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COMMODITY FUTURES TRADING COMMISSION

RIN 3038-AF31

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 275 and 279

[Release No. IA-6083; File No. S7-22-22]

RIN 3235-AN13

Form PF; Reporting Requirements for All Filers and Large Hedge Fund Advisers

AGENCIES: Commodity Futures Trading Commission and Securities and Exchange Commission.

ACTION: Joint proposed rules.

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

Commission (“SEC”) (collectively, “we” or the “Commissions”) are proposing to amend Form PF, the

confidential reporting form for certain SEC-registered investment advisers to private funds, including

those that also are registered with the CFTC as a commodity pool operator (“CPO”) or commodity

trading adviser (“CTA”). The amendments are designed to enhance the Financial Stability Oversight

Council’s (“FSOC’s”) ability to monitor systemic risk as well as bolster the SEC’s regulatory oversight

of private fund advisers and investor protection efforts. In connection with the amendments to Form PF,

the SEC proposes to amend a rule under the Investment Advisers Act of 1940 (the “Advisers Act”) to

revise instructions for requesting a temporary hardship exemption. We also are soliciting comment on

the proposed rules and a number of alternatives, including whether certain possible changes to the

proposal should apply to Form ADV.

DATES: Comments should be received on or before October 11, 2022.

ADDRESSES: Comments may be submitted by any of the following methods.

CFTC: Comments may be submitted to the CFTC by any of the following methods.

•

CFTC Comments portal: https://comments.cftc.gov. Follow the instructions for submitting comments

through the website.

•

Mail: Christopher Kirkpatrick, Secretary of the Commission, Commodity Futures Trading

Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581.

•

Hand Delivery/Courier: Follow the same instructions as for Mail above.

Please submit your comments using only one method. To avoid possible delays with mail or in-

person deliveries, submissions through the CFTC website are encouraged. “Form PF” must be in the

subject field of comments submitted via email, 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 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 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: Comments may be submitted to the SEC by any of the following methods:

Electronic Comments:

•

Use the SEC’s internet comment forms (https://www.sec.gov/regulatory-actions/how-to-submitcomments); or

•

Send an email to rule-comments@sec.gov. Please include File Number S7-22-22 on the subject

line.

Paper Comments:

•

Send paper comments to Secretary, U.S. Securities and Exchange Commission, 100 F Street NE,

Washington, DC 20549-1090.

All submissions should refer to File Number S7-22-22. This file number should be included on

the subject line if email 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 website

(https://www.sec.gov/rules/proposed.shtml). Comments also are available for website 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. Operating conditions may limit access to the

SEC’s Public Reference Room. All comments received will be posted without change. Persons

submitting comments are cautioned that we do not redact or edit personal identifying information from

comment submissions. You should submit only information that you wish to make available publicly.

Studies, memoranda, or other substantive items may be added by the SEC or staff to the comment

file during this rulemaking. A notification of the inclusion in the comment file of any such materials will

be made available on the SEC’s website. To ensure direct electronic receipt of such notifications, sign up

through the “Stay Connected” option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: CFTC: Pamela Geraghty, Associate Director;

Michael Ehrstein, Special Counsel; Andrew Ruggiero, Attorney-Advisor at (202) 418-6700, Commodity

Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW Washington, DC 20581.

SEC: Alexis Palascak, Lawrence Pace, Senior Counsels; Christine Schleppegrell, Acting Branch Chief at

(202) 551-6787 or IArules@sec.gov, Investment Adviser Regulation Office, Division of Investment

Management, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-8549.

SUPPLEMENTARY INFORMATION: The CFTC and SEC are requesting public comment on the

following under the Investment Advisers Act of 1940 [15 U.S.C. 80b] (“Advisers Act”).1

Agency

CFTC & SEC

SEC

Reference

Form PF2

Rule 204(b)-1

CFR Citation

17 CFR 279.9

17 CFR 275.204(b)-1

TABLE OF CONTENTS

INTRODUCTION ...................................................................................................................... 6

II.

DISCUSSION ............................................................................................................................. 9

Proposed Amendments to the General Instructions .................................................................... 9

1. Reporting Master-Feeder Arrangements and Parallel Fund Structures .................................... 10

2. Reporting Private Funds that Invest in Other Funds ................................................................. 13

3. Reporting Timelines.................................................................................................................. 19

Proposed Amendments Concerning Basic Information about the Adviser and the Private

Funds it Advises ........................................................................................................................ 21

1. Proposed Amendments to Section 1a of Form PF - Identifying Information ........................... 21

2. Proposed Amendments to Section 1b of Form PF - Concerning All Private Funds................. 25

3. Proposed Amendments to Section 1c of Form PF - Concerning All Hedge Funds .................. 51

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

are referring to 15 U.S.C. 80b, at which the Advisers Act is codified, and when we refer to rules under the Advisers

Act, or any section of these rules, we are referring to title 17, part 275 of the Code of Federal Regulations [17 CFR

275], in which these rules are published.

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

Proposed Amendments Concerning Information about Hedge Funds Advised by Large

Private Fund Advisers ............................................................................................................... 68

1. Proposed Amendments to Section 2a ....................................................................................... 71

2. Proposed Amendments to Section 2b ....................................................................................... 74

Proposed Amendments to Enhance Data Quality ................................................................... 136

Proposed Additional Amendments ......................................................................................... 141

III.

ECONOMIC ANALYSIS ...................................................................................................... 143

Introduction ............................................................................................................................. 143

Economic Baseline and Affected Parties ................................................................................ 144

1. Economic Baseline.................................................................................................................. 144

2. Affected Parties ....................................................................................................................... 148

Benefits and Costs................................................................................................................... 151

1. Benefits ................................................................................................................................... 151

2. Costs........................................................................................................................................ 168

Reasonable Alternatives.......................................................................................................... 171

1. Alternatives to Proposed Amendments to General Instructions, Proposed Amendments

to Enhance Data Quality, and Proposed Additional Amendments ......................................... 171

2. Alternatives to Proposed Amendments to Basic Information about the Adviser and the

Private Funds It Advises ......................................................................................................... 172

3. Alternatives to Proposed Amendments to Information about Hedge Funds Advised by

Large Private Fund Advisers .................................................................................................. 173

4. Alternatives to the Definition of the Term “Hedge Fund” ..................................................... 175

Request for Comment ............................................................................................................. 179

IV.

PAPERWORK REDUCTION ACT ....................................................................................... 180

Form PF .................................................................................................................................. 182

1. Purpose and Use of the Information Collection ...................................................................... 182

2. Confidentiality ........................................................................................................................ 183

3. Burden Estimates .................................................................................................................... 185

Request for Comments ............................................................................................................ 205

REGULATORY FLEXIBILITY ACT CERTIFICATION .................................................... 206

VI.

CONSIDERATION OF IMPACT ON THE ECONOMY ..................................................... 208

VII.

STATUTORY AUTHORITY ................................................................................................ 208

Introduction

The Commissions are proposing to amend sections of Form PF, the form that certain SEC-

registered investment advisers, including those that also are registered with the CFTC as a CPO or CTA,

use to report confidential information about the private funds that they advise.3 The proposed

amendments are designed to enhance FSOC’s monitoring and assessment of systemic risk and to provide

additional information for FSOC’s use in determining whether and how to deploy its regulatory tools.

The proposed amendments also are designed to collect additional data for use in the Commissions’

regulatory programs, including examinations, investigations and investor protection efforts relating to

private fund advisers.4 Finally, the proposed amendments also are designed to improve the usefulness of

this data.5

An adviser must file Form PF if (1) it is registered or required to register with the SEC as an

investment adviser, (2) it manages one or more private funds, and (3) the adviser and its related persons

collectively had at least $150 million in private fund assets under management as of the last day of its

Specifically, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”),

mandated that the SEC and the CFTC, in consultation with the FSOC, jointly promulgate rules governing the form

and substance of reports required by investment advisers to private funds to be filed with the SEC, and with the

CFTC for those that are dually-registered with both Commissions. Pub. L. No. 111-203, 124 Stat. 1376 (2010). See,

15 U.S.C. 80b-11. See also, 17 C.F.R. 4.27(d). The result was Sections 1 and 2 of Form PF, which were jointly

promulgated. See Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and

Commodity Trading Advisors on Form PF, Advisers Act Release No. 3308 (Oct. 31, 2011), [76 FR 71128 (Nov. 16,

2011)] (“2011 Form PF Adopting Release”) at section I. In 2014, the SEC amended Form PF section 3 in connection

with certain money market fund reforms. See Money Market Fund Reform; Amendments to Form PF, Advisers Act

Release No. 3879 (July 23, 2014), [79 FR 47736 (Aug. 14, 2014)] (“2014 Form PF Amending Release”).

Any reference to the “Commissions”, or “we”, as it relates to the collection and use of Form PF data are meant to

refer to the agencies in their separate or collective capacities, and such data from filings made pursuant to 17 CFR

275.204(b)-1, by and through Private Fund Reporting Depository, a subsystem of the Investment Adviser

Registration Depository (“IARD”), and reports, analysis, and memoranda produced pursuant thereto. Further, as the

collection is being made pursuant to the Advisers Act and the IARD is subject to the authority and control of the

SEC, as of the date of this proposal, it should not be assumed that the CFTC has direct, or timely access to such data.

The Commissions will continue to engage in interagency discussions on the sharing of portions of Form PF data

relevant to the CFTC consistent with the terms of existing interagency agreements or arrangements related to the

sharing of data.

Additionally, the Federal Reserve Board uses this data for research and analysis.

most recently completed fiscal year.6 A CPO or CTA that also is registered or required to register with

the SEC as an investment adviser and satisfies the other conditions described above must file Form PF

with respect to any commodity pool it manages that is a private fund. Most private fund advisers file

annually to report general information such as the types of private funds advised (e.g., hedge funds,

private equity funds, or liquidity funds), fund size, use of borrowings and derivatives, strategy, and types

of investors. Certain larger advisers provide more information on a more frequent basis, including more

detailed information on particular hedge funds and liquidity funds.

Form PF provides the Commissions and FSOC with important information about the basic

operations and strategies of private funds and has helped establish a baseline picture of the private fund

industry for use in assessing systemic risk. We now have almost a decade of experience analyzing the

information collected on Form PF. In that time, the private fund industry has grown in size and evolved

in terms of business practices, complexity of fund structures, and investment strategies and exposures.7

See 17 CFR 275.204(b)-1. Advisers Act section 202(a)(29) 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 (“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 shortterm paper) are beneficially owned by not more than one hundred persons (or, in the case of a qualifying venture

capital fund, 250 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.

The value of private fund net assets reported on Form PF has more than doubled, growing from $5 trillion (net) in

2013 to $12 trillion (net) by the end of the third quarter of 2021, while the number of private funds reported on the

form has increased by nearly 55 percent in that time period. Unless otherwise noted, the private funds statistics used

in this Release are from the Private Funds Statistics Third Quarter 2021. Division of Investment Management,

Private Fund Statistics Third Quarter 2021, (Mar. 30, 2022), available at

https://www.sec.gov/divisions/investment/private-funds-statistics/private-funds-statistics-2021-q3.pdf (“Private Fund

Statistics Q3 2021”). Any comparisons to earlier periods are from the private funds statistics from that period, all of

which are available at https://www.sec.gov/divisions/investment/private-funds-statistics.shtml. SEC staff began

publishing the private fund statistics in 2015, including data from 2013. Therefore, many comparisons in this Release

discuss the almost nine year span from the beginning of 2013 through third quarter 2021. Some discussion in this

Release compares data from a shorter time span, because the SEC staff published such data later than 2013. Staff

reports, statistics, and other staff documents (including those cited herein) represent the views of SEC staff and are

not a rule, regulation, or statement of the SEC. The SEC has neither approved nor disapproved the content of these

For example, certain investment strategies, including credit, digital asset,8 litigation finance,9 and real

estate strategies, have become more common since the form was adopted.10 Similarly, we understand

that qualifying hedge fund exposures to repurchase agreements (“repos”), reverse repurchase agreements

(“reverse repos”), and U.S. treasury securities have increased in recent years.11 Experience with Form PF

data also has identified potential ways to improve data quality, including in instances where existing

reporting may not identify fully the potential risks, such as in the reporting of certain master-feeder

arrangements.

Based on this experience and in light of these changes, the Commissions and FSOC have

identified information gaps and situations where revised information would improve our understanding

of the private fund industry and the potential systemic risk within it. We believe more detailed

information, including with respect to strategies and exposures, would provide better empirical data to

FSOC with which it may assess better the extent to which the activities of private funds or their advisers

pose systemic risks. We expect that FSOC would use the new information collected on Form PF,

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

documents and, like all staff statements, they have no legal force or effect, do not alter or amend applicable law, and

create no new or additional obligations for any person.

See Zuckerman, Gregory, Mainstream Hedge Funds Pour Billions of Dollars Into Crypto, The Wall Street Journal

(March 2022) available at https://www.wsj.com/articles/mainstream-hedge-funds-pour-billions-of-dollars-intocrypto11646808223#:~:text=Brevan%20Howard%20launched%20a%20cryptocurrency,and%20investing%20in%20blockc

hain%20technology.

See Burnett, David and Pierce, John, The Emerging Market for Litigation Funding, The Hedge Fund Journal (June

2013) available at https://thehedgefundjournal.com/the-emerging-market-for-litigation-funding/.

See Private Fund Statistics Q3 2021, supra footnote 7, at p. 24.

A qualifying hedge fund is defined in Form PF as “any hedge fund that has a net asset value (individually or in

combination with any feeder funds, parallel funds and/or dependent parallel managed accounts) of at least $500

million as of the last day of any month in the fiscal quarter immediately preceding [the adviser’s] most recently

completed fiscal quarter.” See Form PF Glossary of Terms. From 2015 through the end of 2020, qualifying hedge

fund exposure to repos doubled to $2 trillion, while from 2013 through the end of 2020, qualifying hedge fund

borrowings attributable to reverse repos more than doubled to $1.3 trillion. For the same period, qualifying hedge

fund exposure to U.S. treasury securities increased by almost 70 percent to $1.7 trillion in aggregate qualifying hedge

fund gross notional exposure.

regulatory tools.12 This may include, for instance, identifying private fund advisers that merit further

analysis or deciding whether to recommend to a primary financial regulator, like the SEC or CFTC, more

stringent regulation of the financial activities that FSOC determines may create or increase systemic risk.

This revised information also would improve our ability to protect investors.13

The Commissions have consulted with FSOC to gain input on this proposal, and to help ensure

that Form PF continues to provide FSOC with information it can use to carry out its monitoring

obligations and assess systemic risk in light of changes in the private fund industry over the past decade.

The Commissions are jointly proposing amendments to the form’s general instructions, as well as section

1 of Form PF, which would apply to all Form PF filers. The Commissions also are jointly proposing

amendments to section 2 of Form PF, which would apply to large hedge fund advisers who advise

qualifying hedge funds (i.e., hedge funds that have a net asset value of at least $500 million).14

II.

