How are private equity firms generally meeting their Form PF reporting requirements?
All private equity fund advisers are subject to annual reporting requirements on Form PF, regardless of size. Annual updates are due 120 calendar days after the end of the adviser’s fiscal year, which must update the answers to all applicable sections of Form PF.
Small private equity firms (those firms with under $2 billion of regulatory assets under management attributable to private equity funds) only completed sections 1a and 1b which asks for basic information about the funds. A number of these small private equity firms, especially those who only advise a couple of funds, opted to complete the forms on their own and filed the form directly on the IARD system. Although many of these managers handled the actual filing on their own, they typically utilized legal counsel or third party compliance consultants to advise them on interpretive issues and to review the filing.
Large private equity firms (those firms with at least $2 billion dollars of regulatory assets under management attributable to private equity funds) had the additional burden of completing Section 4 for each private equity fund that they advised. Such managers generally enlisted the help of a software firm to assist them with their filings or used a compliance consulting firm to advise and complete the form for them.
Have GPs struggled with any common slip-ups or errors when completing the form?
There were not any common slip-ups or errors per se. As with any regulatory filing, a number of questions of interpretation arose that were unique to each firm. The SEC does give managers the opportunity to explain any assumptions that were made while preparing the form and many managers were able to use that section to explain their approach.
One notable, common issue was when to report funds on an aggregated basis rather than individually. Separately, a number of firms spent a great deal of time on the investor classification section as that information may not have been tracked in the manner required by Form PF prior to March 31, 2012. Additionally for some firms, financial information from underlying portfolio companies for December 31 was not finalized until mid-April which meant that finalizing the filing came down to the wire.
Any advice on how firms can streamline the Form PF reporting process going forward?
Firms should maintain all of the assumptions made during the 2013 filing process, both for record-keeping purposes, and to streamline the 2014 process. Determining investor percentages proved to be a very time consuming part of the initial filing, therefore if a firm launches a new fund they should be sure to gather and track the representations from investors as required by the categories outlined in question 16 of Section 1. In addition, to the extent a firm uses an administrator, they should work with the administrator to ensure that they are maintaining data such as investment level, investor categories, portfolio company information etc. in a manner that can easily be transferred to the form.
Are there any lingering uncertainties with respect to GPs’ Form PF obligations?
It is expected that the SEC will continue to provide additional FAQ guidance related to the form. In particular, there was some confusion regarding whether a private equity fund would have to be treated as a hedge fund if it were allowed to sell securities short or if a fund had the ability to use leverage in excess of certain amounts.