advisers + 30,600 hours for periodic filings by large 

hedge fund advisers + 5,600 hours for periodic 

filings by large liquidity fund advisers + 13,000 

hours for periodic filings by large private equity 

fund advisers + 12 hours per year for transition 

filings + 89 hours per year for final filings + 4 hours 

per year for temporary hardship requests = 

approximately 68,905 hours per year. 68,905 hours 

per year ÷ 4,450 total advisers = 15 hours per year 

on average. 

contrast, large liquidity fund advisers, 

which would report more information 

than smaller private fund advisers or 

large private equity fund advisers but 

less information than large hedge fund 

advisers, would require an average of 

approximately 35 burden hours for an 

initial filing and 16 burden hours for 

each subsequent filing. Finally, the SEC 

estimates that large private equity fund 

advisers, which would report more 

information than smaller private fund 

advisers but less than other Large 

Private Fund Advisers, would require 

an average of approximately 25 burden 

hours for an initial filing and 12 burden 

hours for each subsequent filing. Based 

on these estimates, the amortized 

average annual burden of periodic 

filings would be 153 hours per large 

hedge fund adviser,170 70 hours per 

large liquidity fund adviser,171 and 52 

hours per large private equity fund 

adviser, in each case for each of the first 

three years.172 In the aggregate, the 

amortized annual burden of periodic 

filings would then be 30,600 hours for 

large hedge fund advisers,173 5,600 

hours for large liquidity fund 

advisers,174 and 13,000 hours for large 

private equity fund advisers,175 in each 

case for each of the first three years. 

C. Burden Estimates for Transition 

Filings, Final Filings and Temporary 

Hardship Exemption Requests 

In addition to periodic filings, a 

private fund adviser would be required 

to 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 Private Fund 

Adviser would be required to 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 Large Private Fund Advisers 

would need to make a transition filing 

each year with a burden of 0.25 hours, 

or a total of 12 burden hours per year 

for all private fund advisers.176

Second, filers who are no longer 

subject to Form PF’s periodic reporting 

requirements would file a final report 

indicating that fact. The SEC estimates 

that approximately 8 percent of the 

advisers required to file Form PF would 

have to file such an amendment each 

year with a burden of 0.25 of an hour, 

or a total of 89 burden hours per year 

for all private fund advisers.177

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.178 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.179 Assuming that Form PF 

filers request hardship exemptions at 

the same rate and that the applications 

impose the same burden per filing, the 

SEC would expect approximately 4 

filers to request a temporary hardship 

exemption each year 180 for a total of 4 

burden hours.181

D. Aggregate Burden Estimates 

Based on the foregoing, the SEC 

estimates that Form PF would result in 

an aggregate of 68,905 burden hours per 

year for all private fund advisers for 

each of the first three years, or 15 

burden hours per year on average for 

each private fund adviser over the same 

period.182

E. Request for Comment 

Pursuant to 44 U.S.C. 3506(c)(2)(B), 

the SEC solicits comments to: (i) 

Evaluate whether the proposed 

amendments to the collection of 

information are necessary for the proper 

performance of the functions of the SEC, 

including whether the information 

would have practical utility; (ii) 

evaluate the accuracy of the SEC’s 

estimate of the burden of the proposed 

collection of information; (iii) determine 

whether there are ways to enhance the 

quality, utility, and clarity of the 

information to be collected; and (iv) 

determine whether there are ways to 

minimize the burden of the collection of 

information on those who are to 

respond, including through the use of 

automated collection techniques or 

other forms of information technology. 

In particular, would private fund 

advisers seek to automate all or part of 

their Form PF reporting obligations? 

Would automation be efficient only for 

Large Private Fund Advisers, or would 

smaller private fund advisers also be 

able to automate efficiently? What is the 

likely burden of automation? Would 

advisers use internal personnel or pay 

outside service providers to make 

needed system modifications or to 

perform all or part of their Form PF 

reporting obligations? If outside service 

providers are used, what is the likely 

cost and how would it impact our 

estimates of internal costs and hourly 

burdens for the proposed reporting? 

Persons desiring to submit comments 

on the collection of information 

requirements should direct them to the 

Office of Management and Budget, 

Attention: Desk Officer for the 

Securities and Exchange Commission, 

Office of Information and Regulatory 

Affairs, Room 10102, New Executive 

Office Building, Washington, DC 20503, 

and also should send a copy of their 

comments to Elizabeth M. Murphy, 

Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090 with 

reference to File No. S7–05–11. 