Discussion

Proposed Amendments to the General Instructions

We are proposing amendments to the Form PF general instructions designed to improve data

quality and comparability and to enhance investor protection efforts and systemic risk assessment.15

Under the Dodd-Frank Act, FSOC must monitor emerging risks to U.S. financial stability and employ its regulatory

tools to address those risks. S. REP. NO. 111-176, at 2-3 (2010).

The SEC also recently proposed amendments to the SEC-only sections of Form PF (sections 3, 4, 5, and newly

proposed section 6) that would (1) require current reporting for large hedge fund advisers and advisers to private

equity funds, (2) decrease the reporting threshold for large private equity advisers and amend reporting requirements

for large private equity advisers, and (3) amend reporting requirements for large liquidity fund advisers.

Amendments to Form PF to Require Current Reporting and Amend Reporting Requirements for Large Private Equity

Advisers and Large Liquidity Fund Advisers, Investment Advisers Act Release No. 5950 (Jan. 26, 2022), [87 FR

9106 (Feb. 17, 2022)] (“2022 SEC Form PF Proposal”).

Unless stated otherwise, terms in this release that are defined in the Form PF Glossary of Terms are as defined

therein.

Additional proposed changes to the General Instructions concerning amendments to enhance data quality concerning

methodologies and additional amendments are discussed in sections II.D and II.E of this Release, as well as the

proposal to amend Instruction 3 to reflect our proposal to remove section 2a, which is discussed in footnote 138, and

accompanying text.

Reporting Master-Feeder Arrangements and Parallel Fund Structures

Private funds often use complex structures to invest, including master-feeder arrangements and

parallel fund structures.16 We are proposing amendments to Form PF that generally would require

advisers to report separately each component fund of a master-feeder arrangement and parallel fund

structure.17 However, an adviser would continue to aggregate these structures for purposes of

determining whether the adviser meets a reporting threshold.18

Currently, Form PF provides advisers with flexibility to respond to questions regarding masterfeeder arrangements and parallel fund structures either in the aggregate or separately, as long as they do

so consistently throughout Form PF.19 In adopting this approach in 2011, the Commission stated that

requiring advisers to aggregate or disaggregate funds in a manner inconsistent with their internal

recordkeeping and reporting may impose additional burdens and that, as long as the structure of those

arrangements is adequately disclosed, a prescriptive approach to aggregation was not necessary.20

However, based on experience reviewing Form PF data, we observed that when some advisers report in

A “master-feeder arrangement” is an arrangement in which one or more funds (“feeder funds”) invest all or

substantially all of their assets in a single private fund (“master fund”). A “parallel fund structure” is a structure in

which one or more private funds (each, a “parallel fund”) pursues substantially the same investment objective and

strategy and invests side by side in substantially the same positions as another private fund. See Form PF Glossary of

Terms.

Proposed Instruction 6. We also propose to amend Instruction 3 to reflect the proposed approach for reporting

master-feeder arrangements and parallel fund structures. See infra footnote 18.

Proposed Instruction 5. For example, an adviser would aggregate private funds that are part of the same masterfeeder arrangement in determining whether the adviser is a large hedge fund adviser that must complete section 2 of

Form PF. In connection with these proposed changes, we propose to amend the term “reporting fund” and Instruction

3 so they would no longer discuss reporting aggregated information. Additionally, we propose to reorganize current

Instruction 5 and current Instruction 6 so they reflect the proposed approach for when to aggregate certain funds.

Current Instruction 5 instructs advisers about when to aggregate information about certain funds for purposes of

reporting thresholds and responding to questions. Current Instruction 6 instructs advisers about how to aggregate

information about certain funds. Proposed Instruction 5 would instruct advisers on when to aggregate information

about certain funds for purposes of determining whether they meet reporting thresholds. Proposed Instruction 6

would instruct advisers about how to report information about certain funds when responding to questions.

Current Instruction 5.

2011 Form PF Adopting Release, supra footnote 3, at text following n.332.

aggregate and some advisers report separately, this can result in obscured risk profiles (e.g., asset size,

counterparty exposure, investor liquidity) and made it difficult to compare complex structures,

undermining the utility of the data collected. We believe prescribing the way advisers report a masterfeeder arrangement and parallel fund structure would provide better insight into the risks and exposures

of these arrangements.

Accordingly, we propose to require an adviser to report each component fund of a master-feeder

arrangement and parallel fund structure, except where a feeder fund invests all its assets in a single

master fund and/or “cash and cash equivalents” (i.e., a disregarded feeder fund).21 In the case of a

disregarded feeder fund in Question 6, advisers instead would identify the disregarded feeder fund and

look through to any disregarded feeder fund’s investors in responding to certain questions regarding fund

investors on behalf of the applicable master fund. The master fund effectively is a conduit through which

a disregarded feeder fund invests and we do not believe separate reporting for such a feeder fund is

necessary for data analysis purposes.

In addition, we propose to no longer allow advisers to report any “parallel managed accounts,”

(which is distinguished from “parallel fund structure”), except advisers would continue to be required to

report the total value of all parallel managed accounts related to each reporting fund.22 We continue to

believe that including parallel managed accounts in the reporting may reduce the quality of data while

imposing additional burdens on advisers.23 Data regarding the total value of parallel managed accounts,

See proposed Instruction 6. The proposal would revise the term “cash and cash equivalents,” as described in section

II.B.2 in this Release.

Proposed Instruction 6. A “parallel managed account” is any managed account or other pool of assets managed by the

adviser that pursues substantially the same investment objective and strategy and invests side by side in substantially

the same positions as the identified private fund. See Form PF Glossary of Terms. Currently, advisers may, but are

not required to, report information regarding parallel managed accounts in response to certain questions, except they

must report the total value of all parallel managed accounts related to each reporting fund. See current Instruction 5.

See 2011 Form PF Adopting Release, supra footnote 3, at n.334, and accompanying text (the Commission was

persuaded that aggregating parallel managed accounts for reporting purposes would be difficult and “result in

however, allow FSOC to take into account the greater amount of assets an adviser may be managing

using a given strategy for purposes of analyzing the data reported on Form PF.24

We request comment on the proposed amendments.

Should we amend Form PF to require advisers to report component funds of masterfeeder arrangements and parallel fund structures separately except for disregarded feeder

funds, as proposed? Would the proposed amendments lead to more accurate data

regarding the risk profiles of reporting funds and improve comparability? Would the

proposed amendments enhance investor protection efforts and systemic risk assessment?

Are there better ways to meet these objectives? For example, should Form PF require

advisers to report only at the master fund level or the feeder fund level?

Do you agree that the master fund is effectively a conduit through which a disregarded

feeder fund invests and that separate reporting for such a feeder fund is not necessary for

data analysis purposes? Should we require advisers to report additional information

regarding disregarded feeder funds? For example, should we require advisers to report

the total cash holdings of such funds?

Are there other exceptions for reporting each component of a master-feeder arrangement

or parallel fund structures separately that we should adopt?

Should we continue to require advisers to report only limited information on parallel

managed accounts? If we should require additional reporting from parallel managed

inconsistent and misleading data” because the characteristics of parallel managed accounts are often somewhat

different from the funds with which they are managed). For example, in a separately managed account a client

generally selects an adviser’s strategy but tailors it to the client’s own investment guidelines.

Id. at text following n.336.

accounts, what additional information should we require? Should reporting of any such

additional information be mandatory or voluntary?

Should we continue to require advisers to aggregate structures when determining

whether they meet reporting thresholds?

Form PF currently does not require an adviser to report information regarding a private

fund advised by any of the adviser’s related persons, unless the adviser identified that

related person as one for which the adviser is filing Form PF. Should we take a different

approach and require an adviser to include information regarding private funds advised

by any of the adviser’s related persons if they are part of a master-feeder arrangement or

parallel fund structure managed by the adviser? Or, would an adviser have difficulty

gathering the information necessary to report this information for private funds managed

by the adviser’s related persons whose operations are genuinely independent of the

adviser’s own operations?

Could “parallel managed accounts,” be interpreted as overlapping with “parallel fund

structure?” If so, should we remove the phrase “or other pool of assets” in the definition

of “parallel managed account” to prevent that?

Reporting Private Funds that Invest in Other Funds

We are proposing amendments to Form PF regarding how advisers report private fund

investments in other private funds, trading vehicles, and other funds that are not private funds.

Investments in other private funds. We propose to amend Instruction 7, which addresses how

advisers treat private fund investments in other private funds (e.g., a “fund of funds”). Currently,

advisers include the value of private fund investments in other private funds in determining whether the

adviser meets the filing threshold to file Form PF.25 We believe this requirement is implicit in the current

form and we propose to amend Instruction 7 to make it explicit. Current Form PF permits an adviser to

disregard the value of a private fund’s equity investments in other private funds for purposes of both the

form’s reporting thresholds (e.g., whether it qualifies as a large hedge fund adviser) and responding to

questions on Form PF, as long as it does so consistently throughout Form PF, subject to certain

exceptions.26 Under the proposal, the form would continue to permit an adviser to include or exclude the

value of investments in other private funds (including internal and external private funds) when

determining whether the adviser meets the thresholds for reporting as a large hedge fund adviser, large

liquidity fund adviser, or large private equity adviser, and whether a hedge fund is a qualifying hedge

fund.27 The Commissions continue to believe that allowing this flexibility for these reporting thresholds

avoids duplicative reporting, which reduces the burden of reporting for advisers and improves the quality

of the data reported.28 For example, under these instructions an adviser may exclude an investment in an

external private fund that would already be counted through another adviser’s reporting obligations.

However, we believe the form’s current flexibility on whether to disregard underlying funds when

responding to questions has undermined the utility of the data collected, as it provides unclear,

inconsistent data on the scale of reporting funds’ exposures. Therefore, we propose to amend Instruction

7 to require an adviser to include the value of a reporting fund’s investments in other private funds when

responding to questions on Form PF, unless otherwise directed by the instructions to a particular

Form PF Instruction 1 provides that certain advisers meet the filing threshold if they and their related persons,

collectively, had at least $150 million in private fund assets under management as of the last day of their most

recently completed fiscal year.

For example, under the current instructions, an adviser is not permitted to disregard any liabilities of the private fund,

even if incurred in connection with an investment in other private funds. See current Instruction 7.

See current Instruction 7 and proposed Instruction 7.

See 2011 Form PF Adopting Release, supra footnote 3, at n.128, and accompanying text.

question.29 We believe that requiring advisers to report fund of funds arrangements in a consistent

manner would allow the Commissions and FSOC to understand better these fund structures by providing

greater insight into the scale and exposures of reporting funds.

Currently, advisers are not required to, but nonetheless have the option to, “look through” a

reporting fund’s investments in any other entity (including other private funds), except in instances when

the form directs otherwise.30 As a result, some advisers may “look through” a reporting fund’s

investments in other entities, while others do not, leading to unclear data, inconsistent comparisons, and

less precise analysis across advisers. Therefore, we propose to amend Instruction 7 to provide that, when

responding to questions, advisers must not “look through” a reporting fund’s investments in internal

private funds or external private funds (other than a trading vehicle, as described below), unless the

question instructs the adviser to report exposure obtained indirectly through positions in such funds or

other entities.31 We also propose to take the same approach with regard to a reporting fund’s investments

in funds or other entities that are not private funds or trading vehicles.32 These proposed amendments are

designed to improve data quality and comparisons, so the Commissions and FSOC understand what Form

PF data is from advisers “looking through” a reporting fund’s investments, which we believe would lead

to more effective systemic risk assessments and investor protection efforts.

For example, an adviser would report the value of the reporting fund’s investments in other private funds when

reporting its gross asset value and net asset value in proposed Questions 11 and 12; however, Question 3 would

specify that advisers must exclude the value of the reporting fund’s investment in other internal private funds when

providing a breakdown of their regulatory assets under management and net assets under management.

See current Instruction 8.

See proposed Instruction 7. For example, advisers would not “look through” to the creditors of or counterparties to

other private funds in responding to questions that ask about a reporting fund’s borrowings and counterparty

exposures. See proposed Question 18 (concerning borrowings) and proposed Questions 27 and 28 (concerning

counterparty exposures). However, selected questions in section 2 of the form would require advisers to report

indirect exposure resulting from positions held through other entities including private funds, and advisers would “look

through” the reporting fund’s investments in internal private funds and external private funds in responding to those

questions. See e.g., proposed Question 32 (concerning reporting fund exposures).

See proposed Instruction 8 and supra footnote 31 (which provides examples that also apply to advisers to reporting

funds that invest in funds and other entities that are not private funds or trading vehicles).

Trading vehicles. Some private funds wholly own separate legal entities that hold assets, incur

leverage, or conduct trading or other activities as part of the private fund’s investment activities, but do

not operate a business (each, a “trading vehicle”).33 We propose to amend Form PF’s general

instructions to explain how advisers would report information if the reporting fund uses a trading

vehicle.34 Specifically, if the reporting fund uses a trading vehicle, and the reporting fund is its only

equity owner, the adviser would either (1) identify the trading vehicle in section 1b, and report answers

on an aggregated basis for the reporting fund and such trading vehicle, or (2) report the trading vehicle as

a separate reporting fund. An adviser would have to report the trading vehicle separately if the trading

vehicle holds assets, incurs leverage, or conducts trading or other activities on behalf of more than one

reporting fund. If reporting separately, (1) advisers would report the trading vehicle as a hedge fund if a

hedge fund invests through the trading vehicle; (2) advisers would report the trading vehicle as a

qualifying hedge fund if a qualifying hedge fund invests through the trading vehicle; (3) otherwise,

advisers would report the trading vehicle as a liquidity fund, private equity fund, or other type of fund

based on its activities.35

Private funds may use trading vehicles for various purposes, including (1) for jurisdictional, tax,

or other regulatory purposes, or (2) to “ring-fence” assets in light of liability or bankruptcy concerns

associated with a particular investment (i.e., structure assets so counterparties would only have recourse

against the trading vehicle and not against the private fund). Currently, Form PF does not require

advisers to identify trading vehicles. As a result, Form PF does not provide a clear window into the use

of trading vehicles and the risks they present. For example, if a trading vehicle is ring-fenced, current

We propose to add “trading vehicle” to the Form PF Glossary of Terms.

See proposed Instruction 7. We propose to make a conforming change to Instruction 8 to reference this new

instruction.

See proposed Instruction 7.

Form PF does not provide a view into the assets or collateral on which a counterparty to such trading

vehicle relies or the size and nature of the trading vehicle’s exposure. In addition, where more than one

reporting fund invests through a particular trading vehicle, the activities of multiple reporting funds are

blended and potentially obscured. The proposed amendments are designed to address these concerns by

providing more information on the extent private funds use trading vehicles to conduct investment

activities. The proposed amendments also are designed to provide improved visibility into position sizes

and counterparty exposures through trading vehicles. Having a clear, unobscured view into position sizes

and counterparty exposures through trading vehicles is designed to help ensure accurate systemic risk

assessment and analysis to further investor protection efforts, by providing the Commissions and FSOC

with a view into the assets or collateral on which a counterparty to such trading vehicle relies and the size

and nature of the trading vehicle’s exposure.

