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

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2024-03473

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** March 12, 2024
- **Citation:** 89 FR 17984

## Text

COMMODITY FUTURES TRADING COMMISSION
17 CFR Chapter I
RIN 3038-AF31
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 275 and 279
[Release No. IA-6546; File No. S7-22-22]
RIN 3235-AN13
Form PF; Reporting Requirements for All Filers and Large Hedge Fund Advisers

AGENCY:

Commodity Futures Trading Commission and Securities and Exchange Commission.

ACTION:

Joint final rule.

SUMMARY:

The Commodity Futures Trading Commission (“CFTC”) and the Securities and Exchange Commission (“SEC”) (collectively, “we” or “Commissions”) are adopting amendments to 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 is amending a rule under the Investment Advisers Act of 1940 (“Advisers Act”) to revise instructions for requesting a temporary hardship exemption.

DATES:

Effective date:
This rule is effective March 12, 2025.

Compliance date:
See section II.F of this final rule.

FOR FURTHER INFORMATION CONTACT:

CFTC:
Pamela Geraghty, Acting Deputy Director; Michael Ehrstein, Special Counsel; Elizabeth Groover, Special Counsel; or Andrew Ruggiero, Special Counsel, at (202) 418-6700, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581.
SEC:
Neema Nassiri, Jill Pritzker, Senior Counsels; Tom Strumpf, Branch Chief; or Melissa Roverts Harke, Assistant Director, 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 Commissions are adopting amendments to Form PF [17 CFR 279.9] under the Advisers Act, and the SEC is adopting amendments to 17 CFR 275.204(b)-1 under the Advisers Act.
1

1
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.

2
Congress enacted Sections 404 and 406 of the Dodd-Frank Act, which required that private fund advisers file reports and specified certain types of information that should be subject to reporting and/or recordkeeping requirements. With respect to such reports, the Dodd-Frank Act authorized the SEC to require that private fund advisers file such information “as necessary and appropriate in the public interest and for the protection of investors, or for the assessment of systemic risk.” The result of this enactment was Form PF, which is a joint form between the SEC and CFTC only with respect to sections 1 and 2 of the Form.

Agency
Reference
CFR citation

CFTC & SEC

Form PF
2

17 CFR 279.9.

SEC
Rule 204(b)-1
17 CFR 275.204(b)-1.

I. Introduction

II. Discussion

A. Amendments to the General Instructions

1. Reporting Master-Feeder Arrangements and Parallel Fund Structures

2. Reporting Private Funds That Invest in Other Funds

3. Reporting Timelines

B. Amendments Concerning Basic Information About the Adviser and the Private Funds It Advises

1. Amendments to Section 1a of Form PF—Identifying Information

2. Amendments to Section 1b of Form PF—Concerning All Private Funds

3. Amendments to Section 1c of Form PF—Concerning All Hedge Funds

C. Amendments Concerning Information About Hedge Funds Advised by Large Private Fund Advisers

1. Removal of Existing Section 2a

2. Amendments to Section 2

D. Amendments To Enhance Data Quality

E. Additional Amendments

F. Effective and Compliance Dates

III. Other Matters

IV. Economic Analysis

A. Introduction

B. Economic Baseline and Affected Parties

1. Economic Baseline

2. Affected Parties

C. Benefits, Costs, and Effects on Efficiency, Competition, and Capital Formation

1. Benefits

2. Costs

D. Reasonable Alternatives

1. Alternatives to Amendments to General Instructions, Amendments To Enhance Data Quality, and Additional Amendments

2. Alternatives to Amendments to Basic Information About the Adviser and the Private Funds It Advises

3. Alternatives to Amendments to Information About Hedge Funds Advised by Large Private Fund Advisers

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

V. Paperwork Reduction Act

A. Purpose and Use of the Information Collection

B. Confidentiality

C. Burden Estimates

VI. Regulatory Flexibility Act Certification

Statutory Authority

I. Introduction

The Commissions are adopting amendments to 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

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 more than a decade of experience analyzing the information collected on Form PF.
4

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.
5

Based on this experience and in light of these changes, the Commissions and FSOC have identified significant information gaps and situations where revised information would improve the Commissions' and FSOC's understanding of the private fund industry and the potential systemic risk posed by it, as well as further investor protection efforts. Accordingly, to enhance FSOC's monitoring and assessment of systemic risk and to collect additional data and make data more useful for the Commissions' use in their respective regulatory programs,
6

in August 2022, the Commissions proposed amendments to enhance the information advisers file on Form PF and improve data quality.
7

3

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 short-term 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. 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 (as the context requires or permits), 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.

4
Form PF was adopted in 2011 as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). Public Law 111-203, 124 Stat. 1376 (2010).
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)], at section I (“2011 Form PF Adopting Release”). 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”). In May 2023, the SEC amended Form PF section 4, added new sections 5 and 6, and redesignated prior section 5 as section 7 in connection with certain amendments to require event reporting for large hedge fund advisers and all private equity fund advisers and to revise certain reporting requirements for large private equity fund advisers.
See
Form PF; Event Reporting for Large Hedge Fund Advisers and Private Equity Fund Advisers; Requirements for Large Private Equity Fund Adviser Reporting, Advisers Act Release No. 6297 (May 3, 2023) [88 FR 38146 (June 12, 2023)] (“May 2023 SEC Form PF Amending Release”). In July 2023, the SEC amended Form PF section 3 in connection with certain money market fund reforms.
See
Money Market Fund Reforms; Form PF Reporting Requirements for Large Liquidity Fund Advisers; Technical Amendments to Form N-CSR and Form N-1A, Advisers Act Release No. 6344 (July 12, 2023) [88 FR 51404 (Aug. 3, 2023)] (“July 2023 SEC Form PF Amending Release”). We are now adopting amendments to the general instructions, section 1, and section 2, and related amendments in the glossary of terms.

5
The value of private fund net assets reported on Form PF has more than doubled, growing from $5 trillion (net) in 2013 to $14 trillion (net) through the first quarter of 2023, while the number of private funds reported on the form has increased by nearly 130% in that time period. Unless otherwise noted, the private funds statistics used in this Release are from the Private Funds Statistics First Quarter of 2023. Division of Investment Management, Private Fund Statistics First Quarter 2023 (Oct. 16, 2023),
available at https://www.sec.gov/files/investment/private-funds-statistics-2023-q1.pdf
(“Private Fund Statistics Q1 2023”). 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 ten year span from the beginning of 2013 through the first quarter of 2023. 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 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.

6
Additionally, the Board of Governors of the Federal Reserve System (“FRB”) uses this data for research and analysis.

7
Form PF; Reporting Requirements for All Filers and Large Hedge Fund Advisers, Advisers Act Release No. 6083 (Aug. 10, 2022) [87 FR 53832 (Sept. 1, 2022)] (“2022 Joint Form PF Proposing Release”). The Commissions voted to issue the 2022 Joint Form PF Proposing Release on Aug 10, 2022.

The release was posted on each of the Commissions' websites that day (or shortly thereafter), and comment letters were received beginning that same date. The comment period closed on Oct. 11, 2022. We have considered all comments received since Aug. 10, 2022.

The Commissions received a number of comment letters on the 2022 Joint Form PF Proposing Release.
8

Some commenters generally supported the policy goals of the proposal, stating that the proposal would help the Commissions and FSOC assess and respond to systemic risk and the Commissions to achieve their investor protection goals.
9

Certain commenters stated that the additional proposed reporting requirements are not necessary to identify systemic risk or protect investors.
10

Some commenters stated that the economic analysis understates the costs of compliance due to the scope of proposed changes and expressed skepticism at the stated benefits.
11

Some commenters criticized the proposed rulemaking for not considering the cumulative impact and costs of the amendments proposed in the 2022 Joint Form PF Proposing Release along with those proposed in the 2022 SEC Form PF Proposing Release,
12

which the SEC proposed in January 2022 and adopted in May 2023.
13

8
The comment letters on the 2022 Joint Form PF Proposing Release (File No. S7-22-22) that the SEC received are available at
https://www.sec.gov/comments/s7-22-22/s72222.htm.
The comment letters that the CFTC received are available at
https://comments.cftc.gov/PublicComments/CommentList.aspx?id=7312.
Several comment letters are addressed jointly to the Commissions and appear in both comment files.

9

See, e.g.,
Comment Letter of Americans for Financial Reform Education Fund (Oct. 11, 2022) (“AFREF Comment Letter I”); Comment Letter of Better Markets, Inc. (Oct. 11, 2022) (“Better Markets Comment Letter”); Comment Letter of FACT Coalition (Oct. 11, 2022) (“FACT Coalition Comment Letter”); Comment Letter of Global Legal Entity Identifier Foundation (Oct. 11, 2022) (“GLEIF Comment Letter”); Comment Letter of Americans for Financial Reform Education Fund, et al. (Feb. 21, 2023); Comment Letter of Andrew V. (Aug. 10, 2022).

10

See, e.g.,
Comment Letter of American Investment Council (Oct. 11, 2022) (“AIC Comment Letter I”); Comment Letter of U.S. Chamber of Commerce (Oct. 11, 2022) (“USCC Comment Letter”); Comment Letter of Alternative Investment Management Association Limited & Alternative Credit Council (Oct. 11, 2022) (“AIMA/ACC Comment Letter”); Comment Letter of Securities Industry and Financial Markets Association (Oct. 11, 2022) (“SIFMA Comment Letter”); Comment Letter of Managed Funds Association (Dec. 7, 2022) (“MFA Comment Letter II”).
See infra
at sections II and IV.C.1 of this Release for discussion of the benefits of the adopted amendments for systemic risk assessment and investor protection efforts.

11

See, e.g.,
AIC Comment Letter I; SIFMA Comment Letter; Comment Letter of Managed Funds Association and National Association of Private Fund Managers (July 21, 2023) (“MFA/NAPFM Comment Letter”).
See
discussion
infra
at section IV.C of this Release.

