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Written by Jay Gould

On October 26, 2011, the SEC adopted a new rule requiring SEC-registered advisers to hedge funds and other private funds with at least $150 million in private fund assets under management to report information to the Financial Stability Oversight Council (“FSOC”) to enable it to monitor risk to the U.S. financial system.  The information which must be reported to the FSOC on Form PF will remain confidential, and not accessible to the general public.

These private fund advisers are divided into (1) large private fund advisers and (2) smaller private fund advisers.  Large private fund advisers are advisers with at least $1.5 billion in hedge fund, $1 billion in liquidity fund, and $2 billion in private equity fund assets under management.  All other advisers are regarded as smaller private fund advisers.  The SEC anticipates that most advisers will be smaller private fund advisers, but that the large private fund advisers represent a significant portion of private fund assets. 

Smaller private fund advisers must file Form PF once a year within 120 days of the end of the fiscal year, and report only basic information about their hedge funds, private equity funds and/or other private funds, such as information regarding size, leverage, investor types and concentration, liquidity, fund performance, fund strategy, counterparty credit risk and the use of trading and clearing mechanisms.

Large private fund advisers must provide more detailed information than smaller advisers.  The focus and frequency of the reporting depends on the type of private fund the adviser manages.

  • Large advisers to hedge funds must report on Form PF within 60 days of the end of each fiscal quarter, on an aggregated basis, information regarding exposures by asset class, geographical concentration and turnover.  If a hedge fund has a net asset value of at least $500 million, the adviser must report information regarding the fund’s exposures, leverage, risk profile, and liquidity.
  • Large advisers to liquidity funds must report on Form PF within 15 days of the end of each fiscal quarter, the types of assets in their liquidity funds, information relevant to the risks of the funds, and the extent to which the liquidity funds comply with Rule 2a-7 of the Investment Company Act of 1940, as amended.
  • Large advisers to private equity funds must file Form PF annually within 120 days of the end of the fiscal year and respond to questions regarding the extent of leverage incurred by their funds’ portfolio companies, the use of bridge financing and their funds’ investments in financial institutions.

Two-stage phase-in compliance with Form PF filing requirements:

  1. Advisers with at least $5 billion in hedge fund, liquidity fund, and private equity fund assets under management must begin filing Form PF following the end of their first fiscal year or fiscal quarter, as applicable, to end on or after June 15, 2012.
  2. Other private fund advisers must begin filing Form PF following the end of their first fiscal year or fiscal quarter, as applicable, to end on or after December 15, 2012.

Form PF Filing Fees:  $150 for initial, quarter or annual filing.

A full text of the SEC release is available here

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Written by Jonathan J. Russo and Meredith Ervine

At first glance, Southern Peru Copper Corporation (Southern Peru) and its special committee (Committee) appeared to do what they were supposed to do when considering a controlling stockholder transaction—form a special committee of disinterested, sophisticated directors, engage separate, independent financial and legal advisors, request a fairness opinion and obtain super-majority stockholder approval. So why did the Chancellor of the Delaware Court of Chancery (Court) hold that the transaction was unfair and award $1.3 billion in damages—one of the largest derivative monetary awards in the Court’s history? This Advisory discusses In re Southern Peru Copper Corporation Shareholder Derivative Litigation and suggests specific practices that a special committee should consider when evaluating a controlling stockholder transaction.


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Pillsbury named “best” law firm at HFM Week’s U.S. Hedge Fund Services Awards

New York—Premier hedge fund publication HFM Week honored Pillsbury with its “Best Onshore Law Firm – Client Service” award, at the magazine’s annual U.S. Hedge Fund Services Awards ceremony in New York. This marks the third consecutive year Pillsbury has both received the HFM Week client service recognition and been a “shortlist” finalist in multiple award categories. Established to recognize impressive revenue growth, innovation and customer satisfaction among funds and service professionals, the awards are determined by a panel of independent judges, comprised of industry experts. Jay B. Gould, leader of Pillsbury’s Investment Funds & Investment Management practice team, accepted the award on behalf of Pillsbury.

Pillsbury’s press release is available here.

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Written by Michael Ouimette

On October 11, 2011, the Federal Financial Regulators published for public comment a jointly proposed regulation implementing the so-called “Volcker Rule” requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Volcker Rule generally contains two prohibitions, both of which are subject to certain exemptions. First, it generally prohibits insured depository institutions, bank holding companies, and their subsidiaries or affiliates (“Banking Entities”) from engaging in short-term proprietary trading of any security, derivative, and certain other financial instruments for their own accounts. Second, it generally prohibits Banking Entities from owning, sponsoring, or having certain relationships with, a hedge fund or private equity fund.


