Industry wins concessions on reporting duties

The Private Equity Growth Capital Council (PEGCC), the industry’s US lobbying arm, has achieved a number of concessions from US regulators over reporting duties.

On Wednesday the Securities and Exchange Commission adopted a dialed back version of proposals which require private equity and hedge funds to periodically file a new “Form PF”. The form will be held by regulators on a “confidential basis”, used only by agencies to sniff out systematic risk.

The PEGCC, which counts amongst its members industry heavyweights Blackstone and Carlyle,criticised the original proposals floated in January, arguing the rules brought new compliance costs to an industry whose failures did not cascade into wider economic risk. 

Following the backlash the rules now provide an exemption for firms managing less than $150 million in assets, considered by regulators as too small-scale to monitor. Additionally, only private equity firms with more than $2 billion in assets, rather than $1 billion as originally proposed, will need to submit detailed fund information – such as the use of bridge loans, leverage placed on portfolio companies and other metrics regulators’ feel important for the wider economy.  

Mary Schapiro

Smaller firms will need to submit a more basic level of information, including funds’ creditors, investor concentration and monthly performance data.

SEC chairwoman Mary Schapiro said on Wednesday she expects 155 mega-firms to be captured by the more detailed reporting requirements – a group collectively representing 75 percent of the private equity market. .

Acknowledging private equity’s limited systemic risk, Schapiro noted the agency requires substantially less information from private equity houses compared to what's required of their hedge fund counterparts.

Other relaxations were made around the timing and frequency of reporting. All covered private equity firms, regardless of size, must begin filing their Form PFs within 120 days of the end of each fiscal year; a 30 day increase from original proposals to allow GPs more time in collecting their portfolio company financial statements.

In addition, unlike the proposal, large private equity fund managers will only file Form PF once a year, rather than each quarter.

Steve Judge, interim head of the PEGCC, said the changes provide the rule a “more realistic approach” for fund managers, adding the trade body would continue reviewing its impact. 

The new Form PF will be complemented by Form ADV, which will provide regulators information about a fund’s size, its managers, and the entities that serve critical “gatekeeper” functions, such as auditors and custodians.