Requests for materials submitted to 

OMB by the Commission with regard to 

this collection of information should be 


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183See 5 U.S.C. 801(a)(1)(B)(i). 

184See section 112(a)(2)(C) of the Dodd-Frank 

Act. 

185See section 112(d)(1) of the Dodd-Frank Act. 

186See section II.B of this Release for a 

description of who would be required to file Form 

PF, section II.C of this Release for information 

regarding the frequency with which private fund 

advisers would be required to file Form PF, and 

section II.D of this Release for a description of the 

information that private fund advisers would be 

required to report on Form PF. See also proposed 

Instruction 8 to Form PF for information regarding 

the frequency with which private fund advisers 

would be required to file Form PF. 

in writing, refer to File No. S7–05–11, 

and be submitted to the Securities and 

Exchange Commission, Office of 

Investor Education and Advocacy, 100 F 

Street, NE., Washington, DC 20549– 

0213. OMB is required to make a 

decision concerning the collections of 

information between 30 and 60 days 

after publication of this Release. 

Therefore, a comment to OMB is best 

assured of having its full effect if OMB 

receives it within 30 days after 

publication of this Release. 

V. CFTC Cost-Benefit Analysis 

Section 15(a) of the CEA 183 requires 

the CFTC to consider the costs and 

benefits of its actions before issuing 

rules, regulations, or orders under the 

CEA. By its terms, section 15(a) does not 

require the CFTC to quantify the costs 

and benefits of its rules, regulations or 

orders or to determine whether the 

benefits outweigh the costs. Rather, 

section 15(a) requires that the CFTC 

‘‘consider’’ the costs and benefits of its 

actions. Section 15(a) further specifies 

that the costs and benefits shall be 

evaluated in light of the following five 

broad areas of 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. The 

CFTC may in its discretion give greater 

weight to any one of the five 

enumerated areas and could in its 

discretion determine that, 

notwithstanding the costs, a particular 

rule, regulation, or order is necessary or 

appropriate to protect the public interest 

or to effectuate any of the provisions or 

accomplish any of the purposes of the 

CEA. 

The proposed rule 4.27(d) would 

deem a CPO registered with the CFTC 

that is dually registered as a private 

fund adviser with the SEC to have 

satisfied its filing requirements for 

Schedules B and C of proposed 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 DoddFrank Act. Under the proposed rule, 

most of 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. 

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.184 The Dodd-Frank Act also 

requires FSOC to collect information 

from member agencies to support its 

functions.185 The CFTC and the SEC are 

jointly proposing 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. 

With respect to costs, the CFTC has 

determined that: (1) Without the 

proposed reporting requirements 

imposed on dually-registered CPOs and 

CTAs, 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 proposed 

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 proposed reporting 

requirements will create additional 

compliance costs for these registrants. 

The CFTC has determined that the 

proposed reporting requirements will 

provide a benefit to all investors and 

market participants by providing the 

CFTC and other policy makers with 

more complete information about these 

registrants and the potential risk their 

activities may pose to the U.S. financial 

system. In turn, this information would 

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. 

The CFTC invites public comment on 

its cost-benefit considerations as 

concerns sections 1 and 2 of Form PF. 

Commenters are also invited to submit 

any data and other information that they 

may have quantifying or qualifying the 

perceived costs and benefits of this 

proposed rule with their comment 

letters. 

VI. SEC Economic Analysis 

As discussed above, the Dodd-Frank 

Act amended the Advisers Act to, 

among other things, authorize and direct 

the SEC to promulgate reporting 

requirements for private fund advisers. 

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 SEC 

may 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. 

The SEC is proposing rule 204(b)–1 

and Form PF, to implement the private 

fund adviser reporting requirements that 

the Dodd-Frank Act contemplates. 

Under the proposed rule, private fund 

advisers would be required to 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 would be 

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 would be 

required to report annually and provide 

only basic information regarding their 

operations and the private funds they 

advise, while Large Private Fund 

Advisers would report on a quarterly 

basis and provide more information.186

The SEC is sensitive to the costs and 

benefits imposed by its rules. It has 

identified certain costs and benefits of 

proposed Advisers Act rule 204(b)–1 

and Form PF, and it requests comment 

on all aspects of the cost-benefit 

analysis below, including identification 

and assessment of any costs and benefits 

not discussed in this analysis. In 


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187 15 U.S.C. 80b–2(c). 

