Better Markets filed a comment letter in response to proposed rules that would increase reporting requirements for private fund advisers.
Why It Matters. Congress, recognizing the importance of transparency to protecting markets, investors, and the economy, passed the Dodd-Frank Act, which sought to “aggressively address gaps in information” related to private funds and other previously opaque financial intermediaries and instruments. Included in that effort was Section 404, which allowed the SEC to require that advisers to private funds file reports with the Commission “as necessary and appropriate in the public interest and for the protection of investors, or for the assessment of systemic risk by the Financial Stability Oversight Council.” After years of experience with current reporting requirements under Form PF, the SEC has reasonably concluded that more information is necessary. In a key provision, the proposed rule would require certain hedge fund and private equity advisers to report information concerning extraordinary events to the SEC within one business day. Those events include major developments such as massive short-term loss of value, significant margin increases, and general partner clawbacks. The proposal would also increase the information gathered from large private equity advisers and require large liquidity funds to report the same type of information reported to the SEC by money market funds.
What We Said. Form PF is critically important as it serves as the SEC’s primary insight into an otherwise opaque industry. Private funds play a key role in managing the assets of savers and investors, including retirement savers, while being deeply interconnected with the financial system and the economy more broadly. The proposed changes will improve the ability of the SEC and FSOC to monitor systemic risks and respond to potentially significant events. Moreover, the proposed changes will help the SEC better protect investors.
Bottom Line. If finalized as proposed, the amendments to Form PF will be the culmination of a well-considered rulemaking process. The changes being proposed are essential to the SEC’s mission of protecting markets and investors and to FSOC’s mission of protecting the financial system. The SEC must not water down the Proposal in response to misplaced attempts to persuade the SEC to scale back its efforts to protect markets, investors, and the financial system in favor of the private fund advisers.
Read our full Comment Letter here or click the button below.