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Fund Advisers Take Note: Heightened Regulatory Reporting and Scrutiny Forthcoming


8/27/14

Synopsis
 
On August 15, 2014, in compliance with the Dodd-Frank Act mandating the Securities and Exchange Commission (SEC) to establish reporting requirements for investment advisers to private funds, the SEC published its second Annual Staff Report Relating to the Use of Data Collected from Private Fund Systemic Risk Reports.1 The Report, which discloses to Congress how the SEC has used the data collected to protect investors and the integrity of the markets, indicates an environment of tightened regulatory scrutiny and a heightened importance on the accuracy of regulatory reporting.
 
Issue
 

In 2011, the SEC adopted Form PF and established annual filing requirements for certain private fund advisers. The SEC essentially mandated that advisers registered with the SEC and with at least $150 million in private fund regulatory assets under management (RAUM) periodically file Form PF. The annual filing requirement consists of general data including the types of private funds that an adviser advises and detail concerning (although more detailed information is required by large private fund advisers):

  • Fund size
  • Leverage
  • Types of investors
  • Liquidity and performance
     

Although the Dodd-Frank provision was primarily intended to establish a source of data for the Financial Stability Oversight Council (FSOC) in order to assess systemic risk, the SEC is taking advantage of the data to fortify its own regulatory programs, including examinations, investigations, and investor protection efforts as they relate to private fund advisers. This signals that the SEC deems that the analysis of Form PF data is an integral component of its program evaluations and furthers the SEC’s overall mission.
 
What Does CohnReznick Think?

SEC actions point to an environment of tightened regulatory scrutiny and a heightened importance on the accuracy of regulatory reporting. As such, advisers who file Form PF should do so judiciously, paying particular attention to compare against other SEC filings and documents in order to avoid any inconsistencies and costly regulatory scrutiny.

Contact

For more information, please contact Jay Levy, Partner and Financial Services Industry Practice Leader, at 646-254-7412, or William Pidgeon, Partner, at 973-403-7998.

To learn more about CohnReznick’s Financial Services Industry Practice, visit our webpage.


1http://www.sec.gov/reportspubs/special-studies/im-private-fund-annual-report-081514.pdf


This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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