188See supra note 6 and accompanying text. 

189Section 112(a)(2) of the Dodd-Frank Act. 190See supra note 7 and accompanying text. 191See section II.D of this Release for a 

description of the information that private fund 

advisers would be required to report on proposed 

Form PF. 

connection with its consideration of the 

costs and benefits, the SEC also has 

considered whether the proposal would 

promote efficiency, competition, and 

capital formation. Section 202(c) of the 

Advisers Act requires 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.187

The SEC seeks comment and data on 

the value of the benefits identified. It 

also welcomes comments on the 

accuracy of the cost estimates in this 

analysis, and requests that commenters 

provide data that may be relevant to 

these cost estimates. In addition, the 

SEC seeks estimates and views 

regarding these costs and benefits for 

particular covered advisers, including 

small advisers, as well as any other 

costs or benefits that may result from 

the adoption of the proposed rule and 

form. 

Because proposed Advisers Act rule 

204(b)–1 and Form PF would 

implement sections 404 and 406 of the 

Dodd-Frank Act, the benefits and costs 

considered by Congress in passing the 

Dodd-Frank Act are not entirely 

separable from the benefits and costs 

imposed by the SEC in designing the 

proposed rule and form. Accordingly, 

although the PRA hourly burden 

estimates discussed above, and their 

corresponding dollar cost estimates, are 

included in full below and in the PRA 

analysis above, a portion of the 

reporting costs is attributable to the 

requirements of the Dodd-Frank Act and 

not specific requirements of the 

proposed rule or form. 

A. Benefits 

The SEC believes Form PF may create 

two principal classes of benefits. First, 

the information collected through Form 

PF is expected to facilitate FSOC’s 

monitoring of the systemic risks that 

private funds may pose and to assist 

FSOC in carrying out its other duties 

under the Dodd-Frank Act with respect 

to nonbank financial companies. 

Second, this information may enhance 

the ability of the SEC to evaluate and 

form regulatory policies and improve 

the efficiency and effectiveness of the 

SEC’s monitoring of markets for investor 

protection and market vitality. 

The Dodd-Frank Act directs FSOC to 

monitor emerging risks to U.S. financial 

stability 188 and to require FRB 

supervision of designated nonbank 

financial companies that may pose risks 

to U.S. financial stability in the event of 

their material financial distress or 

failure or because of their activities.189

In addition, the Dodd-Frank Act directs 

FSOC to recommend to the FRB 

heightened prudential standards for 

designated nonbank financial 

companies.190

In enacting Sections 404 and 406 of 

the Dodd-Frank Act, Congress 

recognized that FSOC would need 

information from private fund advisers 

to help it carry out its duties. As a 

result, proposed Form PF is designed to 

gather information regarding the private 

fund industry that would be useful to 

FSOC in monitoring systemic risk.191

Systemic risk may arise from a variety 

of sources, including 

interconnectedness, changes in market 

liquidity and market concentrations, 

and so the information that Form PF 

elicits is intended to provide data that, 

individually or in the aggregate, would 

permit FSOC to identify where systemic 

risk may arise across a range of sources. 

The SEC expects that FSOC would use 

this 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. In this manner, 

the SEC believes 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. 

The proposed private fund reporting 

on Form PF would also benefit all 

investors and market participants by 

improving the information available to 

the SEC regarding the private fund 

industry. 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. As 

discussed above, the more reliable data 

collected through Form PF would assist 

FSOC in identifying and addressing 

risks to U.S. financial stability, 

potentially protecting investors and 

other market participants from 

significant losses. In addition, this data 

would provide the SEC 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 its 

ability to form and frame regulatory 

policies regarding the private fund 

industry and its advisers, and to more 

effectively evaluate the outcomes of 

regulatory policies and programs 

directed at this sector, including for the 

protection of private fund investors. 