12
Amendments to Form PF to Require Current Reporting and Amend Reporting Requirements for Large Private Equity Advisers and Large Liquidity Fund Advisers, Advisers Act Release No. 5950 (Jan. 26, 2022) [87 FR 9106 (Feb. 17, 2022)] (“2022 SEC Form PF Proposing Release”).

13

See, e.g.,
AIC Comment Letter I; Comment Letter of Managed Funds Association, Investment Adviser Association, et al. (Sept. 14, 2022) (“MFA Comment Letter I”); Comment Letter of Managed Funds Association (Mar. 16, 2023) (“MFA Comment Letter III”); SIFMA Comment Letter; Comment Letter of United States House of Representatives Committee on Financial Services (Sept. 26, 2023) (“Comment Letter of U.S. House of Representatives Committee on Financial Services”).
See also
May 2023 SEC Form PF Amending Release,
supra
footnote 4.
See also
Comment Letter of AIC (Aug. 8, 2023) (“AIC Comment Letter II”). See
infra
section IV.C of this Release for discussion of costs and benefits.

We are adopting the amendments largely as proposed, but with certain modifications, in consideration of the comments we received:

• First, we are adopting amendments to the form's general instructions, which apply to all Form PF filers, to improve data quality and comparability and to enhance investor protection efforts and systemic risk assessment. Amendments include:

○
Reporting Master-Feeder and Parallel Fund Structures.
As proposed, we are adopting amendments that will require separate reporting for each component fund of a master-feeder arrangement and parallel fund structure, other than a disregarded feeder fund (
i.e.,
a feeder fund that invests all of its assets in a single master fund, U.S. treasury bills, and/or cash and cash equivalents
14

). In a change from the proposal, we are modifying the instructions to specify how a feeder fund is required to treat its equity in the master fund for the purpose of determining its reporting threshold and responding to certain questions.

14
As discussed in greater detail below, we are removing government securities from the definition of “cash and cash equivalents” and presenting government securities as its own line item in the Form PF Glossary of Terms. Thus, references herein to “cash and cash equivalents” refer to the amended definition, unless otherwise indicated. The amended definition is intended to provide more granular detail on this reporting form and is not intended to change any commercial understanding or accounting treatment of cash equivalents.
See infra
section II.B.2 of this Release.

○
Reporting Fund of Funds.
We are also adopting, with some modifications from the proposal, amendments to Form PF regarding how advisers report private fund investments in other funds. We are revising proposed Instruction 7 to require an adviser to include the value of investments in other private funds (including internal and external private funds) when determining whether the adviser is required to file Form PF, whether it meets the thresholds for reporting as a large hedge fund adviser, large liquidity fund adviser, or large private equity fund adviser, and whether a hedge fund is a qualifying hedge fund, rather than permit an adviser to either include or exclude the value of investments in other private funds for the purpose of determining its reporting threshold, as proposed.
15

15

See
Instruction 7.

○
Reporting Trading Vehicles.
In a change from the proposal, we are adopting an amendment to require advisers to identify trading vehicles in section 1b of Form PF and report on an aggregated basis for the reporting fund and all trading vehicles (whether fully owned by the reporting fund or partially owned), rather than (i) permitting advisers to report fully owned trading vehicles on an aggregated or disaggregated basis and (ii) requiring advisers to report partially owned trading vehicles on a disaggregated basis, as proposed. In a change from the proposal, we are also adding an instruction for advisers to specify whether the reporting fund holds assets, incurs leverage, or conducts trading or other activities through a trading vehicle.

○
Reporting Timelines.
We are also adopting, as proposed, an amendment to the instructions that will require all quarterly filers to file on a calendar quarter basis, rather than on a fiscal quarter basis.
16

16
The calendar quarter basis filing requirement does not apply to a private equity fund adviser filing a private equity event report as contemplated by section 6 of Form PF, which requires such adviser to file within 60 calendar days after the end of the applicable fiscal quarter upon the occurrence of a private equity reporting event.
See
May 2023 SEC Form PF Amending Release,
supra
footnote 4.

• Second, we are adopting amendments to sections 1a and 1b of Form PF, which apply to all Form PF filers, to provide greater insight into private funds' operations and strategies, and assist in identifying trends, including those that could create systemic risk and which are as such designed to enhance investor protection efforts and systemic risk assessment. The amendments are also designed to improve comparability across advisers, improve data quality, and reduce reporting errors. We are adopting, as proposed, amendments to collect additional identifying information regarding the adviser and its related persons, as well as their private fund assets under management. We are also adopting, largely as proposed, amendments to require advisers to report additional identifying information about the private funds they manage and other information about the

private funds' assets, financing, investor concentration, and performance.

• Third, we are adopting amendments to section 1c of Form PF, which applies to private fund advisers that advise hedge funds. We are adopting, largely as proposed, amendments to require advisers to hedge funds to report certain additional information. As proposed, we are adopting amendments to require advisers to hedge funds to report on the fund's use of digital assets as an investment strategy, but in a modification from the proposal, we are not adopting the proposed definition of digital assets. We are also adopting, as proposed, amendments to remove certain questions to streamline reporting and to reduce reporting burdens.

• Fourth, as proposed, we are redesignating existing section 2a and 2b of Form PF as section 2, and we are adopting amendments to the new consolidated section 2, which applies to large hedge fund advisers that advise qualifying hedge funds (
i.e.,
hedge funds that have a net asset value of at least $500 million). As proposed, we are removing aggregate reporting questions for large hedge fund advisers and requiring additional fund-level reporting to enhance investor protection efforts and systemic risk assessment.
17

We are adopting, largely as proposed, amendments to require large hedge fund advisers to report more granular information about the reporting fund's investment exposure, open and large position reporting, borrowing and counterparty exposure, and market factor effects. In a change from the proposal, we are not adopting a proposed question about investment performance by portfolio correlation.

17
Unless stated otherwise, terms in this release that are defined in the Form PF Glossary of Terms are as defined therein.

• Finally, we are adopting, largely as proposed, certain additional amendments to improve data quality and accuracy of reporting.

The amendments we are adopting are important enhancements to the ability to monitor and assess systemic risk and to determine whether and how to deploy the Commissions' or FSOC's regulatory tools. The amendments will also strengthen the effectiveness of the SEC's regulatory programs, including examinations, investigations, and investor protection efforts relating to private fund advisers. The Commissions consulted with FSOC to gain input on these amendments and to help ensure that Form PF continues to provide FSOC with information it can use to assess systemic risk.

II. Discussion

A. Amendments to the General Instructions

We are adopting amendments to the Form PF general instructions designed to improve data quality and comparability and to enhance investor protection efforts and systemic risk assessment.
18

18
Additional adopted changes to the General Instructions concerning amendments to enhance data quality methodologies and additional amendments are discussed in sections II.D and II.E of this Release. The amendments to Instruction 3 to reflect the removal of section 2a are discussed in section II.C.1 of this Release.

1. Reporting Master-Feeder Arrangements and Parallel Fund Structures

Private funds often use complex structures to invest, including master-feeder arrangements and parallel fund structures.
19

We are adopting, largely as proposed, amendments to Form PF that generally require advisers to report separately each component fund of a master-feeder arrangement and parallel fund structure.
20

An adviser will continue to aggregate these structures, however, for purposes of determining whether the adviser meets a reporting threshold.
21

19
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.

20

See
Instruction 6. We also are amending Instruction 3, as proposed, to reflect the adopted approach for reporting master-feeder arrangements and parallel fund structures.
See infra
footnote 21.

21

See
Instruction 5. For example, an adviser would aggregate private funds that are part of the same master-feeder arrangement in determining whether the adviser is a large hedge fund adviser that must complete section 2 of Form PF. In connection with these changes, we are amending, as proposed, the term “reporting fund” and Instruction 3 so that they no longer discuss reporting aggregated information. Additionally, we are reorganizing current Instruction 5 and current Instruction 6 so that they reflect the adopted 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. Instruction 5, as amended, instructs advisers on when to aggregate information about certain funds for purposes of determining whether they meet reporting thresholds. Instruction 6, as amended, instructs advisers about how to report information about certain funds when responding to questions. Further, in a modification from the proposal, we have added a reference to section 5 (Current report for large hedge fund advisers to qualifying hedge funds), which a qualifying hedge fund would also be required to complete, as applicable, as a result of the amendments adopted in the May 2023 SEC Form PF Amending Release.

Currently, Form PF provides advisers with flexibility to respond to questions regarding master-feeder arrangements and parallel fund structures either in the aggregate or separately, as long as they do so consistently throughout Form PF.
22

In adopting this approach in 2011, the Commissions 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.
23

However, based on experience reviewing Form PF data, we observed that when some advisers report in aggregate and some advisers report separately, this can result in obscured risk profiles (
e.g.,
with respect to asset size, counterparty exposure, investor liquidity) and make it difficult to compare complex structures, undermining the utility of the data collected.
24

Prescribing the way advisers report a master-feeder arrangement and parallel fund structure will provide better insight into the risks and exposures of these arrangements.

22

See
current Instruction 5.

23
2011 Form PF Adopting Release,
supra
footnote 4, at text following n.332.

24
For example, a feeder fund may have counterparty exposure rather than the entire fund in the aggregate. When this is the case, fewer assets (
e.g.,
only those held at the feeder level) may be available as collateral and the counterparty may have greater risk.

