Material events will require reporting within one business day.
Withdrawal and redemption rights, inflows and outflows must now be reported.
The US Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) voted in favour of amendments to Form Private Fund (Form PF), which is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010).
Form PF was created following the 2008 financial crisis. It is a confidential filing of assets under management to the Financial Stability Oversight Council. Private fund advisors (such as hedge funds) that have at least $150 million in fund assets must file the form.
Under the new amendments, hedge funds that have at least $500 million in assets must report their cryptocurrency exposure via Form PF. The report must also include borrowing and counterparty exposure, turnover, portfolio liquidity, financial liquidity, withdrawal and redemption rights and inflows/outflows.
As opposed to requiring to file the form on a quarterly basis or annually, material events (should they occur) must be reported within 1 business day.
The SEC Chair, Gary Gensler said the amendments will better protect investors. “In the decade since the SEC and CFTC jointly adopted Form PF, regulators have gained vital insight with respect to private funds.
“Since then, though, the private fund industry has grown in gross asset value by nearly 150 percent and evolved in terms of its business practices, complexity and investment strategies.
“I am pleased to support the proposal because, if adopted, it would improve the quality of the information we receive from all Form PF filers, with a particular focus on large hedge fund advisers. That will help protect investors and maintain fair, orderly and efficient markets.”
Since 2008, the number of private funds has increased substantially. At the beginning of 2022, there were approximately 3,800 hedge funds in the United States.
Room for Concern?
Although the amendments may allow US regulators to swiftly identify private funds that are facing difficulties, as greater information is being reported, the number of investigations may increase.
When a regulator launches a probe, investors will not remain silent. Some are expecting private funds to retaliate against the proposed reporting.
Furthermore, the SEC proposed the number of treasury trading platforms under the Fair Access Rule should be increased.