The SEC also estimates that the 

proposed rule may improve the 

efficiency and effectiveness of the SEC’s 

oversight of private fund advisers by 

enabling SEC staff to manage and 

analyze information related to the risks 

posed by private funds more quickly, 

more effectively, and at a lower cost 

than is currently possible. This would 

allow the SEC to more efficiently and 

effectively target its examination 

program. The SEC would be able to use 

Form PF information to generate reports 

on the industry, its characteristics and 

trends. These reports may help the SEC 

anticipate regulatory problems, allocate 

and reallocate its resources, and more 

fully evaluate and anticipate the 

implications of various regulatory 

actions it may consider taking, which 

should increase both the efficiency and 

effectiveness of its programs and thus 

increase investor protection. Responses 

to many of the proposed questions 

would help the SEC better understand 

the investment activities of private 

funds and the scope of their potential 

effect on investors and the markets that 

the SEC regulates. 

The coordination with the CFTC 

would also result in significant 

efficiencies for private fund advisers 

that are also registered as a CPO or CTA 

with the CFTC because, under the 

proposed rules in this Release, these 

advisers would satisfy certain reporting 

obligations under both proposed 

Advisers Act rule 204(b)–1 and 

proposed CEA rule 4.27(d) with respect 

to commodity pools that satisfy the 

definition of ‘‘private fund’’ (as proposed 

in Form PF) by filing Form PF. As 

discussed in section I.B of this Release, 

the SEC also has coordinated with 

foreign financial regulators regarding 

the reporting of systemic risk 

information regarding hedge funds and 

anticipates that this coordination, as 

reflected in proposed Form PF, would 

result in greater efficiencies in reporting 

by private fund advisers, as well as 

information sharing and private fund 

monitoring among foreign financial 

regulators. 

As discussed in section II.B of this 

Release, the SEC has designed the 

reporting frequency in proposed Form 

PF based on when it understands 

advisers to private funds are already 

compiling certain information that Form 

PF would require, creating efficiencies 

for, and benefiting, the adviser in 

satisfying its reporting obligations. The 

SEC also has based certain more specific 


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192See note 105 and accompanying text. 

193See section II.B of this Release for a 

description of who would be required to file Form 

PF, section II.C of this Release for information 

regarding the frequency with which private fund 

advisers would be required to file Form PF, and 

section II.D of this Release for a description of the 

information that private fund advisers would be 

required to report on Form PF. See also proposed 

Instruction 8 to Form PF for information regarding 

the frequency with which private fund advisers 

would be required to file Form PF. 

194The SEC understands that some advisers may 

outsource all or a portion of their Form PF reporting 

responsibilities to a filing agent, software 

consultant, or other third-party service provider. 

The SEC believes, however, 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. 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. 

195The SEC expects 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) × 

10 hours = approximately $3,410. 

196The SEC expects that for subsequent reports 

senior personnel will bear less of the reporting 

burden. 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) × 3 hours = approximately $830. 

197The SEC expects that for the initial report, of 

a total estimated burden of 75 hours, approximately 

45 hours will most likely be performed by 

compliance professionals and 30 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) × 45 hours + ($304/hour × 0.5 + $224/hour × 

0.5) × 30 hours = approximately $23,270. 

198The 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) × 35 hours = approximately $9,700. 

199The SEC expects that for the initial report, of 

a total estimated burden of 35 hours, approximately 

21 hours will most likely be performed by 

compliance professionals and 14 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) × 21 hours + ($304/hour × 0.5 + $224/hour × 

0.5) × 14 hours = approximately $10,860. 

200The 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) × 16 hours = approximately $4,440. 

201The SEC expects that for the initial report, of 

a total estimated burden of 25 hours, approximately 

15 hours will most likely be performed by 

compliance professionals and 10 hours will most 

Continued 

reporting items on information that it 

understands large hedge fund advisers 

frequently calculate for purposes of 

reporting to investors in the funds.192

The SEC does not expect that this 

proposal would have an effect on 

competition because the information 

generally would be non-public and 

similar types of advisers would have 

comparable burdens under the form. 

The SEC also does not expect that this 

proposal would have an effect on capital 

formation because the information 

generally would be non-public and thus 

should not impact private fund advisers’ 

ability to raise capital or their market 

activities. 

B. Costs 

The proposed reporting requirement 

also would impose certain costs on 

private fund advisers. In order to 

minimize these costs, the scope of the 

required information and the frequency 

of the reporting generally would be less 

for private fund advisers that manage 

less private fund assets or that do not 

manage types of private funds that may 

be more likely to pose systemic risk. 