Investments in funds that are not private funds. Under the proposal, advisers would continue to

include the value of the reporting fund’s investments in funds and other entities that are not private funds,

in determining reporting thresholds and responding to questions, unless otherwise directed, as Form PF

currently requires.36 For the reasons discussed above, we are proposing that, when responding to

questions, however, advisers must not “look through” a reporting fund’s investments in funds or other

entities that are not private funds, or trading vehicles, unless the question instructs the adviser to report

exposure obtained indirectly through positions in such funds or other entities.37

We request comment on the proposed amendments.

Would the proposed amendments concerning reporting fund investments in other private

funds, trading vehicles, and other funds that are not private funds provide a better

See Instruction 8.

See supra footnote 32, and accompanying text (discussing proposed amendments to Instruction 8).

understanding of the structure of private funds, and improve data quality and

comparability? Is there a better way to meet these objectives? Should Form PF provide

more or less flexibility to advisers in how they treat these types of private fund

investments? For example, instead of allowing advisers the flexibility to include or

exclude a private fund’s investments in other private funds (including internal private

funds and external private funds) in determining whether they meet thresholds for filing

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

whether a reporting fund is a qualifying hedge fund, should we require advisers to

include or exclude such investments? Should we require external qualifying hedge funds

to be excluded, to avoid receiving duplicate data? If Form PF should provide more

flexibility, how would we help ensure data is understandable and comparable across

advisers?

Would the proposed amendments regarding trading vehicles provide a clearer picture of

how private funds use trading vehicles and their market risks? Would the proposed

amendments provide improved visibility into position sizes and counterparty exposures?

Is there a better way to meet these objectives? For example, should Form PF require

advisers to report whether a trading vehicle is ring-fenced for liability purposes?

10.

Under the proposal, if an adviser reports a trading vehicle as a separate reporting fund,

the adviser must report the trading vehicle as a hedge fund, qualifying hedge fund,

liquidity fund, private equity fund, or other type of fund, if it meets certain requirements.

Would this proposed requirement help ensure advisers could not avoid reporting the

trading vehicle as a private fund that is subject to additional reporting, such as a

qualifying hedge fund? Is there a better way to meet this objective? Should Form PF

instead only require advisers to report trading vehicles as investments in another fund?

11.

Are the “look through” requirements concerning how to report a reporting fund’s

investments in other entities clear? Should we require advisers to not look through a

reporting fund’s investments in other entities, unless the question instructs the adviser to

report exposure obtained indirectly through positions in such funds or other entities, as

proposed?

Reporting Timelines

We propose to amend Instruction 9 to require large hedge fund advisers and large liquidity fund

advisers to update Form PF within a certain number of days after the end of each calendar quarter, rather

than after each fiscal quarter, as Form PF currently requires.38 All other advisers would continue to file

annual updates within 120 calendar days after the end of their fiscal year.39 Form PF would continue to

require all advisers to use fiscal quarters and years to determine filing thresholds because advisers already

make such calculations under 17 CFR 279.1 (“Form ADV”), which requires annual updates based on

fiscal year.40

Currently, fiscal quarter reporting significantly delays the time at which the Commissions and

FSOC receive a complete data set for a calendar quarter. For example, large hedge fund advisers whose

first fiscal quarter ends on the calendar quarter end of March, would file data covering January, February,

Large hedge fund advisers generally would file within 60 calendar days after the end of each calendar quarter and

large liquidity fund advisers generally would file within 15 days after the end of each calendar quarter. See proposed

Instruction 9.

We also propose to amend the term “data reporting date” to reflect this proposed approach. See Form PF Glossary of

Terms.

See Form PF Instructions 1 and 3; Form ADV and [17 CFR 275.204-1] Advisers Act rule 204-1 (amendments to

Form ADV).

and March by the end of May.41 However, large hedge fund advisers whose fiscal quarter ends in May

would not file their March data until the end of July, delaying Commission and FSOC access to full

calendar quarter data by all large hedge fund advisers by four months. The proposed changes are

designed to provide a more complete data set sooner to improve the efficiency and effectiveness of

investor protection efforts and systemic risk assessment. Based on Form ADV data as of December

2021, 99.2 percent of private fund advisers already effectively file Form PF on a calendar basis because

their fiscal quarter or year ends on the calendar quarter or year end, respectively.42 The 0.8 percent of

private fund advisers that have a non-calendar fiscal approach, which could cause a temporary data gap,

represents approximately 274 private funds, totaling $200 billion in gross asset value. Calendar quarter

reporting also would more closely align with reporting on [17 CFR pt. 4, app. A] Form CPO-PQR, which

requires calendar quarterly reporting, allowing easier integration of these data sets.

We request comment on the proposed amendments.

12.

Should we revise the reporting timelines, as proposed?

13.

Should Form PF continue to require advisers to determine filing thresholds by fiscal year

given corresponding Form ADV requirements? Alternatively, should Form PF require

all Form PF filers to use calendar years and quarters for all Form PF purposes, including

in determining filing thresholds and when to update Form PF?

14.

Should we reduce the number of days by which filers must update Form PF to receive

data sooner? How would this relieve or increase burdens? For example, should Form PF

require large hedge fund advisers to update Form PF within 30 calendar days after the

See current Instruction 9 (requiring large hedge fund advisers to update Form PF within 60 calendar days after the

end of their first, second, and third fiscal quarters, among other things).

We are presenting data from all private fund advisers, not just those who would file on a quarterly basis (i.e., large

hedge fund advisers and large liquidity fund advisers), to avoid potentially disclosing proprietary information of

individual Form PF filers, and to be inclusive considering that the population of quarterly filers versus annual filers

may change over time.

end of each calendar or fiscal quarter, rather than 60 calendar days? Should Form PF

require large liquidity fund advisers to report within 10 calendar days after the end of

each calendar quarter, rather than 15 calendar days? Should annual filers file within 30

calendar days after the end of their fiscal year, rather than 120 calendar days?

15.

Should Form PF reporting timelines be more or less consistent with Form CPO-PQR?

Proposed Amendments Concerning Basic Information about the Adviser and the

Private Funds it Advises

Each adviser required to file Form PF must complete all or part of section 1. The proposed

amendments to section 1 are designed to provide greater insight into private funds’ operations and

strategies, and assist in identifying trends, including those that could create systemic risk, which in turn is

designed to enhance investor protection efforts and systemic risk assessment. The proposed changes are

designed to improve comparability across advisers, improve data quality, and reduce reporting errors,

based on our experience with Form PF filings.

Proposed Amendments to Section 1a of Form PF - Identifying Information

Section 1a requires an adviser to report identifying information about the adviser and the private

funds it manages. We are proposing several amendments to collect additional identifying information

regarding the adviser, its related persons, as well as their private fund assets under management.

LEI for advisers and related persons. Legal entity identifiers, or “LEIs,” help identify entities and

link data from different sources that use LEIs.43 Currently, Form PF requires advisers to report the LEI

for certain entities, if they have one, such as for the reporting fund and any parallel funds.44 Form PF’s

Form PF generally defines “LEI” as: the “legal entity identifier” assigned by or on behalf of an internationally

recognized standards setting body and required for reporting purposes by the U.S. Department of the Treasury’s

Office of Financial Research or a financial regulator. See Form PF Glossary of Terms.

See current Question 5(d) and current Question 7(e). Current Form PF also requires large liquidity advisers to report

the LEI for each security and repo held by the reporting fund, if they have one. See current Question 63(d) and

current definition of “LEI” provides that, in the case of a financial institution that has not been assigned

an LEI, advisers must provide the RSSD ID assigned by the National Information Center of the Board of

Governors of the Federal Reserve System (“Federal Reserve Board”), if the financial institution has an

RSSD ID.45 We propose to remove this requirement and, instead, provide that advisers must not

substitute any other identifier that does not meet the definition of an LEI.46 However, advisers would use

the RSSD ID, if the financial institution has one, for questions that specifically request an RSSD ID, and

for questions that require advisers to report any other identifying information where the type of

information is not specified.47 These proposed amendments are designed to improve data quality

because, based on experience with the current form, reporting RSSD IDs as LEIs makes it more difficult

for staff to link data efficiently and effectively.

While Form PF currently requires advisers to provide the LEI for entities such as reporting funds

and parallel funds, if the entities have one, it does not require advisers to report the LEI for itself and its

related persons.48 We propose to require advisers to provide the “LEI” for themselves and their “related

persons,” if they have an LEI.49 This proposed amendment is designed to help identify advisers and their

related persons and link data from other data sources that use this identifier.

current Question 63(g), respectively. Current Form PF also requires large private equity advisers to report the LEI

for each of the reporting fund’s controlled portfolio companies that constitute a financial industry portfolio company.

See current Question 76.

See current Form PF Glossary of Terms. Currently, if an LEI has not been assigned and there is no RSSD ID, then

the adviser would leave that line blank.

See proposed Form PF Glossary of Terms.

See e.g., proposed Question 9. We also would add “RSSD ID” to the Form PF Glossary of Terms and define it as the

identifier assigned by the National Information Center of the Federal Reserve Board, if any. See Form PF Glossary

of Terms.

See e.g., current Question 5 and current Question 7.

See Proposed Question 1. We also propose to require advisers to provide the LEI for other entities, if the other

entities have one, including internal private funds (see proposed Question 7 and proposed Question 15), trading

vehicles (see proposed Question 9), and counterparties (see proposed Question 27 and proposed Question 28). A

“related person” has the meaning provided in Form ADV. See Form PF Glossary of Terms. Form ADV defines a

“related person” as any advisory affiliate and any person that is under common control with the adviser. See Form

We request comment on the proposed amendments.

16.

Should we require advisers to report “LEI” for financial institutions that have one and

only report “RSSD ID” as a secondary identification where asked, as proposed? Would

the proposed amendments help us improve data quality and help link data more

efficiently and effectively from other sources that use LEIs and RSSD IDs? Is there a

better way to meet these objectives?

17.

Should Form PF require advisers to report the LEI for certain entities, if they have one,

as proposed, such as the adviser and each related person, as well as internal private

funds, trading vehicles, creditors, and counterparties, or others? Alternatively, should

Form PF require any entities to obtain LEIs if they do not have them? Would those

entities seek to obtain LEIs in the future absent any regulatory requirement to do so?

18.

Are there other data sources we also should use that would allow us to link entities across

forms?

19.

Should we amend the term “LEI” in Form PF to match Form ADV or any other forms

that use the term or a similar term?

Assets under management. We are proposing to revise how advisers report assets under

management attributable to certain private funds. Current Question 3 requires advisers to provide a

breakdown of regulatory assets under management and net assets under management. These data are

designed to show the size of the adviser and the nature of the adviser’s activities. We propose to amend

the instructions to direct advisers to exclude the value of private funds’ investments in other internal

private funds to avoid double counting of fund of funds assets.50 Advisers would include the value of

ADV Glossary of Terms.

See proposed Question 3.

trading vehicle assets because, under the proposed definition, they would be wholly owned by one or

more reporting funds.51 These proposed amendments are designed to provide a more accurate view of

the assets managed by the adviser and its related persons, as well as the general distribution of those

assets among various types of private funds, because accurately viewing the scale of these managed

assets is important to effectively assess systemic risk and further investor protection efforts.

We request comment on the proposed amendments.

20.

Would the proposed amendments prevent double counting fund of funds assets? Is there

a better way to meet this objective? Should we include private funds managed by the

adviser’s related persons in the definition of internal private fund for these purposes?

Are there other types of investments that should be disregarded in order to prevent

double counting? Are there other approaches to trading vehicles?

21.

Form PF currently requires advisers to provide a breakdown of assets under management

and regulatory assets under management based on certain categories of private funds.

Should we require advisers to provide a breakdown for more, fewer, or different

categories of private funds than Form PF currently provides? For example, should

Question 3 include categories such as special purpose vehicles, private credit funds, or

types of fund of funds?

Explanation of assumptions. We are proposing to amend current Question 4, which advisers use

to explain assumptions that they make in responding to questions on Form PF. Specifically, we propose

to add an instruction directing advisers to provide the question number when the assumptions relate to a

See proposed Question 3. See proposed Form PF Glossary of Terms.

particular question.52 This amendment is designed to help assess data more efficiently and improve

comparability, based on experience with the form.

We request comment on the proposed amendments.

22.

Is there a better way to achieve our objectives of assessing data more efficiently and

improving comparability?

Proposed Amendments to Section 1b of Form PF - Concerning All Private

Funds

Section 1b requires advisers to report certain identifying and other basic information about each

private fund the adviser manages. The proposal would amend section 1b to require advisers to report

additional identifying information about the private funds they manage as well as the private funds’

assets, financing, investor concentration, and performance. The proposed changes are designed to

provide greater insight into private funds’ operations and strategies and assist in identifying trends that

we believe would enhance investor protection efforts and FSOC’s systemic risk assessment. At the same

time, we believe the proposed amendments would help improve data quality and comparability, based on

experience with Form PF.

Type of private fund. We are proposing several amendments to identify different types of

reporting funds better, and help isolate data according to fund type, to allow for more targeted analysis.

Currently, advisers indicate a reporting fund’s type on the Private Fund Reporting Depository (“PFRD”)

filing system, and by filling out particular sections of the form.53 We have found instances, however,

where advisers have identified a reporting fund differently on Form PF than on Form ADV, even though

the definitions of each fund type are the same on both forms. This may be due to error, or may be due to

See proposed Question 4.

For advisers that are also CPOs or CTAs, filing Form PF through PFRD is filing with both the SEC and CFTC. See

Instruction 3 (instructing advisers to file particular sections of Form PF, depending on their circumstances. For

example, all Form PF filers must file section 1 and large hedge fund advisers also must file section 2).

the fund’s characteristics changing between deadlines for Form ADV and Form PF. Accordingly, to help

prevent reporting errors and help ensure accuracy concerning the reporting fund’s type, we propose to

require advisers to identify the reporting fund by selecting one type of fund from a list: hedge fund that is

not a qualifying hedge fund, qualifying hedge fund, liquidity fund, private equity fund, real estate fund,

securitized asset fund, venture capital fund, or “other.”54 If an adviser identifies the reporting fund as

“other,” the adviser would describe the reporting fund in Question 4, including why it would not qualify

for any of the other options.

In addition, we propose to require an adviser to indicate whether the reporting fund is a

“commodity pool,” which is categorized as a hedge fund on Form PF.55 Although the CFTC does not, as

of the date of this proposal, consider Form PF reporting on commodity pools as constituting substituted

compliance with CFTC reporting requirements, some CPOs may continue to report such information on

Form PF.56 This proposed amendment would allow for analysis of hedge fund data both with and

without commodity pools reported on the form.

