Insights on the Private Fund Adviser Rules & Form PF for Chief Compliance Officers

Earlier this month, on November 8, 2023, EisnerAmper hosted a Chief Compliance Officer (“CCO”) Roundtable Luncheon with law firm Lowenstein Sandler LLP and a guest speaker, Rachel Grand, Vice President and Senior Counsel, Regulatory Affairs at the Managed Funds Association (“MFA”). 

The CCO Roundtable, which was attended by CCOs and other compliance executives, provided networking opportunities and facilitated candid discussions about the latest rules adopted or proposed by the SEC and the related compliance challenges. Topics discussed included:

Private Fund Adviser Rules

On August 23, 2023, the SEC adopted the final Private Fund Adviser rules. Under the new rules, private fund advisers will be required to distribute to investors:

• Quarterly statements detailing fund fees, expenses, and performance
• An annual financial statement audit of each private fund
• A fairness opinion or valuation opinion for each adviser-led secondary transaction

In addition, the rules will prohibit or restrict private fund advisers from engaging in certain activities, including providing investors with preferential treatment regarding redemptions rights and information if such treatment would be expected to have a material negative effect on other investors. Under a disclosure exception, private fund advisers may provide preferential treatment in certain circumstances when the private fund adviser provides disclosure of the preferential treatment to all current and prospective investors. The Rule will also restrict private fund advisers from engaging in certain activities except where specific disclosures are made to, and consent is obtained from, investors.

The compliance date for the quarterly statement and audit requirements is March 14, 2025, and compliance with all other requirements will be required by September 14, 2024 for large advisers (i.e., those with more than $1.5 billion in private funds assets under management (“AUM”)) and March 14, 2025 for small advisers (i.e., those with less than $1.5 billion in private funds AUM).

Form PF Reporting

On May 3, 2023, the SEC adopted amendments to Form PF, the confidential reporting form filed by registered investment advisers to private funds. Form PF, as amended, will now require large hedge fund advisers with at least $1.5 billion in hedge fund AUM, as well as private equity fund advisers with at least $150 million in PE fund AUM, to file reports upon the occurrence of certain reporting events in an abbreviated timeframe. The amendments also require enhanced Form PF reporting for large private equity fund advisers with at least $2 billion in AUM.

Events that will now trigger a filing requirement include the following:

• Large hedge fund advisers - certain extraordinary investment losses, significant margin and default events, terminations or material restrictions of prime broker relationships, operations events, and events associated with withdrawals and redemptions.
• Private equity fund advisers - removal of a general partner, certain fund termination events, and the occurrence of an adviser-led secondary transaction.
• Large private equity fund advisers - information on general partner and limited partner clawbacks on an annual basis as well as additional information on strategies and borrowings as a part of the adviser’s annual filing.

Large hedge fund advisers must file the new “current reports” no later than 72 hours from the occurrence of the relevant event. Private equity fund advisers must file these reports on a quarterly basis within 60 days of the fiscal quarter end, if any reporting event occurred during the relevant quarter.