Specifically, smaller private fund 

advisers would be required to report 

annually and provide only basic 

information regarding their operations 

and the private funds they advise, while 

Large Private Fund Advisers would 

report on a quarterly basis and provide 

more information.193 Further, the 

additional information required from 

large hedge fund advisers would be 

more extensive than the additional 

information required from large 

liquidity fund advisers, which in turn 

would be more extensive than that 

required from large private equity fund 

advisers. 

The SEC expects that the costs of 

reporting would be most significant for 

the first report that a private fund 

adviser is required to file because the 

adviser would need to familiarize itself 

with the new reporting form and may 

need to configure its systems in order to 

efficiently gather the required 

information. The SEC also anticipates 

that the initial report would require 

more attention from senior personnel, 

including compliance managers and 

senior risk management specialists, than 

would subsequent reports. In addition, 

the SEC expects that some Large Private 

Fund Advisers would find it efficient to 

automate some portion of the reporting 

process, which would increase the 

burden of the initial filing but reduce 

the burden of subsequent filings. 

In subsequent reporting periods, the 

SEC anticipates that filers would 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, the SEC 

estimates that senior personnel would 

bear less of the reporting burden in 

subsequent reporting periods, reducing 

costs though not necessarily reducing 

the burden hours. 

Based on the foregoing, the SEC 

estimates 194 that, for the purposes of the 

PRA, the periodic filing requirements 

under Form PF (including configuring 

systems and compiling, automating, 

reviewing and electronically filing the 

report) would impose: 

(1) 10 burden hours at a cost of 

$3,410 195 per smaller private fund 

adviser for the initial annual report; 

(2) 3 burden hours at a cost of $830 196

per smaller private fund adviser for each 

subsequent annual report; 

(3) 75 burden hours at a cost of 

$23,270 197 per large hedge fund adviser 

for the initial quarterly report; 

(4) 35 burden hours at a cost of 

$9,700 198 per large hedge fund adviser 

for each subsequent quarterly report; 

(5) 35 burden hours at a cost of 

$10,860 199 per large liquidity fund 

adviser for the initial quarterly report; 

(6) 16 burden hours at a cost of 

$4,440 200 per large liquidity fund 

adviser for each subsequent quarterly 

report; 

(7) 25 burden hours at a cost of 

$7,760 201 per large private equity fund 


srobinson on DSKHWCL6B1PROD with PROPOSALS3
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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) × 15 hours + ($304/hour × 0.5 + $224/hour × 

0.5) × 10 hours = approximately $7,760. 

202The 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) × 12 hours = approximately $3,330. 

203 (3,920 smaller private fund advisers × $3,410 

per initial annual report) + (200 large hedge fund 

advisers × $23,270 per initial quarterly report) + 

(200 large hedge fund advisers × 3 quarterly reports 

× $9,700 per subsequent quarterly report) + (80 

large liquidity fund advisers × $10,860 per initial 

quarterly report) + (80 large liquidity fund advisers 

× 3 quarterly reports × $4,440 per subsequent 

quarterly report) + (250 large private equity fund 

advisers × $7,760 per initial quarterly report) + (250 

large private equity fund advisers × 3 quarterly 

reports × $3,330 per subsequent quarterly report) = 

approximately $30,200,000. 

204 (3,920 smaller private fund advisers × $830 

per subsequent annual report) + (200 large hedge 

fund advisers × 4 quarterly reports × $9,700 per 

subsequent quarterly report) + (80 large liquidity 

fund advisers × 4 quarterly reports × $4,440 per 

subsequent quarterly report) + (250 large private 

equity fund advisers × 4 quarterly reports × $3,330 

per subsequent quarterly report) = approximately 

$15,800,000. 

205The SEC estimates that, for the purposes of the 

PRA, transition filings will impose 12 burden hours 

per year on private fund advisers in the aggregate 

and that final filings will impose 89 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. (12 burden hours + 89 burden hours) × 

$67/hour = approximately $6,770. 

206The 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. 

207See supra note 147 and accompanying text. 

208Public Law 104–121, Title II, 110 Stat. 857 

(1996) (codified in various sections of 5 U.S.C., 15 

U.S.C. and as a note to 5 U.S.C. 601). 209 5 U.S.C. 603(a). 

adviser for the initial quarterly report; 

and 

(8) 12 burden hours at a cost of 

$3,330 202 per large private equity fund 

adviser for each subsequent quarterly 

report. 

