SEC rejects industry argument on Form PF

The SEC has preserved its existing definition of a hedge fund, despite complaints that it captures too many private equity funds.  

Private equity funds that can take on large amounts of debt or sell assets short must continue defining themselves as a hedge fund when completing their Form PF reports, the US Securities and Exchange Commission clarified in new guidance.  

The commission said it “considered, but did not accept” arguments that private equity funds with leverage and shorting features never intended to be used by the GP should be exempt from more detailed hedge fund reporting. 

However, these vehicles should include a note in question 4 of the form that better describes the fund’s investment strategy, the SEC recommended. 

Form PF, used by regulators as part of their efforts to monitor systemic risk, must be filed by private fund advisors within 120 days after the end of their fiscal year. For GPs whose fiscal year ends December 31, their 2014 Form PF filing is due April 30. 

SEC staff also provided more guidance on how to report information on parallel managed accounts, saying information here should be reserved for question 11 of the form. However, GPs can use question 4 of the form to say that information on parallel managed accounts was placed in more places than just question 11.

GPs should also indicate in question 4 whether they have disregarded or included a fund’s investment in other private funds, the guidance said.  

Click here for the SEC’s full Form PF FAQ.