Enhancing Transparency and Compliance: Understanding the Latest Form PF Amendments

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) adopted significant amendments to Form PF in order to enhance the ability of the Financial Stability Oversight Council (FSOC) to monitor and assess systemic risk and to bolster the SEC’s oversight of private fund advisers and the FSOC’s investor protection efforts.

The amendments require large hedge fund advisers to report comprehensive information about investment exposures, borrowing and counterparty exposure, market factor effects, central clearing counterparty reporting, risk metrics, investment performance by strategy, portfolio liquidity, and financing and investor liquidity. These changes are intended to improve both data quality and comparability.

The Form PF amendments also require more information about advisers and the private funds they advise — including identifying information, assets under management, withdrawal and redemption rights, debts and types of creditors, fair value hierarchy, beneficial ownership, and fund performance — to enhance insight into private fund operations and strategies, identify trends, improve data quality and comparability, and reduce reporting errors.

In addition to these changes, the most important Form PF amendments include:

• Separate reporting for each fund: Each component fund of a master-feeder arrangement or parallel fund structure (other than a feeder fund that invests all of its assets in a single master fund, also known as a “disregarded feeder fund”) mandates separate reporting.
• Increased granularity: The level of granularity in reporting data across Sections 1 and 2 of Form PF now includes monthly NAV/RFACV, gross performance, annualized volatility of returns, and consolidated counterparty exposures.
• Consolidated Section 2 reporting: Sections 2a and 2b of Form PF have been consolidated into a new Section 2 that requires additional fund-level reporting about investment exposure, borrowing, and counterparty exposures.
• Expanded Section 3 reporting: More granular data is now required at the fund level, including risk metrics, portfolio holdings, maturity, liquidity, and sales of securities.
• Detailed investment strategies: Section 4 now requires detailed information about investment strategies, portfolio investment exposure, and GP and LP clawback.

Overall, the amendments will require private funds to provide much more detailed reporting on the investment strategies, counterparty exposures, and trading and clearing mechanisms in order to help regulators achieve greater insight into operations and strategy, identify trends, and improve data quality and comparability.

While these amendments will enhance transparency and regulatory oversight that can improve systemic risk monitoring, investor protection, and data quality, they will also increase the regulatory burden on private funds. To mitigate this burden, the IVP Regulatory Reporting Solution can assist private funds with:

• Automated data aggregation: Automate data collection from various sources for accurate and timely aggregation that is essential for Form PF filings.
• Validation and quality checks: Incorporate validation rules and automatic data quality checks to ensure compliance with Form PF guidelines and reduce the risk of errors.
• Comprehensive reporting: Generate detailed reports that align with SEC requirements, streamlining the reporting process.
• Real-time monitoring: Use real-time monitoring and alerts to identify reporting issues promptly and accelerate resolution.
• One-click filing: One-click, machine-to-machine automated XML submission eliminates the need to download and edit the final submission, streamlining the process for maximum efficiency and ease of use.
• Regulatory updates: Stay up-to-date with changes to Form PF automatically as reporting obligations evolve.

Maximize Efficiency with IVP Managed Services

Combining the IVP Regulatory Reporting Solution with our “digital first” IVP Managed Services enables “regulatory reporting as a service” for greater potential gains in efficiency:

• Data sourcing, validation, cleaning, and form population: Our team handles these tasks to ensure accuracy and compliance.
• Full transparency: Includes number drill down and “audit anytime” access for funds.
• Scalability: Add new funds or data sets as needed.
• Continuous improvement: Our team leverages new technologies to optimize efficiency.

By integrating these solutions and services, private funds can effectively manage the increased regulatory demands of Form PF and focus on core investment activities.