Accordingly, we are amending the instructions 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, U.S. treasury bills, and/or “cash and cash equivalents” (
i.e.,
is a disregarded feeder fund).
25

In the case

of a disregarded feeder fund in Question 6, advisers instead will 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, as proposed. 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 a modification from the proposal, we are adopting instructions to specify that a feeder fund should disregard any of its holdings in the master fund's equity for the purpose of determining its reporting threshold.
26

25

See
Instruction 6. We are also revising the term “cash and cash equivalents,” as described in section II.B.2 in this Release, to improve data quality and provide more granular detail of fund exposures to the Commissions and FSOC. In alignment with this revision, we have modified the term “disregarded feeder fund” for the purposes of Form PF to specifically include U.S. treasury bills. U.S. treasury bills are direct obligations of the U.S. Government with a maturity of one year or less. Because these short-term holdings are sufficiently cash-like for our reporting and data analysis purposes, separate reporting for a feeder fund that invests all of its assets in U.S. treasury bills (or some combination of U.S. treasury bills, “cash and cash equivalents,” and a single master fund) is not necessary. One commenter stated that the removal of government securities from the definition of cash and cash equivalents would reduce the number of funds that qualify as disregarded feeder funds.
See
AIMA/ACC Comment Letter. This commenter stated that the Commission should revise the definition to allow for disregarded feeder funds to invest in government securities.
Id.
The final

amendments permit disregarded feeder funds to invest in U.S. treasury bills, but not other government securities. We believe this approach is appropriate because, as noted above and unlike certain other government securities, U.S. treasury bills are short-term holdings and sufficiently cash-like for our reporting and data analysis purposes. Further, U.S. treasury bills generally do not have the interest rate risk that longer-dated government securities have.

26

See
Instruction 6.

Some commenters generally supported the proposed amendments that require more granular reporting of private fund structures because this would allow FSOC to assess systemic risk and the Commissions to protect investors more effectively.
27

Other commenters generally opposed the proposed amendments to require disaggregated reporting of master-feeder funds and parallel fund structures, stating that it would be overly burdensome for advisers to report this information and of limited benefit to the Commissions and/or FSOC.
28

27

See, e.g.,
AFREF Comment Letter I; Better Markets Comment Letter.

28

See, e.g.,
AIMA/ACC Comment Letter; MFA Comment Letter II.

Although we acknowledge that the requirement to report disaggregated data for parallel fund and master-feeder fund structures may increase the reporting burdens on certain advisers, we disagree that requiring disaggregated reporting would be significantly more burdensome than the existing requirements, because filers are already required to assemble aggregated data from the individual components of their fund structures to determine their reporting category on Form PF.
29

Any increased burdens are justified because disaggregated data of these structures will provide the Commissions and FSOC with increased transparency into risk profiles and complex fund structures, which will improve our ability to monitor systemic risk and protect investors. We also disagree that disaggregated reporting of master-feeder funds and parallel fund structures will be of limited value based on our experience with Form PF, which currently obscures our understanding of their fund structures and the risk exposure of their component funds. Some commenters opposed the proposed disaggregated reporting requirement, asserting that it would provide misleading information by reporting data in isolation as opposed to as part of an overall fund or investment program.
30

However, rather than be misleading, the disaggregated reporting will allow for a clearer understanding of a fund's structure. Disaggregated data will not be misleading to the Commissions or FSOC in comparison to aggregated data because the disaggregated data can still be aggregated by FSOC and the Commissions if necessary to understand and assess the risk of the fund.

29

See
current Instruction 5.

30

See, e.g.,
MFA Comment Letter II; USCC Comment Letter.

One commenter stated that the disaggregated reporting requirement would be particularly burdensome for private equity fund advisers, as this commenter believed private equity funds pose less systemic risk.
31

The existing reporting instructions allowing aggregated reporting result in an obscured risk profile of all types of private funds, including private equity funds. Although private equity funds may exhibit a different risk profile than hedge funds, we disagree with the commenter that understanding their structure is unimportant to assessing systemic risk. Understanding the full risk profile of private equity funds is an important component of the reporting on Form PF because of the growth in the private equity fund industry and its significance to financial markets.
32

Additionally, the disaggregated reporting requirement is important for investor protection efforts due to the increased exposure of investors to the private equity industry through investments such as pension funds.
33

31
AIC Comment Letter I.

32
Since 2013, the number of private equity funds has more than doubled from under 7,000 to over 20,000, private equity fund gross assets have quadrupled from $1.6 trillion to $6.6 trillion, and private equity fund net assets have also quadrupled, increasing from $1.5 trillion to $6 trillion.
See
Private Fund Statistics Q1 2023,
supra
footnote 4.

33

See, e.g.,
Public Plans Data (2022),
available at https://publicplansdata.org/quick-facts/national/.

One commenter stated that requiring disaggregated data would add a data security risk that sensitive information about a fund's strategy could be publicly exposed.
34

We do not agree that requiring disaggregated reporting of component funds presents a significant increase in public disclosure risk, in part because the required information is no more granular than the information already required to be reported for other private funds without a master-feeder arrangement or parallel fund structure. The Commissions currently have robust data protection measures in place to protect all information filed on Form PF, which is filed on a non-public basis. Any limited increase in data security risk associated solely with the collection of more information is justified because of the importance of receiving this disaggregated information for FSOC and the Commissions' systemic risk monitoring and the Commissions' investor protection efforts. As discussed more fully above, this disaggregated data will provide increased transparency into complex fund structures and better insight into the risks presented by such arrangements. As discussed above, in response to commenters' concerns, we are modifying the instructions for how a feeder fund determines its reporting category to specify that the feeder fund should exclude any of its holdings in the master fund's equity when calculating its total asset value for the purpose of determining its reporting category.
35

This modification will help avoid double counting of reported assets, given that data for the master fund will be separately reported on Form PF. It will also require a more appropriate level of information from feeder funds than we had proposed. As proposed, an adviser could have determined that a feeder fund is a qualifying hedge fund subject to additional reporting, even if the feeder fund's investments outside of its master fund were trivial. This level of reporting for such a feeder fund is not necessary for data analysis purposes, and the amended Form PF will accordingly only require this additional reporting for feeder funds that are determined to be qualifying hedge funds based on their investments made outside of their master funds. Some commenters recommended adopting an instruction for disregarded feeder fund reporting obligations that allows for a
de minimis
amount of a disregarded feeder fund's investments to be in other assets, such as up to 10 or 20 percent of a fund's capital, rather than the proposed instruction, which would require all of the disregarded feeder fund's assets to be invested in a single master fund, U.S. treasury bills, or cash and cash

equivalents.
36

We do not believe that these recommended exceptions would be appropriate. The adopted instruction, which provides that a feeder fund that invests all of its assets in a single master fund, U.S. treasury bills, or cash and cash equivalents is a disregarded feeder fund, is more appropriate because such a feeder fund is effectively investing only through its associated master fund. Disaggregated reporting of such a disregarded feeder fund is not necessary for data analysis purposes, because such reporting would not convey additional information about the feeder fund's exposures, as the feeder fund's investments are limited to its investments through its master fund, which are required to be reported on the amended Form PF. In contrast, a feeder fund that does not invest all of its assets in a single master fund, U.S. treasury bills, or cash and cash equivalents operates and invests in a different manner, and it is critical to our understanding of these funds and the risks that they may pose to receive disaggregated reporting of these fund arrangements because such feeder funds will generally have distinct risk exposures than their associated master funds. Further, the modified instructions we are adopting, which provide that a reporting feeder fund is to disregard its holdings in the master fund's equity for the purpose of determining its reporting threshold, are responsive to commenter concerns that the burdens on feeder funds with
de minimis
non-cash or cash equivalent holdings would be significant. For example, under the adopted instructions, a feeder fund with minimal holdings outside of the master fund's equity may only be required to complete section 1 of Form PF, when it may have otherwise been required to complete additional sections if its holdings in the equity of the master fund were included in its reporting threshold determination, as proposed. The modified instructions take into consideration the potential burden of reporting feeder funds on a separate basis and allows the Commissions to receive important reporting on the exposures of feeder funds other than to its equity in its master fund.

34
USCC Comment Letter.

35

See
Instruction 6.

36

See
AIMA/ACC Comment Letter; MFA Comment Letter II.

In addition, we are adopting, as proposed, an amendment to no longer allow advisers to separately report any “parallel managed accounts” (which is distinguished from a “parallel fund structure”), provided that advisers will continue to be required to report the total value of all parallel managed accounts related to each reporting fund.
37

Including parallel managed accounts in the reporting may reduce the quality of data for our analyses while also imposing additional burdens on advisers.
38

Data regarding the total value of parallel managed accounts, however, will allow FSOC to take into account the greater amount of assets an adviser may be managing using a given strategy for purposes of analyzing the data reported on Form PF for systemic risk purposes.

37

See
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.

38

See
2011 Form PF Adopting Release,
supra
footnote 4, at n.334, and accompanying text (the Commissions were persuaded that aggregating parallel managed accounts for reporting purposes would be difficult and “result in 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.

We are adopting, as proposed, an instruction to provide that a dependent parallel managed account must be aggregated with the largest private fund to which it relates and, unchanged from the current Form PF, with respect to any private fund, a “dependent parallel managed account” remains defined as any related parallel managed account other than a parallel managed account that individually (or together with other parallel managed accounts that pursue substantially the same investment objective and strategy and invest side by side in substantially the same positions) has a gross asset value greater than the gross asset value of such private fund (or, if the private fund is a parallel fund, the gross asset value of the parallel fund structure).
39

One commenter sought clarification that a parallel managed account should be aggregated with the single largest private fund to which it relates.
40

We continue to believe that this approach will more effectively support systemic risk analyses and our investor protection efforts, particularly given the growth in parallel managed accounts in recent years.
41

39

See
Instruction 5; Form PF Glossary of Terms.

40
AIMA/ACC Comment Letter.

41

See
David C. Johnson & Francis A. Martinez,
Form PF Insights on Private Equity Funds and Their Portfolio Companies,
Office of Financial Research, June 14, 2018, at 3-4,
available at https://www.financialresearch.gov/briefs/files/OFRBr_2018_01_Form-PF.pdf
(stating that fund investments in other funds increased from $227 billion in 2013 to $319 billion in 2016 and noting that the existing reporting on parallel managed accounts may be underreported because parallel managed accounts are not currently required to be reported).

