Monday, July 15, 2024

SEC overhauls Form PF reporting regime for large hedge funds

AIMA chief Jack Inglis

  • Reporting window to be measured in hours, rather than business days, as SEC seeks “visibility” into private funds
  • AIMA and MFA chiefs react to first Form PF changes in 12 years
  • Ex-Lansdowne PM on the future of hedge funds: listen to AFI’s latest podcast

The SEC’s changes to the Form PF reporting process could cause “considerable uncertainty,” especially for large hedge fund managers headquartered outside the US, according to AIMA.

The Securities and Exchange Commission voted to change the Form PF rules for the first time in 12 years. Large hedge fund and private equity fund advisers must now inform regulators within 72 hours of “certain events that may indicate significant stress or otherwise signal for systemic risk and investor harm.”

For large hedge fund advisers, with $1.5bn or more in regulatory assets, the type of event will include extraordinary investment losses, significant margin events, and counter-party defaults.

“History is replete with times when tremors in one corner of the financial system or at one financial institution spill out into the broader economy,” said Gary Gensler, SEC chair, in a statement.

“When this happens, the American public—bystanders to the highway of finance—inevitably gets hurt.”  He has prioritised “visibility” into the alternative fund industry during his time as chair.

AIMA chief Jack Inglis said the final rules, which extended the one-day reporting window to 72 hours, could adversely impact firms outside the US.

“The shift measuring the compliance period from business days to hours will increase the likelihood of filing deadlines occurring outside of regular business hours or over weekends,” he said.

“This will create considerable compliance uncertainty for AIMA members, especially registered advisers outside of the US.”

Managed Funds Association president and CEO Bryan Corbett reacted by saying “alternative asset managers do not pose systemic risk,” but he is “sympathetic to efforts seeking to monitor risk throughout the financial system.”

He said: “We appreciate that the SEC has incorporated some of our suggestions, but we are concerned this final rule has the potential to exacerbate stress on funds, harm investors, and increase market volatility without commensurate benefit.

“It is disappointing that the SEC didn’t move both Form PF rules together to help reduce the implementation burden on managers.”