Assuming that there are 3,920 smaller 

private fund advisers, 200 large hedge 

fund advisers, 80 large liquidity fund 

advisers, and 250 large private equity 

fund advisers, the foregoing estimates 

would suggest an annual cost of 

$30,200,000 203 for all private fund 

advisers in the first year of reporting 

and an annual cost of $15,800,000 in 

subsequent years.204

In addition, as discussed above, a 

private fund adviser would be required 

to file very limited information on Form 

PF if it needed to transition from 

quarterly to annual filing, if it were no 

longer subject to the reporting 

requirements of Form PF or if it 

required a temporary hardship 

exemption under proposed rule 204(b)– 

1(f). The SEC estimates that transition 

and final filings would, collectively, 

cost private fund advisers as a whole 

approximately $6,770 per year.205 The 

SEC further estimates that hardship 

exemption requests would cost private 

fund advisers as a whole approximately 

$760 per year.206

Finally, firms required to file Form PF 

would have to pay filing fees. The 

amount of these fees has not yet been 

determined.207

C. Request for Comment 

The SEC requests comments on all 

aspects of the foregoing cost-benefit 

analysis, including the accuracy of the 

potential costs and benefits identified 

and assessed in this Release, as well as 

any other costs or benefits that may 

result from the proposals. The SEC 

encourages commenters to identify, 

discuss, analyze, and supply relevant 

data regarding these or additional costs 

and benefits. The SEC also requests 

comment on the foregoing analysis of 

the likely effect of the proposed rule on 

competition, efficiency, and capital 

formation. Commenters are requested to 

provide empirical data to support their 

views. 

In addition, for purposes of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996, or ‘‘SBREFA,’’ 208

the SEC must advise OMB whether a 

proposed regulation constitutes a 

‘‘major’’ rule. Under SBREFA, a rule is 

considered ‘‘major’’ where, if adopted, it 

results in or is likely to result in: (1) An 

annual effect on the economy of $100 

million or more; (2) a major increase in 

costs or prices for consumers or 

individual industries; or (3) significant 

adverse effects on competition, 

investment, or innovation. 

We request comment on the potential 

impact of the proposed new rule and 

proposed rule amendments on the 

economy on an annual basis. 

Commenters are requested to provide 

empirical data and other factual support 

for their views to the extent possible. 

VII. Initial Regulatory Flexibility 

Analysis 

CFTC 

Under proposed rule 4.27(d), 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 CFTCrelated filing requirements by 

completing and filing the applicable 

sections of Form PF with the SEC. 

Therefore, any burden imposed by Form 

PF through proposed rule 4.27(d) on 

small entities registered with both the 

CFTC and the SEC has been accounted 

for within the SEC’s initial calculations 

regarding the impact of this collection of 

information under the Regulatory 

Flexibility Act (‘‘RFA’’).209 Accordingly, 

the Chairman, on behalf of the CFTC, 

hereby certifies pursuant to 5 U.S.C. 

605(b) that the proposed rules will not 

have a significant impact on a 

substantial number of small entities. 

SEC 

The SEC has prepared the following 

Initial Regulatory Flexibility Analysis 

(‘‘IRFA’’) regarding proposed Advisers 

Act rule 204(b)–1 in accordance with 

section 3(a) of the RFA. 

A. Reasons for Proposed Action 

The SEC is proposing rule 204(b)–1 

and Form PF specifying information 

that private fund advisers must disclose 

confidentially to the SEC, which 

information the SEC will share with 

FSOC for systemic risk assessment 

purposes to help implement sections 

404 and 406 of the Dodd-Frank Act. 

Under the proposed rule, private fund 

advisers would be required to 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 would be 

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 would be 

required to report annually and provide 

only basic information regarding their 

operations and the private funds they 

advise, while Large Private Fund 


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210See section II.B of this Release for a 

description of who would be required to file Form 

PF, section II.C of this Release for information 

regarding the frequency with which private fund 

advisers would be required to file Form PF, and 

section II.D of this Release for a description of the 

information that private fund advisers would be 

required to report on Form PF. See also proposed 

Instruction 8 to Form PF for information regarding 

the frequency with which private fund advisers 

would be required to file Form PF. 