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LexisNexis Corporate & Securities Law Center Staff 

Each year, LexisNexis honors a select group of blogs that set the online standard for a given industry. This year, we will once again seek your input in choosing the Top Blogs to our Corporate and Securities Law Community….

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Thursday, October 27, 2011
3:30 – 4:00pm Registration
4:00 – 5:30pm Presentation
5:30 – 6:30pm Reception

Pillsbury’s San Francisco office
50 Fremont Street
San Francisco, CA 94105

How can hedge fund managers that seek more efficient methods for raising capital avail themselves of the public markets?

Now, many private fund managers are finding that a registered fund product can address the needs of certain investors, and with turnkey solutions available, the complexity that has traditionally been associated with registered funds may no longer be a deterrent.

Please join the California Hedge Fund Association, Pillsbury, and JD Clark & Company for a panel discussion on solutions for registered funds. All the questions you have regarding how to organize and operate a registered fund will be addressed at this Managers-Only Event, including:

  • What is the process for registering an alternative investment product?
  • What are the tax, regulatory and operational issues for a registered fund?
  • Interval funds, closed-end funds and open-end funds—why choose one over the other?
  • Who are the investors I will reach with a registered fund?
  • Can I run both hedge funds and registered funds at the same time?
  • How do I minimize regulatory scrutiny and outsource the back office?


Tony Fischer, UMB Fund Services
Paul Kangail, Ernst & Young
Vic Fontana, Registered Fund Solutions
Rachel Minard, Minard Capital
Jay Gould, Pillsbury Winthrop Shaw Pittman LLP


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Written by Jay B. Gould and Michael Wu

On October 9, 2011 Governor Brown signed into law Senate Bill 398 which is intended to clarify the current law regarding placement agents and lobbyist requirements.

In 2009, AB 1584 was enacted.  AB 1584 imposed disclosure requirements for investment placement agents associated with public pension funds in California.  It required public employee pension funds to adopt a disclosure policy requiring the disclosure of fees paid to investment placement agents and contributions and gifts made by placement agents to board and staff members.

In 2010, AB 1743 was passed.  That bill subjected investment managers and placement agents to lobbyist registration.  It also defined “placement agents” and revised the definition of “lobbyist” to include a placement agent.  A placement agent includes employees of an external manager unless the employee spends more than 1/3 of his time managing assets for the external manager.  AB 1743 also exempts from lobbyist registration requirements those advisers and broker-dealers who are registered with the SEC, obtained the business through competitive bidding process, and agreed to the California fiduciary standard imposed on public employee pension fund trustees.

The newly enacted and immediately effective SB 398 changes the current law to this extent:

1.  It revises the definition of “external manager” to mean a person or an investment vehicle managing a portfolio of securities or other assets, or a person managing an investment fund offering an ownership interest in the investment fund to a board or an investment vehicle.

2.  It revises the definition of “placement agent” to include an investment fund managed by an external manager offering investment management services of the external manager and an ownership interest in an investment fund managed by the external manager.

3.  It defines “investment fund” and includes private equity fund, public equity fund, venture capital fund, hedge fund, fixed income fund, real estate fund, infrastructure fund, or similar pooled investment entity.  It excludes an investment company that is registered with the SEC pursuant to the Investment Company Act of 1940 and that makes a public offering of its securities.

4.  It defines “investment vehicle” to mean a “corporation, partnership, limited partnership, limited liability company, association, or other entity, either domestic or foreign, managed by an external manager in which a board is the majority investor and that is organized in order to invest with, or retain the investment management services of, other external managers.”

5.  The exemptions from lobbyist registration for managers of local retirement system funds are extended to include the three exemptions similarly available to managers of state retirement system funds.

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Written by Michael Wu

On September 29, 2011, the SEC’s examination staff issued a Risk Alert warning of significant concerns regarding trading through sub-accounts, and offered suggestions to help securities industry firms address these risks.  In the alert, the staff identified certain risks associated with the master/sub-account trading model such as: i) money laundering, ii) insider trading, iii) market manipulation, iv) account intrusions, v) information security, vi) unregistered broker-dealer activity, and (vii) excessive leverage.  The alert is the first in a continuing series of Risk Alerts that the staff expects to issue.

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Written by Michael Wu

The SEC is recommending filing fees related to the new report filing on Form ADV for exempt reporting advisers and Form PF filing for private fund advisers.  The filing fee for exempt reporting advisers is expected to be $150 for each initial and annual report on Form ADV.  The filing fee for private fund advisers’ Form PF filing is expected to be $150 for each quarterly and annual filing.  Both Form ADV report and Form PF filings will be submitted through FINRA’s Investment Adviser Registration Depository system (IARD).

A full text of the SEC notice is available here.