Finally, we propose to require advisers to report whether a reporting fund operates as a UCITS or

AIF, or markets itself as a money market fund outside the United States, and in which countries (if

applicable).57 These proposed amendments are designed to allow the Commissions and FSOC to filter

Proposed Question 6(a).

Proposed Question 6(b). Form PF defines “commodity pool” as defined in section 1a(10) of the U.S. Commodity

Exchange Act, as amended. See Form PF Glossary of Terms.

Previously, the CFTC permitted dually registered CPO-investment advisers to submit Form PF in lieu of certain

CFTC reporting requirements. See Compliance Requirements for Commodity Pool Operators on Form CPO-PQR,

(Oct. 9, 2020) [85 FR 71772 (Nov. 10, 2020)] (“Form CPO-PQR Release”).

See proposed Question 6(c) through (h). We propose to define the term “UCITS” as Undertakings for Collective

Investment in Transferable Securities, as defined in the UCITS Directive of the European Parliament and of the

Council (No. 2009/65/EC), as amended, or as captured by the Collective Investment Schemes (Amendment etc.) (EU

Exit) Regulations 2019, as amended. We propose to define “AIF” as an alternative investment fund that is not

regulated under the UCITS Directive, as defined in the Directive of the European Parliament and of the Council on

alternative investment fund managers (No. 2011/61/EU), as amended, or an alternative investment fund that is

captured by the Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2019, as amended.

See Form PF Glossary of Terms.

data for more targeted analysis to better understand the potential exposure to beneficial owners outside

the United States and to avoid double counting when Form PF data is aggregated with other data sets that

include UCITS, AIFs, and money market funds that are marketed outside the United States.

We request comment on the proposed amendments.

23.

Should Form PF require advisers to report additional identifying information about the

private funds they advise, as proposed? Would the proposed amendments help identify

each type of reporting fund, allow the Commissions and FSOC to filter data concerning

types of funds, and conduct more targeted analysis? Is there a better way to meet these

objectives?

24.

Should proposed Question 6 include more, fewer, or different categories of private

funds? For example, should the form include a category for funds that may be “hybrid”

funds that may have characteristics of different types of private funds? Should proposed

Question 6 include an “other” category, as proposed? Alternatively, should proposed

Question 6 not include an “other” category and instead require that advisers select the

best fit among the specific categories? Are there other ways to limit the types of funds

that may report as “other?”

25.

Should Form PF require advisers to explain in Question 4 why they choose “other” as a

category, as proposed? Would this proposed requirement clarify what type of fund the

reporting fund is, if it does not fit within the other categories? Is there a better way of

identifying what type of fund the reporting fund is? Should Form PF require the adviser

to include more, less, or different information in the explanation?

26.

Should Form PF require advisers to identify if the reporting fund is a commodity pool, as

proposed? Are any CPOs currently reporting information regarding any commodity

pools, even if they are not private funds? If so, why? Alternatively, should we revise the

definition of “hedge fund” so it would not include commodity pools? If we exclude

commodity pools from the definition of “hedge fund,” should we amend Form PF to

require advisers to report the same or different information about commodity pools as

they do for hedge funds?

27.

Should Form PF require advisers to report whether and in which countries the reporting

company operates as a UCITS or AIF, or markets itself as a money market fund outside

the United States, as proposed? Would the proposed amendment allow us and FSOC to

filter data for more targeted analysis to better understand the potential exposure to

beneficial owners outside the United States and to avoid double counting when Form PF

data is aggregated with other data sets that include UCITS and AIFs? Is there a better

way to meet these objectives?

28.

Should Form PF define UCITS and AIF, as proposed? Would the proposed definitions

keep the terms evergreen if directives change or new ones apply? If not, how should we

define these terms? For example, should we provide less detail in the definition about

the directives to keep the definitions evergreen?

Master-feeder arrangements, internal private funds, external private funds, and parallel fund

structures. To reflect that advisers would report components of master-feeder arrangements and parallel

fund structures separately, we propose to amend Form PF to require advisers to report identifying

information about master-feeder arrangements and other private funds (e.g., funds of funds), including

internal private funds, and external private funds.58 Form PF currently requires advisers to report

For master-feeder arrangements, advisers would report the name of the feeder fund, its private fund identification

number, and whether the feeder fund is a separate reporting fund or a disregarded feeder fund. For internal private

funds that invest in the reporting fund, advisers would report the name of the internal private fund, its LEI, if it has

identifying information about parallel funds, and would continue to do so under the proposal.59 The

proposal also would require advisers to report the value of the reporting fund’s investments in other

private funds (e.g., funds of funds), as current Question 10 requires, but with more detail.60 Specifically,

the proposal would require advisers to report the value of the reporting fund’s equity investments in

external private funds and internal private funds (including the master fund and each internal private

fund), which would comprise the total investments in other private funds.61 These amendments are

designed to help map complex fund structures and cross reference private fund information across Form

PF filings, to provide more complete and accurate information about each fund’s risk profile.

In connection with these proposed amendments, in the Form PF Glossary of Terms, we propose to

remove the terms “investments in external private funds” and “investments in internal private funds,” and

replace them with “external private funds” (private funds that neither the adviser nor the adviser’s related

persons advise) and “internal private funds” (private funds that the adviser or any of the adviser’s related

persons advise), respectively. The proposed definitions would not direct advisers to exclude “cash

management funds,” as is currently the case under the terms being removed, because we observed that

advisers determine whether a fund is a cash management fund inconsistently. Therefore, this proposed

amendment is designed to improve data quality.

We request comments on the proposed amendments.

29.

Would the proposed amendments help to map complex fund structures and cross

reference them to private fund information across Form PF filings? Would the proposed

one, and its private fund identification number. See proposed Question 7. If the reporting fund invests in external

private funds, advisers would report the name of the master fund, its private fund identification number, and the

master fund’s LEI, if it has one. If the reporting fund invests in internal private funds, advisers would report the

internal private fund’s name, its private fund identification number, and its LEI, if it has one. Proposed Question 15.

See current Question 7 and proposed Question 8.

This requirement would be part of proposed Question 15.

See proposed Question 15.

amendments provide more complete and accurate information about each fund’s risk

profile? Is there a better way to meet these objectives?

30.

Should the form require different or additional identifying information to identify a

master fund, feeder fund, internal private fund, or external private fund?

31.

Should Form PF require advisers to report the private fund identification number for any

feeder funds, as proposed, even though advisers annually report the private fund

identification number of any feeder funds that invest in a private fund they advise on

Form ADV?62

32.

Should Form PF define “internal private funds,” “external private funds,” and “trading

vehicle,” as proposed? Are there alternative definitions we should adopt? For example,

should we define “internal private funds” and “external private funds” to exclude cash

management funds as the current definitions of “investments in internal private funds”

and “investments in external private funds” do?

Withdrawal or redemption rights. The proposal would change how advisers report withdrawal

and redemption rights. Form PF currently requires only large hedge fund advisers to report whether each

qualifying hedge fund provides investors with withdrawal or redemption rights in the ordinary course.63

We propose to require all advisers to provide this information for each reporting fund to inform the

Commissions and FSOC better of all reporting funds’ susceptibility to stress through investor

redemptions, to help identify how widespread the stress is.64 If the reporting fund provides investors with

Form ADV, section 7.B.(1).A.6.

Current Question 49(a).

To implement this, the proposal would move current Question 49(a) from section 2b, which requires large hedge fund

advisers to report information about qualifying hedge funds, to section 1b which requires all advisers to report

information about all the reporting funds they advise, and redesignate it as Question 10. To accommodate moving

the question, the proposal would make corresponding amendments to the instructions in current Question 49, which

we would redesignate as Question 52.

withdrawal or redemption rights in the ordinary course, we propose to require advisers to indicate how

often withdrawals or redemptions are permitted by selecting from a list of categories.65 Advisers would

report this information regardless of whether there are notice requirements, gates, lock-ups, or other

restrictions on withdrawals or redemptions.66 We believe these proposed amendments would allow us

and FSOC to identify better reporting funds that may be affected by investor withdrawals during certain

market events, or vulnerable to failure as a result of investor redemptions. We believe this information

also would provide insight into other data that all reporting funds report. For example, we understand

that private equity funds that do not typically offer redemption rights in the ordinary course likely have

certain patterns of subscriptions and withdrawals, and also report performance to investors and

prospective investors as an internal rate of return, rather than reporting based on changes in the portfolio

market value. We propose to define “internal rate of return” in the proposed Form PF Glossary of Terms

as the discount rate that causes the net present value of all cash flows throughout the life of the fund to be

equal to zero. Analyzing reported information about investor withdrawal or redemption rights together

with reported information about subscriptions and withdrawals or performance is designed to help us

identify developing trends relevant to identifying systemic risk and would help us further investor

protection efforts. We request comment on the proposed amendments.

33.

Should we require all advisers to report information about withdrawal and redemption

rights about all the reporting funds they advise, as proposed? Alternatively, should only

certain advisers report this information for only certain reporting funds? If so, which

ones and why?

Proposed Question 10(b). The categories would be (1) any business day, (2) at intervals of at least two business days

and up to a month, (3) at intervals longer than monthly up to quarterly, (4) at intervals longer than quarterly up to

annually, and (5) at intervals of more than one year.

For example, if the reporting fund allows quarterly redemptions that are subject to a gate, then the adviser would

select “at intervals longer than monthly up to quarterly.”

34.

Should Form PF include more, fewer, or different categories for the schedule of

withdrawal or redemption rights? As an alternative, should advisers be able to select

“other” as a schedule category? Under what circumstances would an adviser select

“other?”

35.

Should we define “internal rate of return” as proposed? If not, what alternative

definitions should we use?

Trading vehicles. We are proposing to require advisers to provide identifying information for any

trading vehicle in which the reporting fund holds investments or conducts activities.67 Advisers would

disclose the trading vehicle’s legal name; LEI, if it has one; and any other identifying information about

the trading vehicle, such as the RSSD ID, if it has one. This proposed amendment is designed to help the

Commissions and FSOC understand the reporting fund’s activities, including how it interacts with the

market if the fund trades through a trading vehicle and related counterparty exposures. The identifying

information also is designed to allow comparisons of Form PF data with data from other sources that use

such information to identify entities. Enhancing the ability to compare Form PF data in this way is

designed to provide a more comprehensive view of the market, and therefore, enhance investor protection

efforts and systemic risk assessment.

We request comment on the proposed amendments.

36.

Should all advisers provide identifying information for a trading vehicle, including an

LEI if it has one, as proposed? Alternatively, should only certain advisers report it for

certain reporting funds?

37.

Do any trading vehicles not have an LEI?

Proposed Question 9.

38.

Should Form PF require more, less, or different identifying information for the trading

vehicle?

Gross asset value and net asset value. We propose several amendments to the way advisers

report gross asset value and net asset value. We propose to require advisers who are filing quarterly

updates to report gross asset value and net asset value as of the end of each month of the reporting period,

rather than only reporting the information as of the end of the reporting period, as Form PF currently

requires.68 This proposed amendment is designed to facilitate analysis of other monthly Form PF data,

including certain fund performance and risk metrics.69

We also propose to add new Question 13 to require advisers to separately report the value of

unfunded commitments included in the gross and net asset value reported in proposed Questions 11 and

12.70 Current Questions 8 and 9 require valuations based on the instruction in Form ADV for calculating

regulatory assets under management, which requires advisers to include the amount of any unfunded

commitments.71 This approach reflects that, in the early years of a private fund’s life, its adviser

typically earns fees based on the total amount of capital commitments, which we presume reflects

See current Questions 8 and 9, and proposed Questions 11 and 12. We also propose to make amendments to the

instructions in current Question 8 (which we would redesignate as proposed Question 11) to correspond with the

proposed instructions that would no longer allow advisers to aggregate master-feeder arrangements, as discussed

above.

See e.g., proposed Question 23 (requiring all private fund advisers to report monthly performance data, to the extent

such results are calculated for the reporting fund), supra footnote 98, and accompanying text, and proposed Question

48 (requiring large hedge funds to report monthly data concerning the reporting fund’s portfolio correlation), infra

section II.C.2 of this Release.

Form PF currently defines “unfunded commitments” as “committed capital” that has not yet been contributed to the

private equity fund by investors. We propose to amend the definition so it refers to all reporting funds, not only

private equity funds. Form PF defines “committed capital” as any commitment pursuant to which a person is

obligated to acquire an interest in, or make capital contributions to, the private fund. See Form PF Glossary of

Terms.

Form PF requires advisers to calculate gross asset value and net asset value using regulatory assets under

management, a regulatory metric from Form ADV. See “gross asset value” and “net asset value” as defined in Form

PF Glossary of Terms; Form ADV: Instructions for Part 1A, Instruction 5.b. An adviser must calculate its regulatory

assets under management on a gross basis, that is, without deduction of any outstanding indebtedness or other

accrued but unpaid liabilities. In addition, an adviser must include the amount of any uncalled capital commitments

made to a private fund managed by the adviser.

compensation for efforts expended on behalf of the fund in preparation for the investments.72 We

continue to believe that net asset value and gross asset value should include unfunded commitments so

Form PF data is comparable to Form ADV data. However, there are circumstances where understanding

the amount represented by unfunded commitments would enhance our understanding of changes to a

reporting fund’s net and gross asset value over time, inform us of trends, and improve data comparability

over the life of the fund. For example, knowing the value of uncalled commitments would help the

Commissions and FSOC more accurately identify how much leverage a fund with uncalled commitments

has. Currently, the Commissions and FSOC only can infer this information but it is unclear whether such

inferences are correct. Therefore, this proposed amendment is designed to improve data accuracy and

comparability, which is important for effective systemic risk assessment and investor protection efforts.

We request comment on the proposed amendments.

39.

Should Form PF require advisers who are filing quarterly updates to report information

as of the end of each month of the reporting period, as proposed? Would this

requirement facilitate our and FSOC’s analysis of such advisers’ other monthly Form PF

data? Is there a better way to meet this objective?

40.

Should Form PF require advisers to report the value of unfunded commitments included

in the gross asset value and net asset value, as proposed? Would the proposed

amendment improve data accuracy and comparability? Would the proposed amendment

more accurately identify how much leverage a fund with uncalled commitments has? Is

there a better way to meet this objective?

Rules Implementing Amendments to the Investment Advisers Act of 1940, Advisers Act Release No. 3221 (June 22,

2011) [76 FR 42950, 42956 (July 19, 2011)], at text accompanying n.90.

