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Bates Research  |  09-09-22

Private Funds: New Reporting Proposals from Regulators

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As the size of the private funds market has grown, regulators have been increasingly concerned about the risk posed to investors. In its 2022 annual Report, the SEC Examinations Division prioritized focusing on the “heightened risk to investors, registrants and the markets” of investing through private funds (see previous Bates coverage). In the Report, the Division estimated that 35% of registered investment advisers manage about $18 trillion in private hedge funds, private equity funds, and real estate funds. The sheer size of the market—and the state of the current disclosure framework covering it—has motivated regulators from both the SEC and CFTC to propose additional rule amendments to increase the regulatory oversight of private fund advisers and the funds they advise.

On August 10, 2022, the agencies jointly proposed to amend Form PF, a form they originally adopted in 2011, for reporting confidential information by SEC-registered investment advisers, as well as those registered with the CFTC as a Commodity Pool Operator (“CPO”) or Commodities Trading Adviser (“CTA”). The information collected on Form PF is intended to provide the Financial Stability Oversight Council (“FSOC”), an agency of the Treasury Department established by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the necessary insight needed to assess systemic financial risks from private fund activity. The proposal, at 300 pages, is directed toward enhancing the FSOC’s abilities and to “bolster” the SEC’s regulatory oversight. Here are the highlights.

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