2. Reporting Private Funds That Invest in Other Funds

We are adopting 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 are adopting, with modifications from the proposal, amendments to 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.
42

This requirement is implicit in the current form, and we are amending this aspect of Instruction 7, as proposed, to make it explicit. Further, current Form PF generally 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 the adviser does so consistently throughout Form PF, subject to certain exceptions.
43

We proposed continuing to permit an adviser to either include or exclude the value of such investments for the purpose of determining its reporting thresholds but requiring an adviser to include the value of such investments for the purpose of responding to questions on Form PF.

42
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.

43
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.

In a modification from the proposal, we are adopting an amendment to Instruction 7 to require an adviser to include the value of investments in other private funds (including internal and external private funds) when determining whether the adviser is required to file Form PF, whether it meets the thresholds for reporting as a large hedge fund adviser, large liquidity fund adviser, or large private equity fund adviser, and whether a hedge fund is a qualifying hedge fund, rather than permit an adviser to either include or exclude the value of investments in other private funds for the purpose of determining its reporting threshold, as

proposed.
44

As discussed further below, as proposed, an adviser will no longer have flexibility on whether to include or exclude a reporting fund's investments in other private funds for purposes of responding to questions on Form PF.
45

Instead, we are amending 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 question.

44

See
Instruction 7. In connection with this Instruction 7, we are also not adopting the proposed revision to the definition of “qualifying hedge fund,” which would have instructed advisers that they may exclude the fund's investments in other private funds in determining whether a hedge fund meets the “qualifying hedge fund” definition.
See
Form PF Glossary of Terms.

45

Id.

Requiring advisers to report fund of funds arrangements in a more consistent manner will allow the Commissions and FSOC to understand these fund structures more effectively by providing greater insight into the scale of reporting funds' exposures. The form's current flexibility on whether to disregard underlying funds for the purpose of determining a reporting fund's reporting threshold and when responding to questions provides unclear and inconsistent reporting and data on the scale of reporting funds' exposures.

One commenter stated that allowing an adviser to determine whether to include or exclude a reporting fund's investment in other private funds could result in distortions in the data collected on Form PF.
46

This commenter recommended revising the instructions to prohibit an adviser from including a reporting fund's investment in other private funds for the purpose of determining its reporting threshold. We agree with this commenter that permitting advisers the flexibility to include or exclude the value of the reporting fund's investment in other private funds could result in distortions in the data and inconsistent reporting. Therefore, we have modified the instructions to remove this proposed flexibility. However, we have modified the instructions to provide that an adviser must include the reporting fund's investment in other private funds for determining its reporting threshold. For the same reasons that Instruction 7 currently (and will continue to) provide that an adviser must include the reporting fund's investments in other private funds in determining whether it is required to file Form PF, we believe it is appropriate for an adviser to use this same approach to determine the reporting fund's appropriate reporting category. This modification will provide for consistent treatment of investments in other private funds for all Form PF purposes by specifying that these investments should be included for the purpose of determining reporting threshold, determining filing threshold, and responding to questions on Form PF (unless otherwise instructed by a particular question). We do not believe that this modification will materially increase filing burdens because advisers are currently (and will continue to be) required to include the value of the reporting fund's investments in other private funds for the purpose of determining whether it is required to file Form PF and, as discussed further below, will be required, as proposed, to include the value of the reporting fund's investments in other private funds in answering questions on Form PF (unless otherwise instructed by a particular question). Some commenters opposed the proposed amendment to include the value of a reporting fund's investment in other external private funds when responding to questions because of the burden of obtaining information about the underlying investments and their view on the limited value of the data.
47

Data about underlying investments in external private funds is important to provide the Commissions and FSOC with sufficient information to understand a fund structure to be able to assess systemic risk. We disagree that reporting the value of a reporting fund's investments in other external private funds is significantly more burdensome to report because an adviser is currently required to calculate the value of its investment in other private funds in determining whether the adviser meets the threshold to file Form PF. One commenter stated that investments in private funds should be treated like a disregarded feeder fund and not require disaggregated reporting.
48

We disagree that a fund of funds structure presents the same risks as a disregarded feeder fund because, in a fund of funds structure, the feeder fund is itself engaging in direct investment, whereas a disregarded feeder fund invests its assets at the master fund level.

46
AIMA/ACC Comment Letter.

47

See, e.g.,
AIMA/ACC Comment Letter; MFA Comment Letter II.

48
AIMA/ACC Comment Letter.

Currently, Instruction 7 specifies that, in the case of a fund that invests substantially all of its assets in other private funds and, other than its investments in other private funds, only holds cash and cash equivalents and instruments acquired for the purpose of hedging currency exposure, an adviser is only required to complete section 1b of Form PF for that fund.
49

One commenter recommended modifying this instruction to replace the reference to “substantially all of its assets” in other private funds to 80% of its assets and to remove the reference to only holding cash and cash equivalents and instruments acquired for the purpose of hedging currency exposure.
50

This commenter stated that there are circumstances that may cause an adviser to invest a small portion of a fund of fund's assets directly, such as for tax purposes or for an investor's preference, which would cause the fund to no longer be considered a fund that invests substantially all of its assets in other private funds for purposes of Form PF, which allows the adviser to only complete section 1b for that fund.
51

Although we agree that the meaning of “substantially all of its assets” should be clarified for purposes of this form, so as to generally improve data quality and comparability, we disagree that the reference to only holding cash and cash equivalents and instruments acquired for the purpose of hedging currency exposure should be removed. The exclusion from completing section 1c is intended to be limited to funds that invest only through other private funds for which we receive separate reporting. Allowing an exclusion for funds that invest in investments other than private funds would create a data gap because we would not receive separate reporting about investments that are
not
private funds. Accordingly, in a change from the proposal, we are modifying Instruction 7 only to replace the instruction “substantially all of its assets” to “80% or more of its assets.” This modification will help clarify which funds will need to complete only section 1b of Form PF.

49

See
current Instruction 7.

50
AIMA/ACC Comment Letter.

51

Id.

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.
52

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 are amending, largely as proposed, 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.
53

In a modification from the proposal, we are adding an instruction that provides if an adviser cannot avoid “looking through” to the reporting fund's investments in internal private funds or external private funds in responding to a particular question, then the adviser must provide an explanation of its responses in Question 4. This instruction is responsive to certain commenters' concerns regarding the burden of disaggregated reporting where look-through aggregation may be unavoidable and will provide additional context for the data reported. Further, after consideration of commenter recommendations, in a modification from the proposal, we are revising certain questions related to exposures to instruct advisers to select the exposure that “best represents” the indirect investment of the reporting fund, as discussed more fully below in section II.C.
54

This modification will reduce the burden on advisers in reporting exposure information about these investments in private funds, while providing reporting on indirect investments that is important for effective systemic risk assessment and investor protection efforts.

52

See
current Instruction 8.

53

See
Instruction 7. For example, advisers will 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
Question 18 (concerning borrowings) and Questions 27 and 28 (concerning counterparty exposures). However, selected questions in section 2 of the form require advisers to report indirect exposure resulting from positions held through other entities including private funds, and advisers will “look through” the reporting fund's investments in internal private funds and external private funds in responding to those questions.
See, e.g.,
Question 32 (concerning reporting fund exposures).

54

See
Questions 33, 35, 36, and 47.

As discussed further below, we are modifying from the proposal the reporting instructions for trading vehicles to require an adviser to “look through” trading vehicles for all questions. Given this modification, we are also adopting amendments to Instruction 8 to exclude trading vehicles from the general requirement that an adviser must not “look through” a reporting fund's investments in funds or other entities unless the question instructs the adviser to report exposure obtained indirectly through positions in such funds or other entities. These 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 will lead to more effective systemic risk assessments and investor protection efforts.

Trading vehicles.
Some private funds wholly or partially 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”).
55

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 existence or use of trading vehicles and the risks that they present. Because private funds may use trading vehicles for a wide variety of purposes, more complete and accurate visibility into asset class exposures, position sizes, and counterparty exposures relied on by trading vehicles can enhance the Commissions' and FSOC's systemic risk and financial stability assessment efforts and the Commissions' efforts to protect investors by identifying areas in need of outreach, examination, or investigation. We are adopting amendments designed to address these concerns by requiring advisers to identify any trading vehicles of the reporting fund, how the reporting fund uses the trading vehicle, and the position sizes and counterparty exposures of the reporting fund that are attributable to the trading vehicle.

55
We are adopting a definition of “trading vehicle” to the Form PF Glossary of Terms. In a modification from the proposed definition, we are specifying that a trading vehicle may be wholly
or partially
owned by a reporting fund.
See
Form PF Glossary of Terms (definition of “trading vehicle”). The concept of a partially owned trading vehicle (
i.e.,
if the reporting fund is not the trading vehicle's only equity owner) was implicit in the proposed instructions, which would have provided for different treatment for a wholly owned or partially owned trading vehicle.
See
proposed Instruction 7. We are modifying the definition of “trading vehicle” to make this explicit.

We are adopting amendments, with certain modifications from the proposal, to Form PF's general instructions to explain how advisers report information if the reporting fund uses a trading vehicle.
56

Specifically, if the reporting fund uses a trading vehicle, the adviser will be required to identify the trading vehicle in section 1b and report answers on an aggregated basis for the reporting fund and such trading vehicle.
57

Advisers will be instructed to “look through” the trading vehicle's holdings on Form PF, adjusted for the reporting fund's percentage ownership interest of the trading vehicle, in responding to questions on Form PF for the reporting fund, as discussed further below.
58

As discussed more fully in section II.B below, an adviser will also be required to specify if the reporting fund holds assets through a trading vehicle, incurs leverage through a trading vehicle, or conducts trading or other activities through a trading vehicle.
59

Finally, advisers will be required to report trading vehicles on a consolidated basis but in response to certain questions will be required to identify the positions and counterparty exposures that are held through a trading vehicle, which will help differentiate the reporting fund's exposures and risks from those of its trading vehicles, as discussed more fully in sections II.B.3 and II.C.2 below.
60

56

See
Instruction 7. We are also making a conforming change to Instruction 8 to reference this new instruction.