Inflows and outflows. We propose to add a question requiring advisers to report information

concerning the reporting fund’s activity, including contributions to the reporting fund, as well as

withdrawals and redemptions, which would include all withdrawals, redemptions, or other distributions

of any kind to investors.73 Form PF would specify that, for purposes of the question, advisers must

include all new contributions from investors, but exclude contributions of committed capital that they

have already included in gross asset value calculated in accordance with Form ADV instructions.74

Quarterly filers would provide this information for each month of the reporting period. This proposed

requirement is designed to facilitate analysis of other monthly Form PF data, including certain fund

performance and risk metrics.75 Therefore, this amendment is designed to improve data accuracy, and

allow the Commissions and FSOC to analyze data more efficiently. Inflows and outflows inform the

Commissions and FSOC of the relationship between flows and performance, changes to net and gross

asset value, as well as trends in the private fund industry. Accordingly, this question is designed to

provide a more accurate baseline understanding of inflows and outflows, so the Commissions and FSOC

can, for example, more accurately assess how much the private fund industry has grown from flows

versus performance. Inflows and outflows also can indicate funding fragility, which can have systemic

risk implications. Therefore, this amendment also is designed to provide more accurate data of inflows

and outflows for systemic risk assessment and investor protection efforts, including identifying activity

that may not match investor disclosures.

We request comment on the proposed amendments.

41.

Should proposed Question 14 apply to advisers to all reporting funds, as proposed, or

only certain advisers to only certain reporting funds?

See proposed Question 14.

Form PF would cite to Form ADV, Part 1A Instruction 6.e.(3).

See supra footnote 69.

42.

Should proposed Question 14 instruct advisers to include or exclude any other

information? Would proposed Question 14 raise operational challenges? For example,

should the instructions specify whether to include or exclude distributions that may be

recallable by the fund (i.e., “recyclable capital commitments” or capital that can be

recalled to invest during a portion of the investment period)?

43.

Should Form PF require advisers to provide the amount of new redemptions or

subscriptions based on notices that would be payable or expected after Form PF is due?

If so, should all advisers submit such data for all reporting funds, or should only certain

advisers submit it for only certain reporting funds?

Base currency. The proposal would require all advisers to identify the base currency of all

reporting funds, rather than only large hedge fund advisers identifying this information for only

qualifying hedge funds.76 When a reporting fund uses a base currency other than U.S. dollars in the

current Form PF, the adviser must convert all monetary values to U.S. dollars, unless otherwise specified,

to complete Form PF, which may cause inconsistencies in the data.77 Currently, the Commissions and

FSOC can identify such inconsistencies only for qualifying hedge funds from current Question 31.

Therefore, this proposed change is designed to allow us and FSOC to interpret more accurately responses

to questions regarding foreign exchange exposures and the effect of changes in currency rates on all

reporting fund portfolios to aid systemic risk assessment and investor protection efforts across all

reporting fund portfolios.

We request comment on the proposed amendments.

To implement this, the proposal would move current Question 31 from current section 2b, which requires large hedge

fund advisers to report information about qualifying hedge funds, to section 1b which requires all advisers to report

information about all the reporting funds they advise. See proposed Question 17.

See current Instruction 15. We also propose to revise Instruction 15 to provide additional instructions concerning

currency conversions. See section II.D of this Release.

44.

Should we expand reporting of base currency information for all reporting funds, as

proposed? Would the proposed change allow us and FSOC to interpret responses to

questions regarding foreign exchange exposures and the effect of changes in currency

rates for these funds?

45.

Would the proposed amendment improve efficiency?

Borrowings and types of creditors. The proposal would revise how advisers report the reporting

fund’s “borrowings.” We propose to revise the term “borrowings” to (1) specify that it includes

“synthetic long positions,” which Form PF would define in the Glossary of Terms, and (2) provide a nonexhaustive list of types of borrowings.78 This proposed reporting approach is consistent with SEC staff

guidance from Form PF Frequently Asked Questions.79 This proposed amendment is designed to

improve data quality, based on experience with the form. Current Question 12 requires advisers to report

the value of the reporting fund’s borrowings and the types of creditors. We propose to amend this

question to require advisers to indicate whether a creditor is based in the United States and whether it is a

“U.S. depository institution,” rather than a “U.S. financial institution” as is currently required.80 This

“Borrowings” would include, but would not be limited to (1) cash and cash equivalents received with an obligation to

repay; (2) securities lending transactions (count cash and cash equivalents and securities received by the reporting

fund in the transaction, including securities borrowed by the reporting fund for short sales); (3) repo or reverse repo

(count the cash and cash equivalents and securities received by the reporting fund); (4) negative mark-to-market of

derivative transactions from the reporting fund’s point of view; and (5) the gross notional value of “synthetic long

positions.” We propose to define a “synthetic long position” in the Form PF Glossary of Terms (see the proposed

Form PF Glossary of Terms for the proposed definition.) We are proposing this definition based on our

understanding of the instruments and to help ensure data quality to aid comparability.

See SEC staff Form PF Frequently Asked Questions, available at

https://www.sec.gov/divisions/investment/pfrd/pfrdfaq.shtml (“Form PF Frequently Asked Questions”). See Form PF

Frequently Asked Question 12.1 (which provides a non-exhaustive list of types of borrowings).

See proposed Question 18. Form PF would define “U.S. depository institution” as any U.S. domiciled depository

institution, including any of the following: (1) a depository institution chartered in the United States, including any

federally-chartered or state-chartered bank, savings bank, cooperative bank, savings and loan association, or an

international banking facility established by a depositary institution chartered in the United States; (2) banking offices

established in the United States by a financial institution that is not organized or chartered in the United States, including

a branch or agency located in the United States and engaged in banking not incorporated separately from its financial

institution parent, United States subsidiaries established to engage in international business, and international banking

facilities; (3) any bank chartered in any of the following United States affiliated areas: U.S. territories of American

proposed amendment is designed to make the categories more consistent with the categories the Federal

Reserve Board uses in its reports and analysis, to enhance systemic risk assessment. The proposal would

not require advisers to distinguish between non-U.S. creditors that are depository institutions and those

that are not. We understand that it is difficult for advisers to distinguish non-U.S. creditors by type,

resulting in inconsistent data that is less valuable for analysis.

We request comment on the proposed amendments.

46.

Should Form PF define or redefine any terms related to proposed Question 18? For

example, should Form PF define “U.S. depository institution,” “synthetic long

positions,” and revise the term “borrowings,” as proposed? Could the definitions be

clearer? Should Form PF define the terms differently? For example, should “synthetic

long position” provide a different list of assets to be included or excluded? Does the

reference to deep-in-the-money options in the definition of “synthetic long position”

need further clarification? If so, what clarifications should we make?

47.

Would advisers find it difficult to distinguish among different types of non-U.S.

creditors? Should Form PF require advisers to distinguish between non-U.S. creditors

that are depository institutions and those that are not, or non-U.S. creditors that are

financial institutions and those that are not?

Fair value hierarchy. Current Question 14 requires advisers to report the assets and liabilities of

each reporting fund broken down using categories that are based on the fair value hierarchy established

Samoa, Guam, and the U.S. Virgin Islands; the Commonwealth of the Northern Mariana Islands; the Commonwealth

of Puerto Rico; the Republic of the Marshall Islands; the Federated States of Micronesia; and the Trust Territory of

the Pacific Islands (Palau); or (4) a credit union (including a natural person or corporate credit union). Form PF defines

“U.S. financial institution” as any of the following: (1) a financial institution chartered in the United States (whether

federally-chartered or state-chartered); (2) a financial institution that is separately incorporated or otherwise

organized in the United States but has a parent that is a financial institution chartered outside the United States; or (3)

a branch or agency that resides outside the United States but has a parent that is a financial institution chartered in

the United States. See proposed Form PF Glossary of Terms.

under U.S. generally accepted accounting principles.81 Current Question 14 is designed to provide

insight into the illiquidity and complexity of a fund’s portfolio and the extent to which the fund’s value is

determined using metrics other than market mechanisms.82 We are proposing to revise how advisers

report fair value hierarchy in current Question 14, which we would redesignate as proposed Question 20,

in the following ways to improve data quality and better understand the reporting fund’s complexity and

valuation challenges:

•

We propose to require advisers to indicate the date the categorization was performed.

This proposed amendment is designed to show how old the data is. Some advisers report

current fair value hierarchy, while others report a prior year’s fair value hierarchy if the

current data is not yet available.83 This can cause confusion when analyzing the data,

because the fair value hierarchy data concerns a different time period than the other data

advisers report on Form PF. Therefore, we believe that adding a categorization date

would help ensure the data is not incorrectly categorized as applying to the wrong time

period, and in turn, would allow the Commissions and FSOC to correlate data to other

Form PF data and market events more accurately.

•

We propose to direct advisers to report the absolute value of all liabilities. Currently,

advisers report liabilities inconsistently, with some reporting absolute values and others

reporting negative values. This inconsistency causes errors when the Commissions and

FSOC aggregate this data and we believe the proposed instruction would help reduce

aggregation errors.

See 2011 Form PF Adopting Release, supra footnote 3, at text accompanying n.204.

See 2011 Form PF Adopting Release, supra footnote 3, at n.204.

Advisers are not required to update information that they believe in good faith properly responded to Form PF on the

date of filing even if that information is subsequently revised for purposes of their recordkeeping, risk management,

or investor reporting (such as estimates that are refined after completion of a subsequent audit). See Instruction 16.

•

We propose to direct advisers to provide an explanation in Question 4 if they report assets

as a negative value. We have found that some advisers have reported negative values for

assets in error.84 Therefore, this instruction is designed to reduce inadvertent errors.

•

We propose to require advisers to separately report cash and cash equivalents. Currently,

Form PF does not explain where advisers must report cash and cash equivalents in current

Question 14. While SEC staff have suggested that advisers generally should report cash in

the cost based column and cash equivalents in the applicable column in the fair value

hierarchy or the cost based column, depending on the nature of the cash equivalents, we

are proposing to add a separate column for cash and cash equivalents.85 The proposed

categorization is designed to differentiate reported holdings of cash and cash equivalents

from harder to value assets that may be valued at cost, and in turn, improve data quality

and comparability.

•

We propose to amend the definition of “cash and cash equivalents.” The current

definition of “cash and cash equivalents” includes “government securities.”86 When

reporting cash and cash equivalents, some advisers may include government securities

with longer maturities, while others do not, which results in inconsistent reporting and

may obscure our and FSOC’s understanding of fund exposures. Therefore, to improve

data quality, we propose to remove government securities from the definition of “cash and

cash equivalents,” and present it as its own line item in the proposed Form PF Glossary of

We recognize that there may be cases when advisers correctly report negative values, such as when subtracting fund

of fund investments.

See Form PF Frequently Asked Question 14.3, Form PF Frequently Asked Questions, supra footnote 79.

Current Form PF defines “government securities” in the current term “cash and cash equivalents” as (1) U.S. treasury

securities, (2) agency securities, and (3) any certificate of deposit for any of the foregoing.

Terms.87 We also propose to amend the term “cash and cash equivalents” so it would

direct advisers to not include any digital assets when reporting cash and cash equivalents.

As discussed in section II.B.3 of this Release, we propose to define “digital assets” and

require advisers to report them separately than other types of assets.88 Therefore, this

proposed amendment is designed to ensure that the categories of “cash and cash

equivalents” and “digital assets” are clearly distinct to help ensure accurate reporting.

•

We propose to add instructions directing advisers about how to report data if their

financial statement’s audit is not yet completed when Form PF is due. The instructions

would state that advisers should use the estimated values for the fiscal year and explain

that the information is an estimate in Question 4. The proposed instructions also would

provide that the adviser may, but is not required to, amend Form PF when the audited

financial statements are complete.89 The instructions are consistent with responses to

Form PF Frequently Asked Questions and are designed to provide the Commissions and

FSOC with more recent information regarding the reporting fund than may be possible if

the reporting fund relied solely on audited financial statement information (i.e., the

reporting fund’s previous fiscal year’s audited financial statements).90 Given that advisers

file Form PF sometimes months after their quarter and year ends, depending on their size

and the type of funds they advise, we believe the proposed instruction would balance

We propose to make corresponding amendments to the definition of “unencumbered cash” to reflect that

“government securities” would be a distinct term from “cash and cash equivalents.” This proposed amendment is not

intended to change the meaning of the term “unencumbered cash.” See Form PF Glossary of Terms.

See e.g., proposed Question 25, which would include digital assets as a strategy category for advisers to hedge funds.

Form PF Instruction 16 would continue to provide that an adviser is not required to update information that it believes

in good faith properly responds to Form PF on the date of filing, even if that information is subsequently revised, as

Form PF currently provides.

See Form PF Frequently Asked Question A.11, Form PF Frequently Asked Questions, supra footnote 79.

reporting burdens with more timely information for assessing potential systemic risk and

investor protection concerns.

We request comment on the proposed amendments.

48.

Should we require advisers to indicate the date the categorization was performed, as

proposed? Would this proposed amendment help ensure the data is correctly categorized

as applying to the appropriate time period, and in turn, allow the Commissions and

FSOC to correlate data to other Form PF data and market events more accurately? Is

there a better way to meet this objective?

49.

Should Form PF direct advisers to report the absolute value of all liabilities, as proposed?

Would this proposed amendment reduce aggregation errors? Is there a better way to

meet this objective?

50.

Should Form PF direct advisers to provide an explanation in Question 4 if they report

assets as a negative value, as proposed? Would this proposed instruction reduce

inadvertent errors?

51.

Should advisers report cash or cash equivalents separately from other assets, as

proposed? Are there other alternatives we should implement? For example, should

Form PF require advisers to report cash in the cost based column and cash equivalents in

the applicable column in the fair value hierarchy or the cost based column, depending on

the nature of the cash equivalents?91

52.

Would the proposed amendments to the terms “cash and cash equivalents” and

“unencumbered cash,” and the addition of “government securities” allow for more

precise reporting for these types of assets? Alternatively, should the definition of “cash

See supra footnote 85.

and cash equivalents” provide that government securities would be included in cash

equivalents if they are eligible to be held by money market funds under the risk-limiting

condition set forth in [17 CFR 270.2a-7(d)(1)(i)] Investment Company Act rule 2a7(d)(1)(i), which generally prohibits a money market fund from acquiring any instrument

with a remaining maturity of greater than 397 calendar days? Should this language be

more comparable with other requirements of Form PF, which require large liquidity fund

advisers to report the dollar amount of a liquidity fund’s assets that have a maturity

greater than 397 days?92 Should Form PF provide distinct line items for the term “cash”

and “cash equivalents,” and revise questions to refer to each term, as applicable? Should

the term “unencumbered cash” continue to refer to government securities, as proposed,

or should we modify the term differently? For example, should “unencumbered cash”

refer to U.S. treasury bills, rather than government securities?

53.

Should Form PF direct advisers to report estimated values if their financial statement’s

audit is not yet completed when Form PF is due, as proposed? Alternatively, should we

require advisers to update Form PF with updated values when the audited financial

statements are complete?

Beneficial Ownership of the Reporting Fund. Current Question 16 requires advisers to specify the

approximate percentage of the reporting funds’ equity that is beneficially owned by different groups of

investors. We propose to require advisers to provide more granular information regarding the following

groups of beneficial owners.93

See e.g., Form PF, section 3, current Question 55(i). The SEC recently proposed amendments to Form PF section 3,

which would redesignate current Question 55(i) to reflect new numbering. See 2022 SEC Form PF Proposal, supra

footnote 13.

