November 08, 2011

Form PF’s final rules for hedge funds and private equity businesses, announced last week by the SEC, aren’t as bad as anticipated, according to Kinetic Partners, a compliance advisory firm.

Firms will now have to disclose more information to the U.S. government than previously required, and as such each organization should plan how they will address the Form’s requirements carefully, Kinetic pointed out.

Hedge funds and private equity firms across the board have been complaining about Form PF being extremely a burden of little value to regulators.

Its main purpose is to collect information for the Financial Stability Oversight Council, as outlined in Dodd-Frank, so that it can assess whether certain investment advisers possess inherent financial systematic risk.

“It’s a very onerous rule,” Peter Sanchez, CEO, Northern Trust Hedge Fund Services, pointed out at a breakfast meeting. He said the administrator, whose biggest client is Citadel, is currently developing a Form PF reporting solution.

Still, despite industry concerns, the final Form PF rules, which applies to private funds managed by registered investment advisers, commodity advisers and commodity pool operators, will actually make it easier than previously thought to report earnings.

One of the major differences the SEC has made in comparison to the Form’s original version is the assets under management at which private fund advisors must report, which was raised from $1 billion to $1 .5 billion, Kinetic pointed out.

Further, advisors will now have a 60-day reporting deadline as opposed to the 15-day deadline originally proposed.

In yet another lucky break for fund managers, Form PF will take effect later than the original deadline: advisors with over $5 billion in assets under management will be the first to be affected, but won’t have to start reporting until the middle of 2012.

Still, hedge funds and private equity firms are faced with a barrage of demands for more transparency that is transforming the industry, Sanchez of Northern Trust pointed out. In addition with new SEC regulations on transparency, firms are faced with new demands on tax and risk reporting, he said.

Meanwhile, administrators are expected to do more than before, from carrying out upfront valuations to handling the rapid growth of funds from equities to multi-asset strategies, Sanchez said.

ABOUT THE AUTHOR
Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in ...