57
We proposed the following for reporting requirements for trading vehicles: if the reporting fund uses a trading vehicle, and the reporting fund is its only equity owner, the adviser would have been required to 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 been required 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 have been required to report the trading vehicle as a hedge fund if a hedge fund invests through the trading vehicle; (2) advisers would have been required to report the trading vehicle as a qualifying hedge fund if a qualifying hedge fund invests through the trading vehicle; or (3) otherwise, advisers would have been required to report the trading vehicle as a liquidity fund, private equity fund, or other type of fund based on its activities.

58

See
Instruction 7. We had proposed to permit disaggregated reporting for wholly-owned trading vehicles and to require disaggregated reporting for partially-owned trading vehicles. As discussed below, the final amendments will instead require advisers to report all trading vehicles, whether wholly or partially owned, on a consolidated basis. In connection with this change, the final amendments specify that an adviser must adjust trading vehicle information to reflect the reporting fund's percentage ownership interest of the trading vehicle.

59

See
Questions 9(d) through (f). A trading vehicle is defined as a separate legal entity, wholly or partially owned by one or more reporting funds, that holds assets, incurs leverage, or conducts trading or other activities as part of a reporting fund's investment activities but does not operate a business.
See
Form PF Glossary of Terms (definition of “trading vehicle”). Questions 9(d) through (f) ask the reporting fund to identify the vehicle's activities that results in it being a “trading vehicle,” as defined in the Form PF Glossary of Terms.

60

See, e.g.,
Questions 27 and 28, which are required for all hedge fund advisers, and Questions

42, 43, and 44, which are required for large hedge fund advisers.

We are not adopting proposed amendments that would have permitted an adviser to select whether to report a wholly owned trading vehicle on either a consolidated or disaggregated basis and would have required advisers to report a partially owned trading vehicle on a disaggregated basis. One commenter stated the proposed disaggregated reporting for trading vehicles would provide the Commissions and FSOC with insights into a private fund's assets and activities that are not currently reported on Form PF, which would support assessment of potential systemic risk.
61

Other commenters opposed the proposed requirements to disclose trading vehicles on a disaggregated basis because of the significant cost and burdens for such reporting and their view on the limited benefit of such reporting to the Commissions.
62

Some commenters stated that disaggregated reporting of trading vehicles would be misleading because advisers do not account for risk on a disaggregated basis.
63

Another commenter stated that allowing consolidated reporting of trading vehicles would provide the Commissions with a clearer and more accurate depiction of a fund's characteristics and exposures than disaggregated reporting.
64

Some commenters stated that separate reporting for trading vehicles is not necessary because trading vehicles are often used for administrative purposes, such as for tax or efficiency purposes, but are managed on a consolidated basis and regarded as a single entity for investment purposes.
65

Another commenter recommended limiting disaggregated reporting of trading vehicles to only vehicles that engage in leverage or borrowing to reduce the cost of implementation of separate reporting.
66

Another commenter recommended that we focus on specific questions on Form PF to gain information about trading vehicles instead of requiring full separate reporting of trading vehicles to reduce burdens and provide clearer reporting.
67

Another commenter recommended permitting aggregated reporting for trading vehicles that are at least 90% owned by a single reporting fund.
68

61
NASAA Comment Letter.

62

See, e.g.,
AIMA/ACC Comment Letter; MFA Comment Letter II; SIFMA Comment Letter.

63

See, e.g.,
MFA Comment Letter II; MFA/NAPFM Comment Letter.

64
AIMA/ACC Comment Letter.

65

See, e.g.,
MFA Comment Letter II; Schulte Comment Letter.

66
SIFMA Comment Letter.

67
Schulte Comment Letter.

68
MFA Comment Letter II.

After considering such comments, we are not adopting the proposed requirement that would have permitted advisers to report fully owned trading vehicles on a disaggregated basis and required them to do so in the case of partially owned trading vehicles. Instead, we are requiring advisers to report all trading vehicles, whether wholly owned or partially owned, on a consolidated basis. Requiring advisers to instead “look through” the reporting fund's investment in all trading vehicles on a consistent basis is appropriate because receiving disaggregated data for some but not all trading vehicles could result in distorted data. Requiring all reporting funds to report their trading vehicles, whether fully or partially owned, on an aggregated basis will improve data comparability and allow us to better understand the holdings and exposures of the fund structure for our assessments of potential systemic risk. We also understand from commenters that a consolidated reporting better aligns with how advisers regard trading vehicles internally. However, after considering a commenter's recommendation to include specific questions on trading vehicles rather than full disaggregated reporting,
69

we are adopting amendments to include specific questions relating to a reporting fund's trading vehicle use and a trading vehicle's position size and risk exposure, as opposed to requiring the greater burden of full separate reporting on Form PF for trading vehicles. We are also requiring advisers to identify the relevant party that bears certain risk exposures, which will allow us to understand how the reporting fund makes use of its fund structure, including any trading vehicles.
70

This approach will result in greater insight into the overall fund structure and support of FSOC's systemic risk assessments than under the existing reporting requirements, and it will also be less burdensome than the approach we had proposed to require separate full reporting for certain trading vehicles. We disagree that any trading vehicle reporting should be limited to only vehicles that are used for leverage and borrowing activities because the amendments are intended to support systemic risk assessments more broadly on and provide insight into how trading vehicles are used, which includes trading vehicles that are used for other purposes, such as holding assets or trading. This reporting is important for systemic risk assessment because it provides visibility into private funds' operations and can assist the Commissions and FSOC in identifying trends across the industry.

69
Schulte Comment Letter.

70

See, e.g.,
Questions 27 and 28, which are applicable to all hedge funds, and Questions 42, 43, and 44, which are applicable to only large hedge funds.

Investments in funds that are not private funds.
Advisers will 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.
71

For the reasons discussed above, we are revising the instructions, substantially as proposed, to indicate 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.
72

71

See
Instruction 8. In a modification from the proposal, we are removing the erroneous reference to Questions 39 and 40 from Instructions 7 and 8, which implied that these questions require advisers to look-through the reporting fund's investments.

72
We are also specifying that advisers should “look through” trading vehicles for all questions, as provided in Instruction 7 and discussed above.

3. Reporting Timelines

We are amending, as proposed, 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.
73

One commenter stated that for quarterly filers who have a fiscal year ending in a non-calendar quarter month, the proposed instructions do not specify the procedure for a filer who, during the transition from fiscal to calendar quarter reporting, would otherwise be required to report twice in one calendar quarter.
74

As suggested by this commenter, we are requiring that such filers transition to the new timing requirement by their first calendar quarter-end filing for the first full quarterly reporting period after the compliance date.
75

73
Large hedge fund advisers generally are required to file within 60 calendar days after the end of each calendar quarter and large liquidity fund advisers generally are required to file within 15 calendar days after the end of each calendar quarter.
See
Instruction 9.

74
AIMA/ACC Comment Letter.

75
See
infra
section II.F (Effective and Compliance Dates).

All other advisers will continue to file annual updates within 120 calendar days after the end of their fiscal year.
76

Private equity fund advisers will continue to file any required quarterly private equity event reports on a fiscal quarter basis, as applicable.
77

Form PF will 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.
78

76
We also are adopting amendments to the term “data reporting date” to reflect this approach.
See
Form PF Glossary of Terms.

77

See
Form PF Section 6 and Instruction 9.

78

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

Currently, routine fiscal quarter reporting by large hedge fund advisers and large liquidity fund advisers 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, and March by the end of May.
79

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 adopted 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 2022, 99.6 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.
80

The 0.4 percent of private fund advisers that have a non-calendar fiscal approach, which could cause a temporary data gap, represents approximately 224 private funds, totaling approximately $80 billion in gross asset value. Calendar quarter reporting also will more closely align with reporting on Form CPO-PQR,
81

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

79

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).

80
We are presenting data from all private fund advisers, not just those who would file their routine filings 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.

81

See
17 CFR pt 4, app A.

In response to a request for comment whether reporting deadlines for large hedge fund advisers to complete their routine annual filing should be shortened to 30 calendar days (from 60 calendar days) after the end of each quarter, one commenter stated that shorter reporting timelines would provide FSOC and the Commissions with the most current information to monitor systemic risk.
82

Another commenter opposed shortened reporting timelines and stated that the existing requirements are already burdensome and requiring shorter deadlines could undermine data quality.
83

After the 2022 Joint Form PF Proposing Release, the SEC adopted amendments to Form PF, which require large hedge fund advisers to file current reports and private equity fund advisers to file event reports upon the occurrence of certain events.
84

The amendment to require calendar quarter, rather than fiscal quarter, basis reporting will improve data comparability and will provide the Commissions with more timely information for those large hedge advisers that currently do not report on a calendar quarter basis.

82
Comment Letter of Mohammed R. (Sept. 9, 2022).

83
Schulte Comment Letter.

84
May 2023 SEC Form PF Amending Release,
supra
footnote 4.

B. 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. We are adopting amendments to section 1 to provide greater insight into private funds' operations and strategies and to assist in identifying trends, including those that could create systemic risk and which are as such designed to enhance investor protection efforts and systemic risk assessment. The amendments are designed to improve comparability across advisers, improve data quality, and reduce reporting errors, based on our experience with Form PF filings.

1. 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 adopting, as proposed, several amendments to collect additional identifying information regarding the adviser, its related persons, and their private fund assets under management.

Legal entity identifiers.
We are adopting, as proposed, amendments to the definition of “LEI” to exclude the use of any non-LEI identifier, such as an RSSD ID, as a substitute for LEI. Legal entity identifiers, or “LEIs,” help identify entities and link data from different sources that use LEIs.
85

These amendments will improve data quality because, based on our experience with the current form, reporting RSSD IDs as LEIs makes it more difficult for our staff to link data efficiently and effectively.