211 17 CFR 275.0–7(a). 

212Based on IARD data. 

213See supra notes 195–196 and accompanying 

text. 

214 If the adviser had no hedge fund assets under 

management, it would not need to complete section 

1.C of the proposed form. Advisers that manage 

both registered money market funds and liquidity 

funds would be required to complete section 3 of 

Form PF, but there are no small entities that manage 

a registered money market fund. See section II.B of 

this Release for a description of who would be 

required to file Form PF, section II.C of this Release 

for information regarding the frequency with which 

smaller private fund advisers would be required to 

file Form PF, and section II.D.1 of this Release for 

a description of the information that smaller private 

fund advisers would be required to report on Form 

PF. See also proposed Instruction 8 to Form PF for 

information regarding the frequency with which 

smaller private fund advisers would be required to 

file Form PF. 

Advisers would report on a quarterly 

basis and provide more information.210

B. Objectives and Legal Basis 

As described more fully in sections I 

and II of this Release, the general 

objective of proposed Advisers Act rule 

204(b)–1 is to assist FSOC in its 

obligations under the Dodd-Frank Act 

relating to nonbank financial companies 

and in monitoring systemic risk. The 

SEC is proposing rule 204(b)–1 and 

Form PF pursuant to the SEC’s authority 

set forth in sections 404 and 406 of the 

Dodd-Frank Act, to be codified at 

sections 204(b) and 211(e) of the 

Advisers Act [15 U.S.C. 80b–4(b) and 

80b–11(e)]. 

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.211

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 would be subject to the 

proposed rule and form. The SEC 

estimates that as of December 1, 2010, 

approximately 50 advisers that were 

small entities were registered with the 

SEC and advised one or more private 

funds.212

D. Reporting, Recordkeeping, and Other 

Compliance Requirements 

The proposed rule and form would 

impose certain reporting and 

compliance requirements on advisers, 

including small advisers. The proposed 

rule would require all small advisers 

registered with the SEC and that advise 

one or more private funds to file Form 

PF, completing all or part of section 1 

of that form. As discussed above, the 

SEC estimates that completing, 

reviewing, and filing Form PF would 

cost $3,410 per year for each small 

adviser in its first year of reporting and 

$830 per year for each subsequent 

year.213 In addition, small entities 

would be required to pay a filing fee 

when submitting Form PF. The amount 

of the filing fee has not yet been 

determined, but we anticipate that Large 

Private Fund Advisers’ filing fees would 

be set at a higher amount than small 

advisers. 

E. Duplicative, Overlapping, or 

Conflicting Federal Rules 

The SEC has not identified any 

Federal rules that duplicate or overlap 

or conflict with the proposed rule. 

F. Significant Alternatives 

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: (i) The 

establishment of differing compliance or 

reporting requirements or timetables 

that take into account the resources 

available to small entities; (ii) the 

clarification, consolidation, or 

simplification of compliance and 

reporting requirements under the rule 

for small entities; (iii) the use of 

performance rather than design 

standards; and (iv) an exemption from 

coverage of the rule, or any part thereof, 

for small entities. 

Regarding the first and fourth 

alternatives, the SEC has proposed 

different reporting requirements and 

timetables for small entities. The 

proposed rule only would require small 

entity advisers to file Form PF annually 

and to complete applicable portions of 

section 1 of the form.214 These smaller 

advisers also would have to pay a 

smaller amount of filing fees than Large 

Private Fund Advisers. Regarding the 

second alternative, the information that 

would be required of small entities 

under section 1 of Form PF is quite 

simplified from the more extensive 

reporting that would be required of 

Large Private Fund Advisers and is 

consolidated in one section of the form. 

G. Solicitation of Comments 

The SEC encourages written 

comments on matters discussed in this 

IRFA. In particular, the SEC seeks 

comment on: 

• The number of small entities that 

would be subject to the proposed rule; 

and 

• Whether the effect of the proposed 

rule on small entities would be 

economically significant. 

Commenters are asked to describe the 

nature of any effect and provide 

empirical data supporting the extent of 

the effect. 

VIII. Statutory Authority 

CFTC 

The CFTC is proposing rule 4.27(d) 

[17 CFR 4.27(d)] pursuant to its 

authority set forth in section 4n of the 

Commodity Exchange Act [7 U.S.C. 6n]. 

