Understanding Form PF Sections 5 and 6: Implications for Hedge Funds

As the regulatory landscape continues to evolve, hedge funds face increased scrutiny and reporting obligations. Form PF, implemented by the Securities and Exchange Commission (SEC), is a critical component of regulatory reporting for hedge funds. In this blog post, we will delve into Section 5 and Section 6 of Form PF, both of which describe reporting requirements with important implications for hedge funds.

SEC amendments to Form PF filings

The initial set of Form PF amendments that the SEC proposed in 2022 have been approved and integrated into a final regulation that will soon be made available in the Federal Register of the SEC. According to the SEC, these amendments will enhance the Commission’s regulatory programs, such as examinations, investigations, and efforts to protect investors with respect to private fund advisors. Specifically, the new Form PF regulations introduce Section 5 for large hedge fund advisors and Section 6 for private equity fund advisors, as well as changes to Section 4 for large private equity fund advisors.

The SEC has provided a summary factsheet that outlines which funds will be affected by the adopted changes, including:

• Large hedge fund advisors with at least $1.5 billion AUM
• Private equity fund advisors with at least $150 million AUM
• Large private equity fund advisors with at least $2 billion AUM

Section 5: Large hedge fund advisors

Section 5 requires large hedge fund advisors to submit a current report as soon as reasonably possible but no later than 72 hours following the occurrence of a trigger event, including all of the following, among others:

• Extraordinary investment losses, or 20% of reporting fund aggregated calculated value (RFACV) during a rolling 10-business-day period
• Margin increases of 20% over the rolling 10-business-day average RFAVC
• Margin default
• Termination of or significant modifications to prime broker relationships
• Inability to fulfill a redemption request

Section 6: Private equity fund advisors

With the addition of Section 6, Form PF requires private equity fund advisors to file a report within 60 days of the conclusion of any fiscal quarter after the occurrence of a trigger event, such as:

• Advisor-driven secondary transaction
• Dismissal of a general partner
• Adjustments to a fund’s investment period
• Termination of a fund

Section 4: Large private equity fund advisors

The new regulation amends the existing Section 4, requiring large private equity advisors to annually report any general partner or limited partner clawbacks that exceed 10% of a fund’s total aggregate capital commitments. Section 4 also includes new questions as well as changes to previous questions that will increase the work required to complete Section 4.

When do the new regulations take effect?

These new regulations will require a very quick turnaround for compliance departments. Compliance is required within the following deadlines:

• The effective date for new Section 5, which addresses current reporting events for large hedge fund advisers, and new Section 6, which addresses quarterly reporting events for all private equity fund advisers, is Dec. 11, 2023.
• The effective date for amended Section 4, which addresses annual reporting for large private equity fund advisers, is June 11, 2024.

How IVP can help streamline Form PF compliance

Meeting the new Form PF regulatory reporting requirements will likely be a complex and time-consuming endeavor for hedge funds. The IVP Regulatory Reporting Solution can streamline these efforts significantly with all of the following capabilities:

• Data aggregation: The IVP Regulatory Reporting Solution automates data collection from multiple sources, including internal systems, custodians, and administrators. This ensures accurate, timely aggregation of the information required for Form PF filings.
• Data validation and quality checks: The IVP solution incorporates validation rules and data quality checks, reducing the risk of errors and ensuring compliance with Form PF guidelines.
• Report generation: The IVP Regulatory Reporting Solution generates comprehensive reports that align with SEC requirements, saving significant time and effort.
• Real-time monitoring: Real-time monitoring and alerts enable hedge funds to address potential reporting issues proactively and make informed decisions.
• Regulatory updates: The IVP Regulatory Reporting Solution automatically stays up-to-date with Form PF changes, ensuring hedge funds remain compliant as reporting obligations evolve.

Learn more about the IVP Regulatory Reporting Solution and schedule a demo today.