85
Form PF generally defines “LEI” as, with respect to any company, 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 (definition of “LEI”).

Current Form PF requires advisers to report the LEI for certain entities, such as for the reporting fund, and any parallel funds if they have an assigned LEI. It currently instructs advisers, in the case of an entity that is a financial institution and does not have an assigned LEI, to provide the RSSD ID assigned to the financial institution by the National Information Center of the FRB.
86

We are adopting an amendment to the definition of “LEI” to remove the instruction that an adviser provide an RSSD ID with respect to an entity that is a financial institution and that has not been assigned an LEI. Accordingly, an adviser will no longer be permitted to substitute an RSSD ID or any other financial identifier for any requirement in Form PF to provide an LEI, if one has been assigned.
87

An adviser may continue to use an RSSD ID, if the financial institution has one, or another financial identifier for any question that requires an adviser to report other identifying information, where the form of identifying information is not specified.
88

86
Currently, if an adviser has not been assigned an LEI and does not have an RSSD ID, then the adviser would leave that line blank.

87

See, e.g.,
Questions 5(d) and 7(e).

88

See, e.g.,
Question 9(c). We also added “RSSD ID” to the Form PF Glossary of Terms and have defined it as the identifier assigned by the National Information Center of the Board of Governors of the Federal Reserve System, if any.
See
Form PF Glossary of Terms.

We are also adopting, as proposed, an amendment to require advisers to provide LEIs for themselves and their “related persons,” if they have an LEI.

89

This amendment will help identify advisers and their related persons and link data from other data sources that use LEI as an identifier.

89

See
Question 1. We are also adopting amendments to require advisers to provide the LEI for other entities, if the other entities have one, including internal private funds (see Question 7 and Question 15), trading vehicles (see Question 9), and counterparties (see Question 27 and 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 ADV Glossary of Terms.

One commenter supported an expanded use of LEI as a legal identifier in Form PF and stated that more comprehensive inclusion of LEI would create a more complete identification scheme for the Commissions.
90

The commenter also stated that the LEI field in the existing Form PF should be used only for an LEI and not substitute any other identifier for an LEI.
91

The commenter also supported the creation of a separate field for the RSSD ID.
92

Another commenter stated that requirements in Form PF to use a particular financial identifier may increase costs and reduce innovation and competition among financial identifier providers and that increased competition among financial identifiers would improve overall transparency and data quality and reduce costs.
93

As stated above, based on our experience with the current form, however, permitting the reporting of other financial identifiers (namely, RSSD IDs) as LEIs has generally made it more difficult for our staff to link data efficiently and effectively. The amendments to the “LEI” definition will thus improve data quality and comparability on Form PF, which supports effective assessment of systemic risk and investor protection efforts. Additionally, Form PF continues to not require an adviser to obtain or use LEI or any other particular financial identifier (other than private fund identification numbers for reporting funds), as our amendments provide only that any identifier that does not meet the definition of “LEI” may not be substituted for an LEI where a question requests an LEI. Form PF continues to permit advisers to use other financial identifiers elsewhere on Form PF where the reporting of LEI is either not specified or not required. The amendments to Form PF we are adopting do not require any entity that does not already have an LEI to obtain one and clarifies that an identifier that does not meet the “LEI” definition may not be substituted for an LEI where an LEI, if available, is requested on Form PF.

90

See
GLEIF Comment Letter.

91

See id.

92

Id.

93

See
Comment Letter of Bloomberg, L.P. (Oct. 13, 2022) (“Bloomberg Comment Letter”).

Assets under management.
We are adopting, substantially as proposed, amendments to Question 3 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 did not receive comment on the proposed amendments to Question 3. We are amending 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, as proposed.
94

Advisers are required to include the value of trading vehicle assets because, under the amended instructions for reporting trading vehicle assets, as discussed more fully in section II.A.2 above, advisers are required to “look through” the reporting fund's investment in any trading vehicles.
95

We did not receive comment on the proposed change in instructions to Question 3. These 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.

94

See
Question 3.

95

Id.
We have also modified the proposed instructions to Question 3 to remove a reference to the proposed requirement to report trading vehicles on a disaggregated basis, which we are not adopting in this Release.
See also
Form PF Glossary of Terms.

Explanation of assumptions.
We are amending, as proposed, Question 4, which advisers use to explain assumptions that they make in responding to questions on Form PF, to add an instruction directing advisers to provide the question number when the assumptions relate to a particular question. We did not receive comments on this change. This amendment is designed to help assess data more efficiently and improve comparability, based on experience with the form.

We asked in the proposal whether there are other data sources we should use to link entities across forms and to assess data more efficiently. In a further modification from the proposal, we are adopting an amendment to require an adviser to indicate whether it, or any of its related persons, is registered or required to be registered as a CPO and/or a CTA and to provide the legal name of the entity.
96

This information will help more accurately and efficiently identify dual registrants, including those that might be implicated in the identification of threats to financial stability, increase the usefulness and interoperability of the data collected by the Commissions on Form PF and by the CFTC on Form CPO-PQR, and facilitate collaboration between the Commissions with respect to dual registrants.

96

See
Question 1(c).

2. 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. We are adopting, largely as proposed, amendments to section 1b to require advisers to report additional identifying information about the private funds they manage as well as other basic information about the private funds' assets, financing, investor concentration, and performance. The amendments are designed to provide greater insight into private funds' operations and strategies and assist in identifying trends, which will enhance investor protection efforts and FSOC's systemic risk assessment. At the same time, the amendments will help improve data quality and comparability, based on our experience with Form PF.

Type of private fund.
We are adopting several amendments to identify different types of reporting funds more effectively and to help better isolate data according to fund type, in order 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, but they do not report on the form itself the type of fund.
97

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 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 are adopting, as proposed, amendments to require advisers to identify the reporting fund by selecting one type of fund from the following 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.”
98

If an adviser identifies the reporting fund as “other,” the adviser will be required to describe the reporting fund in Question 4, including why it would not qualify for any of the other options. We did not receive comments on this amendment. This amendment will further improve data quality and data comparability, based on our experience with Form PF.

97
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).

98
Question 6(a).

In addition, we are adopting, as proposed, amendments to require an adviser to indicate whether the reporting fund is a “commodity pool,” which is categorized as a hedge fund on Form PF.
99

Although the CFTC does not, as of the date of this Release, 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.
100

This amendment will allow for analysis of hedge fund data both with and without commodity pools reported on the form. One commenter opposed the existing default treatment of a commodity pool as a hedge fund for purposes of Form PF and recommended allowing an adviser to categorize a commodity pool in the manner it determines most appropriate.
101

The amendment we are adopting will improve data quality and comparability, based on our experience with Form PF, and enhance our understanding of the hedge fund data collected from Form PF by allowing for analysis of hedge fund data both including and excluding CPOs. Additionally, as it relates to the treatment of commodity pools as hedge funds for reporting purposes, such treatment further aligns the consistency of questions asked across these entities, both on Form PF, as well as on the CFTC's Form CPO-PQR.

99
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.

100
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”).

101

See
MFA Comment Letter II.

Finally, we are adopting, with a modification from the proposal, amendments to require advisers to report whether a reporting fund operates as a UCITS or AIF.
102

One commenter supported the requirement to report whether a fund is a UCITS or AIF and where a fund is domiciled, but not where the fund is “marketed,” because a fund could be marketed anywhere and a fund's marketing activity may change over time.
103

Another commenter recommended that references to “marketing” be reconsidered, because “marketing” is a defined term in the UCITS Directive applicable to a UCITS and in the AIFMD and UK AIFMR applicable to an AIF, and these definitions may differ in meaning from the rule's references to “marketing.”
104

This commenter also stated that the references to “marketing” in the sense of rule 206(4)-1 and concepts of “offers” or “sales” under the Securities Act of 1933 would be confusing in this question if the purpose of the proposed question is to determine whether a fund calls itself a money market fund or an equivalent term to prospective investors outside of the United States.
105

After considering comments, we are modifying the question from the proposal to require reporting of a fund that “offers,” rather than “markets,” itself as a money market fund outside the United States. This modification will more precisely capture the type of conduct that we intend to trigger a reporting requirement, and uses a term that we believe is commonly understood by the industry, and which we accordingly disagree would be confusing.
106

Further, the modification will be less burdensome on advisers than the proposed use of “marketing” by clarifying the scope of information required to be reported and requiring a more limited subset of conduct to be reported. For example, a money market fund may engage in certain conduct that constitutes marketing in a particular jurisdiction but not an offering for purposes of the form.

102

See
Questions 6(c) through (f). We are adopting, as proposed, a definition for 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 are adopting, as proposed, a definition for the term “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.

103

See
SIFMA Comment Letter.

104

See
AIMA/ACC Comment Letter.

105

Id.

106
“Offer” is defined in the Securities Act as “every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value.” 12 U.S.C. 77b(a)(3). For purposes of this question, activity may constitute an “offer” under this definition whether or not the offering is subject to the registration requirements of the Securities Act.

One commenter stated that proposed Question 6(c) would not enhance the Commissions' knowledge about exposures to non-U.S. beneficial owners that is not already included in proposed Question 22 on Form PF.
107

Question 6(c), however, is not intended to elicit the same information about exposures to non-U.S. beneficial owners as proposed Question 22, as discussed further below in section II.B.3. The amendments to Question 6 relate to the conduct and operations of the reporting fund, which are designed to allow the Commissions and FSOC to filter data for more targeted analysis to better understand to what extent and in what jurisdictions a reporting fund operates outside of the United States. This information can help the Commissions better understand the private fund's potential exposure to beneficial owners outside the United States and to identify potential systemic risk resulting from economic conditions or events in particular foreign jurisdictions. This reporting will also help avoid double counting when Form PF data is aggregated with other data sets that include UCITS, AIFs, and money market funds that are offered outside the United States. Proposed Question 22, as discussed further below in section II.B.3, requires an adviser to report more granular information about the fund's beneficial owners, including the percentage of beneficial owners that are non-U.S. persons.
108

107
AIMA/ACC Comment Letter.

108

See
Question 22.