See proposed Question 22.

•

Advisers would indicate whether beneficial owners that are broker-dealers, insurance

companies, non-profits, pension plans, banking or thrift institutions are U.S. persons or nonU.S. persons.94 This proposed amendment is designed to allow the Commissions and FSOC

to conduct more targeted analysis about risks presented in the United States separate from

risks presented abroad. With regard to pension plans, in particular, it is currently unclear

how advisers must report assets in non-U.S. pension plans: as governmental pension plans or

foreign official institutions. Therefore, this proposed amendment also is designed to

improve data quality, based on experience with the form.

•

Advisers would indicate whether beneficial owners that are private funds are either internal

private funds (i.e., managed by the adviser or its related persons) or external private funds.

This proposed amendment is designed to help the Commissions and FSOC understand the

interconnectedness of private funds to each other, which would aid systemic risk assessment

and investor protection efforts. Furthermore, this information is designed to help the

Commissions and FSOC understand a reporting fund’s risk from investor demands for

liquidity, because beneficial owners that are external private funds may have less predictable

withdrawals than internal private funds.

•

We would specify that “state” investors are U.S. state investors to improve data quality and

reduce potential confusion.95

We understand that, in some cases, an adviser may not be able to determine what type of non-U.S. entity the investor

is. Current Question 16 already provides a category that would address that scenario in certain circumstances, and we

would maintain that approach. If investors that are not United States persons and about which certain beneficial

ownership information is not known and cannot reasonably be obtained because the beneficial interest is held through

a chain involving one or more third-party intermediaries, advisers currently report this in current Question 16(m),

which we would redesignate as proposed Question 22(s).

The proposal also would include instructions to proposed Question 22, as well as current Question 15, which we

would redesignate as proposed Question 21 (concerning a certain percentage of beneficial ownership), providing that

if the reporting fund is the master fund in a master-feeder arrangement, advisers must look through any disregarded

feeder fund (i.e., a feeder fund that is not required to be separately reported). This proposed amendment is designed

The proposal would provide that if advisers report information in the “other” category, they must

describe in Question 4 the type of investor, why it would not qualify for any of the other categories, and

any other information to explain the selection of “other.” This proposed amendment is designed to

improve data quality by providing context to the adviser’s selection of the “other” category, and help

ensure that advisers do not inadvertently report information in the wrong category.

We request comment on the proposed amendments.

54.

Should we revise the reporting categories as proposed? Should we eliminate, add, or

change any categories? For example, should we add categories for security-based swap

dealers that are U.S. persons and those that are not? The instructions for current

Question 16 require advisers to include each investor in only one group. Therefore, if we

require advisers to report whether an investor is a security-based swap dealer, how

should they report the investor if the investor also qualifies for another category, such as

broker-dealers or “banking or thrift institutions?” For example, should the list be nonexclusive? Is there a better way to address cases when advisers may not be able to

determine what type of entity the investor is?96

55.

Should Form PF require advisers to explain their response when they select “other” as a

category, as proposed? Should Form PF require the adviser to include more, less, or

different information in the explanation? Would this proposed change provide context to

the adviser’s selection of the “other” category and help prevent misreporting?

56.

Should we add instructions to current Question 15 (which we propose to redesignate as

proposed Question 21) to allow good faith estimates in determining beneficial interests

to implement the proposed master-feeder reporting. See section II.A.1 of this Release.

See supra footnote 94.

outstanding before March 31, 2012 (the effective date of Form PF), that have not been

transferred on or after that date, as current Question 16 does and Form PF would

continue to provide in proposed Question 22?

57.

Current Question 16 includes a category concerning broker-dealers. Under the proposal,

advisers would distinguish between broker-dealers that are U.S. persons and those that

are not U.S. persons. Should Form PF define “broker-dealer” or use different terms so

the categories would be more consistent with the Federal Reserve Board’s reports and

analysis? Is there a way to achieve this objective while ensuring the terms are consistent

with the SEC’s definition of the terms? For example, should Form PF use and define the

term “broker” or “dealer” as they are defined in the Securities Exchange Act of 1934

(“Exchange Act”)?97 Should Form PF use and define the term “foreign broker or dealer”

as it is defined in [17 CFR 240.15a-6(b)(3)] (“Exchange Act rule 15a-6(b)(3)”)? Should

Form PF use the term “securities brokers and dealers,” and define it the following way:

Firms that buy and sell securities for a fee, hold an inventory of securities for resale, or

do both? Are the firms that make up this sector those that submit information to the SEC

on one of two reporting forms, either [17 CFR 249.617] Form X-17A-5, Financial and

Operational Combined Uniform Single Report of Brokers and Dealers (“FOCUS

Report”) or [17 CFR 449.5] Form G-405, on Finances and Operations of Government

Securities Brokers and Dealers (“FOGS Report”)?

Fund Performance. We are proposing several amendments regarding fund performance reporting

in current Question 17, which we would redesignate as proposed Question 23.98 Currently, Form PF

15 U.S.C. 78c(a)(4) and 15 U.S.C. 78c(a)(5).

In a separate release, the SEC is proposing a new rule under the Advisers Act to require advisers to provide certain

fund performance information to its private funds’ investors in quarterly statements. See Private Fund Advisers;

requires all advisers to report gross and net fund performance for specified fiscal periods using a table in

current Question 17. The table in current Question 17 requires advisers to provide monthly and quarterly

performance results in the table only if such results are calculated for the reporting fund. This

requirement would remain, but we propose to add instructions specifying which lines to complete

depending on whether the adviser is submitting an initial filing, annual update, or quarterly update.99 We

also propose to amend the instructions to the table to specify that if gross and net performance is reported

to current and prospective investors, counterparties, or otherwise in a currency other than U.S. dollars,

advisers must report the data using that currency. We believe this instruction is implied in the current

form and we propose to amend this instruction to make it explicit. We also propose to require advisers to

identify the currency in Question 4.100 This proposed amendment is designed to inform the Commissions

and FSOC of the currency the adviser used to report the reporting fund’s gross and net performance, for

more accurate and informed analysis.

We also propose to create an exception to the tabular reporting. If the reporting fund’s

performance is reported to current and prospective investors, counterparties, or otherwise as an internal

rate of return since inception, the adviser would report its performance as an internal rate of return.101 If

such information is reported to current and prospective investors, counterparties, or otherwise, in a

Documentation of Registered Investment Adviser Compliance Reviews, Advisers Act Release No. IA-5955 (Feb. 9,

2022) [87 FR 16886, (Mar. 24, 2022)].

We also propose to reorganize the table so monthly, quarterly, and yearly data is presented in separate categories, but

this change would not affect reporting; advisers would report information according to the same intervals, as they

currently do. We also propose to amend the table to refer to the end date of each applicable month, quarter, and year,

rather than last day of the fiscal period, to reflect the proposed amendments to the reporting period, as discussed

above. See supra section II.A.3 of this Release, and proposed Question 23(a).

100

See proposed Question 23(a).

101

See proposed Question 23 instructions, and proposed Question 23(b). Proposed Question 23(b) also would require

that if the fund reports different performance results to different groups, advisers must provide the most representative

results and explain their selection in Question 4. The instructions to proposed Question 23(b) would specify that

internal rates of return for periods longer than one year must be annualized, while internal rates of return for periods

one year or less must not be annualized. This instruction is designed to help ensure consistent reporting for accurate

comparisons.

currency other than U.S. dollars, advisers would report the data using that currency, and identify the

currency in Question 4. This approach is designed to acknowledge that advisers calculate performance

data differently for different types of private funds. For example, advisers of private equity funds may

use internal rate of return to calculate performance data, while advisers to liquidity funds and hedge funds

may use a periodic rate of return. These calculations may differ in the way they reflect realized and

unrealized gains, among other things. Therefore, the proposed change is designed to allow the

Commissions and FSOC to improve the usefulness and quality of performance data to conduct more

accurate analysis, including comparisons, and aggregations.

The proposal would require advisers to report additional performance-related information if the

adviser calculates a market value on a daily basis for any position in the reporting fund’s portfolio. In

such a case, the adviser would report the following:

•

The “reporting fund aggregate calculated value” at the end of the reporting period.102

Advisers that file a quarterly update also would report the reporting fund aggregate

calculated value as of the end of the first and second month of the reporting period.103

•

The reporting fund’s volatility of the natural log of the daily “rate of return” for each

month of the reporting period, following a prescribed methodology.104 Advisers would

report whether the reporting fund uses a different methodology than is prescribed in Form

102

We would define the term “reporting fund aggregate calculated value” in the Form PF Glossary of Terms. See

proposed Form PF Glossary of Terms and proposed Question 23(c).

103

See proposed Question 23(c)(i).

104

We would define “rate of return” for a reporting fund as the percentage change in the reporting fund aggregate

calculated value in the reporting fund’s base currency from one date to another, and adjusted for subscriptions and

redemptions. For a portfolio position, the “rate of return” would be the percentage change in the “position calculated

value,” adjusted for income earned. We would define “position calculated value” in the Form PF Glossary of Terms.

The prescribed methodology would be the standard deviation of the natural log of one plus each of the daily rates of

return in the month, annualized by the square root of 252 trading days. When calculating the natural log of a daily

rate of return, the rate of return, which is expressed as a percent, must first be converted to a decimal value and then

one must be added to the decimal value. See proposed Form PF Glossary of Terms and Question 23(c)(ii).

PF to report to current and prospective investors, counterparties, or otherwise, and if so,

they would describe it in Question 4.105

•

Whether the reporting fund had one or more days with a negative daily rate of return

during the reporting period. If so, advisers would report (1) the most recent peak to trough

drawdown, and indicate whether the drawdown was continuing on the data reporting date,

(2) the largest peak to trough drawdown, (3) the largest single day drawdown, and (4) the

number of days with a negative daily rate of return in the reporting period.106 These

measures are designed to help us and FSOC understand risk, particularly in reporting

funds with unique return patterns that are poorly measured using volatility alone. We

understand that advisers use drawdown metrics, therefore, this question also is designed to

be more reflective of industry practice, and in turn improve data quality.

Together, the proposed changes are designed to allow the Commissions and FSOC to more

accurately compare volatility across different fund types to identify market trends (e.g., volatility of a

specific fund type), for systemic risk assessment and investor protection efforts. For example, if several

reporting funds that engage in similar trading activity experience a surge in volatility, the volatility itself

or the reporting funds’ response to the volatility may impact others who also are engaging in similar

trading activity, which could pose systemic risk, and negatively affect investors.

We request comments on the proposed amendments.

58.

Would the proposed changes improve data quality and provide the Commissions and

FSOC with a more robust picture of fund performance?

105

See proposed Question 23(c)(iii).

106

See proposed Question 23(iv).

59.

Should we amend the table in current Question 17, as proposed? For example, should

we specify that if a reporting fund’s gross and net performance is reported to current and

prospective investors, counterparties, or others in a currency other than U.S. dollars,

advisers must report the data using that currency, as proposed? Should we require

advisers to identify the currency in Question 4, as proposed?

60.

Do different types of private funds calculate performance data differently based on

industry conventions, or otherwise? Do the proposed requirements and defined terms

accurately capture the right types of performance reporting for investor protection and

systemic risk assessment? Is there a better way to meet these objectives?

61.

As an alternative, should Form PF require advisers to report the reporting fund aggregate

calculated value information only for reporting funds that meet a certain asset threshold?

62.

Should Form PF require advisers to follow the prescribed methodology to compute the

reporting fund’s volatility of the daily rate of return, as proposed, or should Form PF

require advisers to follow a different methodology? If so, what methodology should

Form PF prescribe and why? Should advisers have the flexibility to use their own

methodology to compute the reporting fund’s volatility of the daily rate of return? If

advisers use their own methodology, how could the Commissions and FSOC ensure data

could be aggregated and compared?

63.

Could the instructions on how to calculate the volatility of the daily rate of return be

clearer? For example, should the form include a calculation worksheet for advisers to fill

out to help advisers calculate the volatility of rates of return?

64.

Should we define “position calculated value,” “reporting fund aggregate calculated

value,” and “rate of return,” as proposed?

65.

We are not defining the term “drawdown.” Should Form PF define “drawdown?” For

example, should Form PF define “drawdown” as the maximum loss in the value over a

specified time internal? Should Form PF define or redefine any other terms?

66.

Should Form PF specify what “peak to trough” means? For example, should “peak to

trough” mean the percentage decline from portfolio’s highest value (peak) to lowest

value (trough) following the establishment of the highest value (peak)? Are there

industry standards for determining peak to trough? For example, should Form PF

provide guidance on when the “peak” or “trough” should be reset? As an alternative to

requiring information about “peak to trough,” should Form PF require advisers to report

the maximum drawdown? If so, should Form PF define “maximum drawdown” as the

largest decline over any time interval within the reporting period?

67.

Should Form PF require advisers to report information about the negative daily rates of

return, as proposed? Alternatively, should Form PF require the largest peak to trough

drawdown over a rolling 10-day period, or in each month?

68.

Alternatively, should Form PF require advisers to report the daily mark to market

calculations, or both the daily rate of return and the daily mark to market calculations?

69.

Are the instructions clear for reporting funds that have base currencies other than U.S.

dollars? Should we revise the form further to accommodate data concerning such funds?

Proposed Amendments to Section 1c of Form PF - Concerning All Hedge

Funds

Section 1c requires advisers to report information about the hedge funds they advise. We propose

to require advisers to report additional information about hedge funds to provide greater insight into

hedge funds’ operations and strategies, assist in identifying trends, and improve data quality and data

comparability for purposes of systemic risk assessments and to further investor protection efforts. We

also propose to remove certain questions where other questions would provide the same or more useful

data to streamline reporting and reduce reporting burdens without compromising investor protection

efforts and systemic risk analysis.

Investment Strategies. We propose to amend how advisers report hedge fund investment

strategies.107 We propose to require advisers to indicate which investment strategies best describe the

reporting fund’s strategies on the last day of the reporting period, rather than allowing advisers flexibility

to report information as of the data reporting date or throughout the reporting period, as Form PF

currently provides.108 This amendment is designed to improve data quality by specifying how to report

information if the reporting fund changes strategies over time.

We also propose to update the strategy categories that advisers can select to reflect our

understanding of hedge fund strategies better, and improve data quality and comparability, based on

experience with the form. For example, we propose to include more granular categories for equity

strategies, such as factor driven, statistical arbitrage, and emerging markets. Similarly, we propose to

include more granular categories for credit strategies, such as litigation finance, emerging markets, and

asset-backed/structured products. These more granular categories are designed to allow the Commissions

and FSOC to conduct more targeted analysis and improve comparability among advisers and hedge

funds, which the Commissions and FSOC can use to more accurately identify and address systemic risk

and investor protection issues in times of stress. We also propose to add categories that have become

more commonly pursued by hedge funds since Form PF was adopted, such as categories concerning real

estate and digital assets.109 Today, advisers may report information regarding these strategies in the

107

We would amend current Question 20, and redesignate it as proposed Question 25.