SEC 

The SEC is proposing rule 204(b)–1 

[17 CFR 275.204(b)–1] pursuant to its 

authority set forth in sections 404 and 

406 of the Dodd-Frank Act, to be 

codified at 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 proposing rule 279.9 

pursuant to its authority set forth in 

sections 404 and 406 of the Dodd-Frank 

Act, to be codified at 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 Part 275 

Reporting and recordkeeping 

requirements, Securities. 


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Text of Proposed Rules 

Commodity Futures Trading 

Commission 

For the reasons set out in the 

preamble, the CFTC is proposing to 

amend Title 17, Chapter I of the Code 

of Federal Regulations as follows: 

PART 4—COMMODITY POOL 

OPERATORS AND COMMODITY 

TRADING ADVISORS 

1. The authority citation for part 4 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 4, 6(c), 6b, 6c, 

6l, 6m, 6n, 6o, 12a, and 23. 

* * * * * 

2. In § 4.27, as proposed to be added 

elsewhere in this issue of the Federal 

Register, add paragraph (d) to read as 

follows: 

§ 4.27 Additional reporting by advisors of 

commodity pools. 

* * * * * 

(d) Investment advisers to private 

funds. CPOs and CTAs who are dually 

registered with the Securities and 

Exchange Commission and advise one 

or more private funds, as defined in 

section 202 of the Investment Advisers 

Act of 1940 (15 U.S.C. 80b–2(a)), shall 

file Form PF with the Securities and 

Exchange Commission. 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. 

Dually registered CPOs and CTAs must 

file such other reports as are required 

under this section with respect to all 

pools that are not private funds. 

* * * * * 

Securities and Exchange Commission 

For the reasons set out in the 

preamble, the SEC is proposing to 

amend 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. Subject to 

paragraph (g), if you are an investment 

adviser registered or required to be 

registered under section 203 of the Act 

(15 U.S.C. 80b–3) and act as an 

investment adviser to one or more 

private funds, you must complete and 

file a report on Form PF (17 CFR 279.9) 

within 15 days of the end of the next 

calendar quarter by following the 

instructions in the Form, which specify 

the information that an investment 

adviser must provide. 

(b) Electronic filing. You must file 

Form PF electronically with the Form 

PF filing system. 

Note to paragraph (b): Information on how 

to file Form PF is available on the 

Commission’s Web site at http:// 

www.sec.gov/[__]. 

(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) Amendments to Form PF. You 

must amend your Form PF: 

(1) At least annually, no later than the 

last day on which you may timely file 

your annual amendment to Form ADV 

under rule 204–1(a)(1) (17 CFR 275.204– 

1(a)(1)); and 

(2) More frequently, if required by the 

instructions to Form PF. You must file 

all amendments to Form PF 

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 with the operator 

of the Form PF filing system in paper 

format 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. 

(g) Transition for certain filers. If you 

were an investment adviser registered or 

required to be registered under section 

203 of the Act (15 U.S.C. 80b–3), act as 

an investment adviser to one or more 

private funds immediately prior to the 

compliance date of rule 204(b)–1, and 

are only required to complete all or 

portions of section 1 of Form PF, no 

later than 90 days after the end of your 

then-current fiscal year you must 

complete and file your initial report on 

Form PF by following the instructions 

in the Form, which specify the 

information that an investment adviser 

must provide. 

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 following Form PF will not 

appear in the Code of Federal Regulations. 


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Federal Register / Vol. 76, No. 29 / Friday, February 11, 2011 / Proposed Rules 8155 

By the Commodity Futures Trading 

Commission. 

Dated: January 26, 2011. 

David A. Stawick, 

Secretary. 

By the Securities and Exchange 

Commission. 

Dated: January 26, 2011. 

Elizabeth M. Murphy, 

Secretary. 

Appendix 1—Commodity Futures 

Trading Commission Voting Summary 

On this matter, Chairman Gensler and 

Commissioners Dunn, Sommers (by proxy), 

Chilton and O’Malia voted in the affirmative; 

no Commissioner voted in the negative. 

[FR Doc. 2011–2175 Filed 2–10–11; 8:45 am] 

BILLING CODE 8011–01–P; 6351–01–P 


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