The amendments will improve the data we collect on fund operations and help us better understand a fund's potential exposure to beneficial owners outside the United States. The additional information is necessary for a more targeted analysis of risks presented in the United States from risks presented abroad.
109

Another commenter stated that the proposed amendments do not specify what conduct constitutes operating as a UCITS or how to determine where a fund operates.
110

A UCITS operates under the laws mandated by the member country of its headquarters when it is qualified as a UCITS and authorized by that jurisdiction. This commenter also stated that the meaning of money market fund in Question 6(g) is unclear, particularly for funds that are established and operate as money market funds outside of the United States. For purposes of this question, we have removed reference in Question 6 to

the defined term “money market fund” as included in the Form PF Glossary of Terms, which continues to have the meaning provided in rule 2a-7 under the Investment Company Act.
111

Instead, in a modification from the proposal, we have amended Question 6 to specify that a money market fund for purposes of Question 6 includes money market funds more generally, including those that operate outside of the United States in accordance with applicable non-U.S. laws, rather than being limited to only “money market funds” as defined in Form PF.

109

See
Fact Coalition Comment Letter (discussing the importance of collecting information on exposures outside of the United States).

110
AIMA/ACC Comment Letter.

111

See
Form PF Glossary of Terms (definition of “money market fund”).

Master-feeder arrangements, internal private funds, external private funds, and parallel fund structures.
We are adopting, as proposed, amendments to 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.
112

These changes to the form reflect that advisers will be required to report components of master-feeder arrangements and parallel fund structures separately, as discussed more fully in section II.A.1 above. Form PF currently requires advisers to report identifying information about parallel funds, and will continue to do so under the amended Form PF.
113

The amendments will also require advisers to report the value of the reporting fund's investments in other private funds (
e.g.,
for funds of funds) in more detail than is currently required.
114

Specifically, the amendments will 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 together make up the total investments in other private funds.
115

These amendments are designed to help map complex fund structures and cross reference private fund information more effectively across Form PF filings, in order to provide more complete and accurate information about each fund's risk profile.

112
For master-feeder arrangements, advisers will be required to 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 will be required to report the name of the internal private fund, its LEI, if it has one, and its private fund identification number.
See
Question 7. If the reporting fund invests in external private funds, advisers will be required to 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 will be required to report the internal private fund's name, its private fund identification number, and its LEI, if it has one.
See
Question 15.

113

See
Question 7 and Question 8.

114

See
Question 15.

115

Id.

In connection with these amendments, in the Form PF Glossary of Terms, we are removing the terms “investments in external private funds” and “investments in internal private funds,” and replacing them with the terms “external private funds” (
i.e.,
private funds that neither the adviser nor the adviser's related persons advise) and “internal private funds” (
i.e.,
private funds that the adviser or any of the adviser's related persons advise), respectively. The definitions do not direct advisers to exclude “cash management funds,” as is currently the case under the terms being removed, because we have observed that advisers determine whether a fund is a cash management fund inconsistently for purposes of Form PF, which reduces data quality.

As discussed more fully above in section II.A.1, some commenters supported requiring disaggregated reporting of master-feeder arrangements and parallel fund structures, stating that it will allow the Commissions to identify potential systemic risk more effectively and increase the transparency of private fund holdings.
116

Other commenters opposed the proposed amendments to require reporting of the components of parallel funds and master-feeder funds separately.
117

We did not however receive specific comment on the proposed definitional changes. One commenter recommended including an exclusion in Questions 15(a) and 15(b), similar to the exclusion in Question 15(c), to avoid potentially double counting any master funds that are external private funds.
118

We believe the instruction in Question 15(c) to exclude any funds disclosed in Question 15(b) is sufficient to avoid any double counting of assets in this set of questions.
119

These amendments will improve data quality and comparability, based on our experience with Form PF and in light of adopted changes to master-feeder and parallel fund structure reporting on Form PF.

116

See, e.g.,
Better Markets Comment Letter; NASAA Comment Letter.

117

See, e.g.,
AIC Comment Letter I; AIMA/ACC Comment Letter; MFA Comment Letter II.

118

See
AIMA/ACC Comment Letter.

119
We do not believe an instruction in Question 15(c) to exclude funds reported in Question 15(a) is necessary because Question 15(a) relates to external private funds only.

Withdrawal or redemption rights.
We are also adopting, with modifications from the proposal, as specified below, amendments to 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.
120

We proposed adding a new Question 10(a) which would generally require all advisers to report whether a reporting fund provides investors with withdrawal and/or redemption rights in the ordinary course.
121

In a modification from the proposal, we are adopting a modified Question 10, which instead requires all advisers to indicate whether the reporting fund is an open-end private fund in Question 10(a) or a closed-end private fund in Question 10(b).

120

See
current Question 49(a).

121

See
proposed Question 10(a).

We are relatedly adopting new defined terms for “open-end private fund” and “closed-end private fund” and modifying Question 10 to ask whether the reporting fund is an “open-end private fund” or “closed-end private fund,” rather than whether the reporting fund provides investors with withdrawal and/or redemption rights in the ordinary course. In discussing certain aspects of the proposal, some commenters distinguished between open-end and closed-end funds.
122

One commenter indicated that the term “closed-end fund” refers to funds that do not offer withdrawal or redemption rights in the ordinary course.
123

We are defining a “closed-end private fund” as any private fund that only issues securities, the terms of which do not provide a holder with any right, except in extraordinary circumstances, to withdraw, redeem, or require the repurchase of such securities, but which may entitle holders to receive distributions made to all holders
pro rata.
124

We are defining an “open-end private fund” as a private fund that offers redemption rights to its investors in the ordinary course, which may be paid in cash or in kind, irrespective of redemption frequency or notice periods and without regard to any suspensions, gates, lock-ups, or side pockets that may be employed by the fund.
125

These terms are commonly used in the market,

based on staff experience, and will be used in place of the existing question that asks whether the reporting fund provides investors with withdrawal/redemption rights in the ordinary course.

122

See, e.g.,
AIMA/ACC Comment Letter; Comment Letter of Ropes & Gray LLP (Oct. 11, 2022) (“Ropes & Gray Comment Letter”).

123
AIMA/ACC Comment Letter.

124

See
Form PF Glossary of Terms (definition of “closed-end private fund”). The definition of “closed-end private fund” is adapted from the definition of “venture capital fund” in rule 203(l)-1 under the Advisers Act.
See
17 CFR 275.203(l)-1.

125

See
Form PF Glossary of Terms (definition of “open-end private fund”).

Although the proposed question and the adopted question lead to substantively identical results in most cases, the adopted question will improve data quality by more precisely specifying what is meant by “offer[ing] withdrawal and/or redemption rights in the ordinary course” and, accordingly, how an adviser should classify a reporting fund that offers limited withdrawal or redemption rights. In a modification from the proposal, an adviser that selects in Question 10 that the reporting fund is neither an open-end private fund nor a closed-end private fund will be required to provide a detailed explanation of these responses in Question 4.
126

We requested comment on whether we should include an additional category of “other” withdrawal and/or redemption frequency.
127

Some commenters stated that the proposed question 10 was unclear on how to report withdrawal and redemption rights properly, particularly for funds with rights that do not fit within a single frequency category.
128

Instead of including an “other” category, as stated above, advisers that respond “no” to both Questions 10(a) and 10(b) will be required to provide a detailed explanation of these responses in Question 4, which will enable us to understand the circumstances of the fund's withdrawal and/or redemption rights and will improve data quality. It will also help an adviser that might otherwise feel constrained by these two categories if the fund it advises does not fit into either. We are requiring advisers to identify whether a reporting fund is an open-end private fund or a closed-end private fund to inform the Commissions and FSOC better of all reporting funds' susceptibility to stress related to investor redemptions, in order to help identify more effectively how widespread the potential stress may be.
129

126

See
Questions 10(a) and 10(b).

127

See
2022 Joint Form PF Proposing Release
supra
footnote 4, at 32.

128

See, e.g.,
AIMA/ACC Comment Letter; SIFMA Comment Letter.

129
To implement this change, we have moved current Questions 49(a) through (e) from section 2b, which required only large hedge fund advisers to report withdrawal and redemption information about qualifying hedge funds, to section 1b, which requires all advisers to report withdrawal and redemption information about all the reporting funds they advise, and we have redesignated Questions 49(a) through (e) as part of new Question 10.

In a modification from the proposal, if the reporting fund is an open-end private fund under Question 10(a), the adviser will be required to indicate (i) how often withdrawals or redemptions are permitted by selecting from a list of categories pursuant to Question 10(c)
130

and (ii) what percentage of the reporting fund's net asset value may be, or is, subject to a suspension of, or material restrictions on, investor withdrawals/redemptions by an adviser or fund governing body pursuant to Question 10(d).
131

The adviser will be required to report this information regardless of whether there are notice requirements, gates, lock-ups, or other restrictions on withdrawals or redemptions.
132

These amendments will allow the Commissions and FSOC to identify more effectively the reporting funds that may be affected by investor withdrawals during certain market events and/or are vulnerable to failure as a result of investor redemptions. This information will also provide insight into other data that all reporting funds report. For example, we understand that closed-end private equity funds may have certain patterns of subscriptions and withdrawals, despite not offering redemption rights in the ordinary course, and also may report performance to investors and prospective investors as an internal rate of return as opposed to as a measure of the changes in the fund's portfolio market value.

130

See
Question 10(c). The categories are: (1) on 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.