108

See current Question 20.

109

Aggregate qualifying hedge fund gross notional exposure to physical real estate has grown by 72 percent from the

second quarter 2018 through the third quarter of 2021, to $146 billion. See Private Funds Statistics, supra footnote 7,

First Quarter 2020 (showing data from the second quarter of 2018), and Third Quarter 2021.

“other” category, resulting in less robust Form PF data for analysis, especially when such analysis filters

results based on strategy.110 Therefore, the additional categories are designed to improve reporting

quality and data comparability across advisers, based on experience with the form. If advisers select the

“other” category, we propose to require them to describe in Question 4 the investment strategy, why the

reporting fund would not qualify for any of the other categories, and any other information to explain the

selection of “other.” This proposed change is designed to improve data quality by providing context to

the adviser’s selection of the “other” category. It also is designed to help us ensure that advisers are not

misreporting information in the “other” category when they should be reporting information in a different

category.

In connection with these proposed amendments, we propose to define the term “digital asset” as

an asset that is issued and/or transferred using distributed ledger or blockchain technology (“distributed

ledger technology”), including, but not limited to, so-called “virtual currencies,” “coins,” and “tokens.”

These types of assets also are commonly referred to as “crypto assets.”111 We view these terms as

synonymous. We are proposing the term and definition to be consistent with the SEC’s recent statement

on digital assets, and we believe that such term and definition would provide a consistent understanding

of the type of assets we intend to address.112 The SEC proposed to add the same term and definition to

SEC’s section of Form PF in the 2022 SEC Form PF Proposal.113 The definition is designed to help

ensure that advisers report digital asset strategies accurately.

110

The amount of hedge fund exposure that advisers attribute to the “other” category has more than doubled to $57

billion, from 2013 through third quarter 2021. See Private Funds Statistics, supra footnote 7.

111

See e.g., FSOC 2021 Annual Report, at 184-185, available at

https://home.treasury.gov/system/files/261/FSOC2021AnnualReport.pdf (noting that another industry term for

“digital asset” is “crypto asset”).

112

See Custody of Digital Asset Securities by Special Purpose Broker-Dealers, Exchange Act Release No. 90788 (Dec.

23, 2020) [86 FR 11627 (Feb. 26, 2021)], at n.1.

113

2022 SEC Form PF Proposal, supra footnote 13.

We request comment on the proposed amendments.

70.

Should Form PF direct advisers to report information about the reporting fund’s

strategies on the last day of the reporting period, as proposed? Would this proposed

amendment improve data quality, and reduce ambiguity?

71.

Should Form PF continue to provide that the strategies are mutually exclusive and direct

advisers to not report the same assets under multiple strategies, as it currently does?

Alternatively, should Form PF allow advisers to report the same assets under multiple

strategies?

72.

Should Form PF include more, fewer, or different categories? Would the proposed

categories improve reporting accuracy and data comparability across advisers? Are there

other strategies that are important to track for assessing systemic risk or for the

protection of investors?

73.

Are there categories that advisers report in the “other” category that Form PF should

include as their own categories? Should we remove the “other” category?

74.

Should we require more specific disclosure of what each digital asset represents? If so,

what kinds of descriptions would be needed and in what detail? For example, should the

description include the rights the digital asset provides to the holder? Should Form PF

distinguish, for example, between digital assets that represent an ability to convert or

exchange the digital asset for fiat currency or another asset, including another digital

asset, and those that do not represent such a right to convert or exchange? For those

digital assets that represent a right to convert or exchange for fiat currency or another

digital asset, should we distinguish between those where the redemption obligation is

supported by an unconditional guarantee of payment, such as some “central bank digital

currencies,” and those digital assets redeemable upon demand from the issuer, whether or

not collateralized by a pool of assets or a reserve? Should we identify digital assets that

do not represent any direct or indirect obligation of any party to redeem or those that

represent an equity, profit, or other interest in an entity?

75.

Should Form PF define or re-define any terms that are listed as a proposed strategy?

Should Form PF define “digital asset,” as proposed? If not, please identify alternative

elements that would better identify the digital assets held by private funds. Should Form

PF use the term “crypto asset” instead of the term “digital asset”?

76.

Some reporting funds report as hedge funds, but may hold commodities that are not

securities or may hold commodity derivatives such as bitcoin futures that would make

them a commodity pool. Should Form PF include categories for funds that hold digital

assets regardless of how the fund characterizes itself based on the assets it is holding or

would the proposed categories (other than the “other” category) apply?

77.

If advisers select the “other” category, should Form PF require them to explain the

selection, as proposed? Should Form PF require the adviser to include more, less, or

different information in the explanation?

78.

Should Form PF require advisers to provide explanations for any other categories besides

the “other” category, as proposed? For example, if advisers report digital assets, should

Form PF require advisers to provide the name of the digital asset, or describe the

characteristics of the digital asset?

Counterparty exposures. Counterparty exposure informs the Commissions and FSOC of the

interconnectedness of hedge funds with the broader financial services industry, which is a critical part of

systemic risk assessment and investor protection efforts. Understanding counterparty exposures allows

the Commissions and FSOC to assess who may be impacted by a reporting fund’s failure, and which

reporting funds may be impacted by a counterparty’s failure. Counterparty exposure concerning central

clearing counterparties (“CCPs”) is of importance to FSOC’s systemic risk assessment efforts as

evidenced by the fact that FSOC has designated many CCP institutions as “systemically important,” and

recommended that regulators continue to coordinate to evaluate threats from both default and non-default

losses associated with CCPs.114

The proposal would add proposed Question 26, and revise current Questions 22 and 23, and

redesignate them as proposed Questions 27 and 28, to provide better insight into hedge funds’ borrowing

and financing arrangements with counterparties, including CCPs. Proposed Question 26 would require

advisers to hedge funds (other than qualifying hedge funds) to complete a new table (the “consolidated

counterparty exposure table”) concerning exposures that (1) the reporting fund has to creditors and

counterparties, and (2) creditors and other counterparties have to the reporting fund.115 Advisers would

report the U.S. dollar value of the reporting fund’s “borrowing and collateral received (B/CR),” as well as

its “lending and posted collateral (L/PC),” aggregated across all counterparties, including CCPs, as of the

114

Form PF defines “CCP” as central clearing counterparties (or central clearing houses) (for example, CME Clearing,

The Depository Trust & Clearing Corporation, Fedwire and LCH Clearnet Limited). See Financial Stability

Oversight Council, 2012 Annual Report, Appendix A, available at https://home.treasury.gov/system/files/261/2012Annual-Report.pdf. (concerning the designations); Financial Stability Oversight Council, 2021 Annual Report, p. 14,

available at https://home.treasury.gov/system/files/261/FSOC2021AnnualReport.pdf. (concerning the

recommendation).

115

Qualifying hedge funds would not complete this table because section 2 would be revised to include similar questions

that require additional detail. See discussion at Section II.C of this Release. Together the proposed questions in

section 1c and similar questions at section 2 would allow the Commissions and FSOC to consolidate information

relating to hedge funds’ and qualifying hedge funds’ arrangements with creditors and other counterparties, to support

systemic risk assessment and investor protection efforts. We propose to define the term “consolidated counterparty

exposure table” in the Form PF Glossary of Terms. For hedge funds, other than qualifying hedge funds, it would

mean the section 1c table (at proposed Question 26) that collects the reporting fund’s borrowing and collateral

received and lending and posted collateral aggregated across all creditors and counterparties as of the end of the

reporting period. For qualifying hedge funds, it would mean the section 2 table (at proposed Question 41) that

collects the reporting fund’s borrowing and collateral received and lending and posted collateral aggregated across all

creditors and counterparties as of the end of the reporting period.

end of the reporting period.116 The form would explain what exposures to net.117 Advisers would

classify information according to type (e.g., unsecured borrowing, secured borrowing, derivatives cleared

by a CCP, and uncleared derivatives) and the governing legal agreement (e.g., a prime brokerage or other

brokerage agreement for cash margin and securities lending and borrowing, a global master repurchase

agreement for repo/reverse repo, and International Swaps and Derivatives Association (“ISDA”) master

agreement for synthetic long positions, “synthetic short positions,” and derivatives).118 Advisers would

report transactions under a master securities loan agreement as secured borrowings. Advisers would

check a box if one or more prime brokerage agreements provide for cross-margining of derivatives and

secured financing transactions. If advisers check the box, we propose to include instructions about how

to report secured financing and derivatives in the consolidated counterparty exposure table.

Form PF would continue to require advisers to report information about individual counterparties

that present the greatest exposure to and from hedge funds.119 Under the proposal, however, advisers to

qualifying hedge funds would not complete proposed Questions 27 and 28, if they complete certain

116

We would define “borrowing and collateral received (B/CR)” and “lending and posted collateral (L/PC)” in the Form

PF Glossary of Terms. We are proposing these definitions based on our understanding of borrowing and lending and

to help ensure data quality and comparability. We also propose to amend the term “gross notional value” to provide

more detail on how to report it to aid advisers completing the consolidated counterparty exposure table. See proposed

Form PF Glossary of Terms.

117

Advisers would net the reporting fund’s exposure with each counterparty and among affiliated entities of a

counterparty to the extent such exposures may be contractually or legally set-off or netted across those entities or one

affiliate guarantees or may otherwise be obligated to satisfy the obligations of another under the agreements

governing the transactions. We would include instructions providing that netting must be used to reflect net cash

borrowed from or lent to a counterparty, but must not be used to offset securities borrowed and lent against one

another, when reporting prime brokerage and repo/reverse repo transactions. These instructions are designed to help

ensure data quality and comparability. See proposed Question 26.

118

We propose to define “ISDA” as the International Swaps and Derivatives Association. We also propose to define

“synthetic short positions” in the Form PF Glossary of Terms (see the proposed Form PF Glossary of Terms for the

proposed definition). We are proposing this definition based on our understanding of the instruments and to help

ensure data quality to aid comparability. See also supra footnote 78 (discussing the proposed definition of “synthetic

long position”).

119

See current Questions 22 and 23, and proposed Questions 27 and 28.

similar questions in Form PF section 2, to avoid duplication.120 We also propose to revise current

Questions 22 and 23 to improve data quality.

•

Although current Questions 22 and 23 provide instructions on how to identify the

counterparties, we understand that advisers have been using different methodologies to

identify them, and have misidentified lending relationships, which has limited the utility

and comparability of the reported information. Therefore, we propose to provide more

detailed instructions for advisers to use to identify the individual counterparties. For both

proposed Questions 27 and 28, advisers would use the calculations from the consolidated

counterparty exposure table to identify the counterparties.121 This proposed amendment is

designed to help ensure that the Commissions’ and FSOC’s analysis can identify true data

differences, without the distraction of methodology differences, which can suggest

differences where there are none, and reduce circumstances where advisers would

misidentify lending relationships.

•

Proposed Question 27 would require advisers to identify each creditor or other

counterparty (including CCPs) to which the reporting fund owes a certain amount (before

posted collateral) equal to or greater than either (1) five percent of net asset value as of the

data reporting date or (2) $1 billion. If there are more than five such counterparties, the

adviser only would report the five counterparties to which the reporting fund owes the

largest dollar amount, before taking into account collateral that the reporting fund posted.

If there are fewer than five such counterparties, the adviser only would report the

120

See proposed Questions 42 and 43 in Form PF section 2, and supra footnote 115.

121

See proposed Question 26 for the consolidated counterparty exposure table. The proposal would define new terms

related to the consolidated counterparty exposure table: “cash borrowing entries,” “cash lending entries,” “collateral

posted entries,” and “collateral received entries.” See proposed Form PF Glossary of Terms.

counterparties that meet the threshold. For example, if only three counterparties meet the

threshold, the adviser would report only three counterparties. This would be a change

from current Question 22, which requires advisers to identify five counterparties to which

the reporting fund has the greatest mark-to-market net counterparty credit exposure,

regardless of the actual size of the exposure. The proposed threshold is designed to

highlight two different, significant, potentially systemic, risks: five percent of net asset

value represents an amount of borrowing by a reporting fund that, if repayment was

required, could be a significant loss of financing that could result in a forced unwind and

forced sales from the reporting fund’s portfolio. Additionally, the $1 billion represents an

amount that, in the case of a very large fund, may not represent five percent of its net

assets, but may be large enough to create stress for certain of its counterparties.

•

Proposed Question 28 would require advisers to provide information for counterparties to

which the reporting fund has net mark-to-market counterparty credit exposure which is

equal to or greater than either (1) five percent of the reporting fund’s net asset value as of

the data reporting date or (2) $1 billion, after taking into account collateral received or

posted by the reporting fund. If there are more than five such counterparties, the adviser

would only report the five to which the reporting fund has the greatest mark-to-market

exposure after taking into account collateral received. If there are fewer than five such

counterparties, the adviser only would report the counterparties that meet the threshold.

This would be a change from current Question 23, which requires advisers to identify five

counterparties to which the reporting fund has the greatest mark-to-market net

counterparty credit exposure, regardless of the actual size of the exposure. The proposed

threshold is designed to represent an amount of lending from a reporting fund that, if a

default occurred, could cause a significant loss that could result in a forced unwind and

forced sales from the reporting fund’s portfolio. Furthermore, we believe that the five

percent threshold level would be large enough to constitute a shock to a reporting fund’s

net asset value and is an often-used industry metric. The $1 billion threshold represents an

amount that, in the case of a very large counterparty, may not represent five percent of its

net assets, but may be large enough to create stress for the reporting fund.

•

Currently, advisers report exposures that the reporting fund has to counterparties as a

percentage of the reporting fund’s net asset value, and advisers report exposures that

counterparties have to the reporting fund in U.S. dollars.122 We propose to require

advisers to report both data sets in U.S. dollars for consistency and comparability.123

•

We propose to require advisers to report the amount of collateral posted, to help inform

the Commissions and FSOC of the potential impact of a reporting fund or counterparty

default.

•

We also propose to require advisers to report the counterparty’s LEI, if it has one, to help

identify counterparties and more efficiently link data from other data sources that use this

identifier.

•

Advisers would continue to indicate if a counterparty is affiliated with a major financial

institution, as Form PF currently provides.124 If the financial institution is not listed on

Form PF, advisers would continue to have the option of selecting “other” and naming the

entity in the chart, as Form PF currently provides. However, we propose to require the

122

See current Questions 22 and 23.

123

See proposed Questions 27 and 28.

124

See current Question 22 and current Question 23.

adviser to also describe the financial institution in Question 4. This proposed amendment

is designed to help the Commissions and FSOC efficiently and accurately identify the

entity, without having to contact advisers individually.

Together, the proposed amendments are designed to allow the Commissions and FSOC to identify

and align sources of borrowing and lending to identify significant counterparty exposures, so that

different styles of borrowing would not be not obscured by methodology differences or misidentified

lending relationships, based on our experience with the form. We request comment on the proposed

amendments.

79.

Would the proposed amendments help us and FSOC identify which advisers and

reporting funds may have counterparty credit risk in the event of a counterparty failure

(including CCP failure) or other market event that affects performance by prime brokers

or other counterparties (including CCPs)? Is there a better way to meet these objectives?

80.

Are the proposed consolidated counterparty exposure table, its instructions, and defined

terms clear? Could they be clearer? Are there circumstances not contemplated by the

instructions that need to be addressed? Is there an easier way for advisers to report

counterparty exposures that would provide comparable data? Should Form PF define the

terms “counterparty exposure table,” “borrowing and collateral received (B/CR),”

“lending and posted collateral (L/PC),” “synthetic short position,” “cash borrowing

entries,” “cash lending entries,” “collateral posted entries,” “collateral received entries,”

and redefine “gross notional value,” as proposed? For example, should “synthetic short

position” provide a different list of assets to be included or excluded? Should Form PF

define or redefine more, fewer, or different terms?

81.

Should Form PF require advisers to identify more or less than only significant

counterparty exposures? Is the proposed threshold for identifying the counterparties with

the most significant exposure to and from the reporting fund the right threshold? Does it

represent an amount of borrowing from a reporting fund that, if repayment was required,

could be a significant loss of financing that could result in a forced unwind and forced

sales from the reporting fund’s portfolio? Is there a different threshold that would meet

this objective? Should advisers report all counterparties that meet the threshold, even if

there are more than five such counterparties? Should advisers report the five

counterparties that the reporting fund has the greatest exposure to and from, even if they

don’t meet the proposed threshold?

82.

Should Form PF provide more detailed instructions for advisers to use to identify the

individual counterparties, as proposed? Could the instructions be clearer? If Form PF

should have less detailed instructions on how to identify the counterparties, how could

the Commissions and FSOC help ensure that the data would be comparable?

83.

Should we require advisers to report values in U.S. dollars, as proposed? Alternatively,

should Form PF require advisers to report values as a percentage of the reporting fund’s

net asset value? Should Form PF require advisers to report amounts as both U.S. dollars

and as a percentage of the reporting fund’s net asset value, or another way?

84.

Should Form PF require advisers to report collateral posted, as proposed? Would the

proposed amendment help inform the Commissions and FSOC of the potential impact of

a reporting fund or counterparty default? Is there a better way to meet this objective?

85.

Should Form PF require advisers to report the counterparty’s LEI, if it has one?

86.

If an adviser selects “other,” should we require the adviser to describe the entity in

Question 4? Alternatively, should we eliminate the “other” category?

Trading and clearing mechanisms. We propose to revise how advisers report information about

trading and clearing mechanisms.125 These types of data inform the Commissions and FSOC of the

extent of private fund activities that are conducted on and away from regulated exchanges and clearing

systems, which is important to understanding systemic risk that could be transmitted through

counterparty exposures.126 We propose to require advisers to report (1) the value traded and (2) the value

of positions at the end of the reporting period, rather than requiring advisers to report information as a

percentage in terms of value and trade volumes, as Form PF currently requires.127 This proposed change

is designed to simplify reporting because advisers would compute the value before they convert it into a

percentage; therefore, this proposed change would eliminate an extra calculation for advisers. It also is

designed to provide the Commissions and FSOC with data that can be more efficiently compared and

aggregated among advisers and other data sources. With data in dollar values, the Commissions and

FSOC could more effectively estimate the size, extent, and pace of each hedge fund’s participation in

activity on or away from regulated exchanges and clearing systems in relation to total values.

Understanding the size of hedge fund participation in activity on and away from regulated exchanges and

clearing systems is important to assessing systemic risk, because activity that takes place on regulated

125

See current Questions 24, and 25, which we would redesignate as proposed Questions 29 and 30.

126

See supra footnote 114 and accompanying text (discussing the role of CCPs); 2011 Form PF Adopting Release, supra

footnote 3, at n.228, and accompanying text.

127

Proposed Question 29 would specify that “value traded” is the total value in U.S. dollars of the reporting fund’s

transactions in the instrument category and trading mode during the reporting period. Proposed Question 29 also

would specify that, for derivatives, value traded would be the weighted average of the notional amount of aggregate

derivatives transactions entered into by the reporting fund during the reporting period, except for the following: (1)

for options, advisers would use the delta adjusted notional value, and (2) for interest rate derivatives, advisers would use

the “10-year bond equivalent.” This measurement is designed to track standard industry convention. We propose to add

the term “10-year bond equivalent” to the Form PF Glossary of Terms, as discussed in section II.C.2 of this Release.

See infra footnote 159.

exchanges and clearing systems presents different risks than activity that takes places away from

regulated exchange and clearing systems. For example, activity that takes place away from a regulated

exchange or clearing system may be less transparent, and may present more credit risk than activity that

takes place on a regulated exchange and a clearing system that acts as a central counterparty that

guarantees trades.

We also propose to require advisers to report information about trading and clearing mechanisms

for transactions in interest rate derivatives separately from other types of derivatives. Form PF data show

that interest rate derivatives represent the largest gross investment exposure of qualifying hedge funds.128

Therefore, this amendment is designed to help ensure that the Commissions and FSOC can identify risks

of such a significant volume of activity on and away from regulated exchanges and clearing systems,

without the data being obscured by other types of derivatives. The proposal would require advisers to

report interest rate derivatives and other types of derivatives, by indicating the estimated amounts that

were (1) traded on a regulated exchange or swap execution facility, (2) traded over-the-counter and

cleared by a CCP, and (3) traded over the counter or bilaterally transacted (and not cleared by a CCP).

These proposed categories reflect our understanding of how derivatives may be traded.

The proposal would continue to require advisers to report clearing information concerning repos,

but would specify how to report sponsored repos, and would specify that advisers must report reverse

repos with repos.129 According to the Fixed Income Clearing Corporation (“FICC”), FICC’s sponsored

128

See Private Funds Statistics, supra footnote 7.

129

The proposal also would explain that “repo” means “securities in” transactions and “reverse repo” means “securities

out” transactions. Sponsored repos and sponsored reverse repos would apply to transactions in which the reporting

fund has been sponsored by a sponsoring member of the Fixed Income Clearing Corporation. We would revise how

Form PF explains tri-party repos to help ensure they do not exclude sponsored tri-party repos. Currently, Form PF

explains that a tri-party repo applies where repo collateral is held at a custodian (not including a CCP) that acts as a

third party agent to both the repo buyer and the repo seller. We propose to amend Form PF so it would explain that

tri-party repo would apply where the repo or reverse repo collateral is executed using collateral management and

settlement services of a third party that does not act as a CCP. See Form PF Glossary of Terms (modifying the terms

“repo” and “reverse repo”) and Question 29 instructions (discussing sponsored repos, sponsored reverse repos, and

repo service has expanded in 2017 and 2019, ultimately resulting in daily volume up to $300 million per

day as of 2021, with a peak in March 2020 of $564 billion.130 Sponsored repos incorporate a different

structure than other repos, in that FICC serves as a counterparty to any sponsored trade and the sponsored

member bears responsibility for meeting the obligations of the sponsored member on all transactions that

it submits for clearing. Adding a particular reference to sponsored repos would ensure that advisers

understand how sponsored repos cleared by a CCP should be reported, i.e., as trades cleared at a CCP.131

Therefore, we propose to provide a separate line item for sponsored repos. The proposed amendment is

designed to improve data quality concerning repos and sponsored repos, to allow the Commissions and

FSOC to conduct more accurate and targeted systemic risk assessments and analysis concerning investor

protection efforts. We also propose to specify that advisers must report reverse repos with repos.

Current Question 24 requires advisers to report “repos,” which some advisers could interpret to include

reverse repos, while others could interpret as excluding reverse repos. Therefore, this proposed

amendment is designed to improve data quality.132

The proposal also would revise current Question 25, which requires advisers to report the

percentage of the reporting fund’s net asset value related to transactions not described in current Question

24, which we would redesignate as proposed Question 29. The proposal would, instead, require advisers

to report both the value traded and the position value as of the end of the reporting period for transactions

not described in proposed Question 29. These amendments are designed to make proposed Question 30

data comparable with data from proposed Question 29, so that together, Questions 29 and 30 would

tri-party repos).

130

See FICC Sponsored Repo in 2021, by DTCC Connection Staff (Feb. 9, 2021), available at

https://www.dtcc.com/dtcc-connection/articles/2021/february/09/ficc-sponsored-repo-in-2021.

131

Current Question 24.

132

See proposed Question 29.

provide the Commissions and FSOC with a complete data set of the adviser’s trading and clearing

mechanisms during the reporting period.

We request comment on the proposed amendments.

87.

Would the proposed amendments enhance analysis of clearance and settlement, interest

rate derivatives, as well as repos, reverse repos, and sponsored repos?

88.

Should Form PF require advisers to add repos and reverse repos together when reporting

information about trading and clearing mechanisms, as proposed? Alternatively, should

Form PF require advisers to report information about repos separately from reverse

repos?

89.

Do the proposed reporting categories cover the types of trading and clearing mechanisms

used to trade derivatives? Should Form PF include more or fewer trading and clearing

categories?

90.

Would the proposed amendments make data from proposed Questions 29 and 30

comparable, so that together, the questions would provide the Commissions and FSOC

with a complete data set of the adviser’s trading and clearing mechanisms during the

reporting period? Is there a better way to meet this objective?

91.

Would the proposal to require advisers to report the value traded and the value of

positions as of the end of the reporting period improve our ability to aggregate data and

compare data among advisers? Would requiring the values, instead of the percentages,

provide the Commissions and FSOC with a view into the extent of exposures across

reporting funds, which would inform the Commissions and FSOC as to how much value

would be at stake, given a market event? Are there better ways to meet these objectives?

92.

Should we amend the terms “repo” and “reverse repo,” as proposed? Are the proposed

definitions more consistent with how the private fund industry understands repos and

reverse repos? If not, how should we define the terms, and would such definitions be

consistent with how the Commissions use the terms in other contexts? Should Form PF

refer to sponsored repos, as proposed?

Removing Certain Questions Concerning Hedge Funds. We propose to remove current Questions

19 and 21 from the form. Current Question 19 requires advisers to hedge funds to report whether the

hedge fund has a single primary investment strategy or multiple strategies. Proposed Question 25, which

requires hedge fund advisers to disclose certain information about each investment strategy, would

provide this information, as discussed above in this section II.B.3 of the Release.

We also propose to remove current Question 21, which requires hedge fund advisers to

approximate what percentage of the hedge fund’s net asset value was managed using high frequency

trading strategies. We believe the form’s question on portfolio turnover, with proposed revisions, would

better inform our and FSOC’s understanding of the extent of trading by large hedge fund advisers and

would better show how larger hedge funds interact with the markets and provide trading liquidity.133

We request comments on the proposed amendments.

93.

Should we remove current Questions 19 and 21, as proposed? Alternatively, should Form

PF keep current Question 21, but revise it to improve data quality? For example, should

Form PF define “high frequency trading?”

94.

Does the turnover data Form PF would collect provide more informative data than

current Question 21, which we propose to remove?

133

See proposed revisions to current Question 27, as discussed in section II.C of this Release.

95.

Should Form PF require advisers to report more or less turnover data? For example,

should Form PF require only large hedge fund advisers to report the value of turnover

during the month for the qualifying hedge funds that they advise, as proposed, or should

Form PF require such information for all advisers who advise hedge funds of any size?

96.

Should Form PF remove any other questions that would be answered by other questions

that would provide the same or more useful data?

Proposed Amendments Concerning Information about Hedge Funds Advised by

Large Private Fund Advisers

A private fund adviser must complete section 2 of Form PF if it had at least $1.5 billion in hedge

fund assets under management as of the last day of any month in the fiscal quarter immediately preceding

the adviser’s most recently completed fiscal quarter.134 This section requires additional information

regarding the hedge funds these advisers manage, which is tailored to focus on relevant areas of financial

activity that have the potential to raise systemic concerns. We are proposing several amendments to this

section, including amendments that would remove aggregate reporting in section 2a, which we have

found to be less meaningful for analysis and more burdensome for advisers to report, while preserving

and enhancing reporting on a per fund basis in section 2b. We also propose to retain certain questions

previously reported by advisers on an aggregate basis that we believe are important for data analysis and

systemic risk assessment, but require reporting on a per fund basis. Collectively, the proposed changes to

section 2 are designed to provide better insight into the operations and strategies employed by qualifying

hedge funds and their advisers, and improve data quality and comparability to enable FSOC to monitor

systemic risk better and enhance the Commissions’ regulatory programs and investor protection efforts.

134

Section 2a requires a large hedge fund adviser to report certain aggregate information about any hedge fund it advises

and section 2b requires a large hedge fund adviser to report certain additional information about any hedge fund it

advises that has a net asset value of at least $500 million as of the last day of any month in the fiscal quarter

immediately preceding the adviser’s most recently completed fiscal quarter (a “qualifying hedge fund”).

Furthermore, the proposal would remove certain other reporting requirements that we have found to be

less useful based on our experience with Form PF since adoption, which would help reduce reporting

burdens for advisers while preserving the Commissions’ and FSOC’s regulatory oversight.

Currently, the Form PF Glossary of Terms defines a “hedge fund” generally as any private fund

(other than a securitized asset fund):

(a)

with respect to which one or more investment advisers (or related persons of investment advisers)

may be paid a performance fee or allocation calculated by taking into account unrealized gains

(other than a fee or allocation the calculation of which may take into account unrealized gains

solely for the purpose of reducing such fee or allocation to reflect net unrealized losses);

(b)

that 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

(c)

that may sell securities or other assets short or enter into similar transactions (other than for the

purpose of hedging currency exposure or managing duration).135

The definition is designed to include any private fund having any one of three common

characteristics of a hedge fund: (1) a performance fee that takes into account market value (instead of

only realized gains); (2) leverage; or (3) short selling. We request comment on whether we should amend

the definition of “hedge fund” as such term is defined in the Form PF Glossary of Terms in order to

address potential data mismatches and improve data quality. Specifically, we request comment on the

following:

97.

We understand that some reporting funds may consider themselves “private equity

funds,” but advisers report them as hedge funds as Form PF directs because the reporting

fund’s governing documents permit the fund to engage in certain borrowing and short

selling (even though it did not do so at any time in the past, for example, 12 months) (a

“deemed hedge fund” for purposes of this Release). Should we amend the definition of

135

See current Form PF Glossary of Terms for the complete definition.

“hedge fund” in the Form PF Glossary of Terms so that such deemed hedge funds report

as private equity funds and not hedge funds? If so, how? Would such changes improve

data quality by excluding private equity strategies from reporting as hedge funds and

instead requiring such funds to report as private equity funds? If so, and if we were to

amend the definition of “hedge fund” in Form PF, should we amend it for all purposes

under Form PF or only certain sections such as sections 1 and 2? Should we

concurrently make conforming d

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