131
We are redesignating current Questions 49(a) through (e) as new Question 10. Currently, all advisers to qualifying hedge funds that provided investors with withdrawal/redemption rights in the ordinary course are required to respond to Questions 52(a) through (e) in section 2(b). We are moving proposed Questions 52(a) through (e) to section 1(b) and redesignating it as part of new Question 10, so that all advisers to open-end private funds, rather than only advisers to qualifying hedge funds that provide investors with withdrawal/redemption rights in the ordinary course, will need to respond to this question.

132
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.”

One commenter stated that expanding the classes of private funds that are required to disclose withdrawal and redemption rights would allow FSOC to better identify systemic risks, particularly resulting from market events.
133

Another commenter opposed the proposed requirement for all advisers to report on withdrawal and redemption rights, asserting that the data would be of limited benefit for systemic risk monitoring due to the inclusion of data from smaller funds, as well as that the types of withdrawal and redemption restrictions referenced in proposed Question 10(b) (which has been redesignated as Question 10(c)) do not reflect the practices of many hedge funds.
134

A private fund of any size that provides for withdrawal or redemption rights may be affected by increased investor withdrawals during certain market events and/or vulnerable to failure as a result of investor redemptions. This reporting will allow the Commissions and FSOC to assess withdrawal and redemption patterns to identify potential signals of stress at a particular fund or across many funds, or related to a particular investment strategy or strategies, which is relevant for assessing broader systemic risk. Information on withdrawal and redemption rights from all private funds, including smaller private funds or funds that are not included in the definition of a “hedge fund,” will improve FSOC's ability to monitor potential systemic risk and support the Commissions' investor protection efforts.

133

See
Fact Coalition Comment Letter.

134

See
Schulte Comment Letter.

Some commenters stated that the proposed Question 10(b) (which has been redesignated as Question 10(c)) does not address how to report a fund with multiple types of redemption rights.
135

Some commenters recommended permitting an adviser to select multiple options for withdrawal and redemption rights in Question 10.
136

However, it would not support or enhance our data analysis efforts to modify Question 10(c) to allow for multiple selections, given that other questions on Form PF require reporting of a fund's withdrawal and redemption activity.
137

Instead, we are modifying Question 10(c) to ask for the interval on which withdrawals or redemptions are “most commonly” permitted (
i.e.,
with respect to most investors). We also encourage an adviser to report any additional details on a fund's withdrawal or redemption schedule in response to Question 4, as appropriate.

135

See, e.g.,
MFA Comment Letter II; SIFMA Comment Letter; USCC Comment Letter.

136

See, e.g.,
AIMA/ACC Comment Letter; MFA Comment Letter II.

137

See, e.g.,
Question 14.

Trading vehicles.
We are adopting, with modifications from the proposal as specified below, amendments to require advisers to provide identifying information for any trading vehicle in

which the reporting fund holds assets, incurs leverage, or conducts trading or other activities.
138

Advisers will be required to 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 any. In a change from the proposal, an adviser will also be required to specify if the reporting fund holds assets through a trading vehicle, incurs leverage through a trading vehicle, or conducts trading or other activities through a trading vehicle.
139

As discussed above, the final amendments will include specific questions to target specified information related to a reporting fund's use of trading vehicles, leveraging information used to answer Questions 9(a) through (c), as opposed to requiring a full separate reporting on Form PF for trading vehicles.
140

These questions are intended to identify what conduct requires the vehicle to be reported as a trading vehicle for purposes of Form PF and will help improve our understanding of a reporting fund's trading vehicle use. This amendment will 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, as well as its related counterparty exposures. The identifying information will also 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, including with respect to the use of trading vehicles, will provide a more comprehensive view of the market that enhances systemic risk assessment and our investor protection efforts.

138

See
Question 9.

139

See
Questions 9(d) through (f).

140

See supra
section II.A.2 of this Release for further discussion.

As discussed more fully above in section II.A.2 of this Release, we received comments regarding proposed Instruction 7 regarding the proposed disaggregated reporting of trading vehicles. One commenter recommended that a threshold question of whether the reporting fund uses a trading vehicle should be added to proposed Question 9.
141

Such an instruction is not necessary because it is generally understood that an adviser may leave blank any inapplicable question.

141
AIMA/ACC Comment Letter.

Gross asset value and net asset value.
We are adopting, with changes from the proposal, several amendments to the way advisers report gross asset value and net asset value. We are adopting amendments to require large hedge fund advisers and large liquidity fund advisers to report net asset value and gross asset value (or, if such values are not calculated monthly, the reporting fund aggregate calculated value and the gross reporting fund aggregate calculated value, respectively) as of the end of each month of the reporting period in their quarterly filings, rather than only reporting the information as of the end of the reporting period, as Form PF currently requires.
142

This amendment is designed to facilitate analysis of other monthly Form PF data, including certain fund performance and risk metrics.
143

142

See
Questions 11 and 12. We also are adopting amendments to the instructions in Question 11 to correspond with the instructions that no longer allow advisers to aggregate master-feeder arrangements, as discussed above. In a modification from the proposal, we are adding an instruction to specify that for feeder funds responding to Questions 11 and 12, the gross asset value or gross reporting fund aggregate calculated value and net asset value or reporting fund aggregate calculated value calculations should be inclusive of its equity holdings in the master fund, along with its other holdings, to more accurately represent the value of the feeder fund's holdings.

143

See, e.g.,
Question 23 (requiring all private fund advisers to report monthly performance data, to the extent such results are calculated for the reporting fund).

Some commenters expressed concerns that calculating net asset value (or gross asset value) on a monthly basis would be overly burdensome.
144

Another commenter asserted that the net asset value or gross asset value of a fund or a fund's investments may not be available on a monthly basis in the case of investments made into other funds or entities that are not advised by the filer or its related persons, in which case the timing of the reporting may not match a monthly reporting obligation.
145

One commenter recommended requiring reporting on net asset value and gross asset value on a quarterly, rather than monthly, basis to lessen the burden on advisers.
146

144

See, e.g.,
MFA Comment Letter II.

145

See
AIMA/ACC Comment Letter.

146

See
MFA Comment Letter II.

Monthly asset value data is important to allow analysis of other monthly basis data collected on Form PF for systemic risk monitoring and to support our investor protection efforts. However, after considering comments, and in a change from the proposal, an adviser may report in response to Questions 11 and 12 a fund's “gross reporting fund aggregate calculated value” (“GRFACV”) or “reporting fund aggregate calculated value” (“RFACV”), rather than gross asset value or net asset value, respectively and as applicable, if its net asset value and gross asset value are not calculated on a monthly basis.
147

Permitting an adviser to report GRFACV or RFACV will reduce the need for advisers to report the net asset value or gross asset value on a monthly basis, as proposed. As discussed more fully below, in connection with proposed amendments to fund performance reporting, we proposed adding a requirement for certain advisers to report additional performance information, including RFACV. We are adding the option for advisers to report RFACV for Question 12 and GRFACV for Question 11 because use of RFACV and GRFACV will reduce burdens on advisers while allowing us to continue to receive useful monthly valuation data to allow for effective systemic risk monitoring and investor protection efforts.
148

RFACV and GRFACV may be calculated using the adviser's own methodologies or those of its service providers, provided that the methodologies used to calculate RFACV and GRFACV are consistent with information reported internally.
149

Advisers will be required to indicate whether the reported data represents RFACV or GRFACV, rather than a net asset value or gross asset value, as applicable, to maintain data comparability. Requiring monthly data will help facilitate analysis of the other monthly data reported on Form PF, such as fund performance, and help identify trends for systemic risk analysis and investor protection efforts.

147
The amendments to Form PF adopted in the May 2023 SEC Form PF Amending Release,
supra
footnote 4, adopted a definition for “reporting fund aggregate calculated value.” RFACV is defined as every position in the reporting fund's portfolio, including cash and cash equivalents, short positions, and any fund-level borrowing, with the most recent price or value applied to the position for purposes of managing the investment portfolio.
See
Form PF Glossary of Terms (definition of “reporting fund aggregate calculated value”). Because we are now, after considering comments, adding the new GRFACV term, we are also modifying the definition of RFACV to clarify that it is a signed (
i.e.,
positive or negative) value where all positions are summed. GRFACV, which is used solely in Question 11 is calculated in the same manner as RFACV, except that instead of summing each position's signed value, GRFACV converts each position's value to an absolute value prior to summing these absolute values.

148
This change is also consistent with the recent amendments adopted by the SEC which require a large hedge fund adviser to monitor and in certain instances report, the fund's RFACV in compliance with its current reporting obligation.
See
May 2023 SEC Form PF Amending Release,
supra
footnote 4.

149

See
Form PF Glossary of Terms. Advisers will continue to be required to report gross asset value and net asset value as of the end of the reporting period. See current Questions 8 and 9, which have been redesignated as Questions 11(a) and 12(a).

We also are adopting, as proposed, amendments to add new Question 13, which requires advisers to separately

report the value of unfunded commitments included in the net and gross asset values reported in Questions 12 and 11.
150

Advisers that provide an RFACV or GRFACV in response to Questions 12 and 11 will report the value of unfunded commitments that are included in the RFACV or GFRACV figures. Current Questions 8 and 9 (which have been replaced by Questions 11 and 12) 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.
151

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 compensation for efforts expended on behalf of the fund in preparation for the investments.
152

The asset value calculations in Questions 11 and 12 should include unfunded commitments, so that Form PF data is comparable to Form ADV data. However, there are circumstances where understanding the amount represented by unfunded commitments will 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 will help the Commissions and FSOC more accurately identify the leverage of a fund with uncalled commitments. We did not receive specific comment on the proposed addition of Question 13. We continue to believe that receiving this information on uncalled commitments will improve data accuracy and comparability, which is important for effective systemic risk assessment and investor protection efforts.

150
We are adopting amendments to the definition of “unfunded commitments” as committed capital that has not yet been contributed to the reporting fund by investors. Currently, the definition refers only to private equity funds, and we are adopting amendments to amend the definition to refer to all reporting 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,

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2024-03473. Public record. Not legal advice.