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Last week’s article on HFMWeek entitled “Disclosure Gets Closer” discussed registration requirements of investment advisers to hedge funds under the Dodd-Frank Act.  The article, which was written by Will Wainewright, quoted Jay Gould, a partner and member of our Investment Fund and Investment Management team, who said “[T]he most difficult part of SEC registration – not an onerous process in itself – is implementing, testing, internally enforcing and updating the compliance procedures that the SEC will be checking on once you are registered.” 

A full text of the article is available here.

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Written by: Jay Gould and Peter Chess

1.  What is the Form PF?

The Form PF (PF is short for “private funds”) is a new form that focuses mainly on private fund reporting with regard to information such as counterparty dealings, leverage, and investment exposure.  A “private fund” under the Form PF refers to any issuer that would be an investment company under the Investment Company Act of 1940, as amended, if not for the exemptions provided by Sections 3(c)1 or 3(c)7 of that Act.  Under some circumstances, non-“private funds” such as money market funds registered with the SEC may be required to report on the Form, in addition to “private funds.”

2.  Do investment advisers need to file the Form PF?

Yes, in certain circumstances.  Only investment advisers registered with the SEC that meet a $150 million threshold must report on the Form PF.  The $150 million threshold refers to a specific and somewhat complicated calculation with regard to regulatory assets under management. 

3.  What are the categories of filers? 

Advisers required to file the Form PF need to determine which category of filer corresponds to them.  Large private fund advisers are categorized as either large hedge fund advisers, large liquidity fund advisers, or large private equity fund advisers.  Large hedge fund advisers are those having at least $1.5 billion in regulatory assets under management attributable to hedge funds, subject to other conditions.  Large liquidity fund advisers are those having at least $1 billion in regulatory assets under management attributable to “liquidity funds” and money market funds registered with the SEC, subject to other conditions.  Large private equity fund advisers are those having at least $2 billion in regulatory assets under management attributable to private equity funds, subject to other conditions.  All other filers are categorized as smaller private fund advisers.

4. What are the reporting deadlines?

Initial compliance under the Form PF will be in phases.  The first required filers will be large private fund advisers with at least $5 billion attributable to hedge funds, to liquidity funds, or to private equity funds.  These large hedge fund advisers will have 60 days, and large liquidity fund advisers will have 15 days, after the end of the first fiscal quarter ending on or after June 15, 2012, to file their first Form PF.

Other filers will have to make their first filing by the deadline following the end of the first fiscal quarter for each adviser, as applicable, on or after December 15, 2012.  Under the initial compliance, many advisers will not need to file their first Form PF until 2013.

Going forward, the Form PF must be filed:

  • For large hedge fund advisers, within 60 days of its fiscal quarter end;
  • For large liquidity fund advisers, within 15 days of each fiscal quarter end; and
  • For other filers, within 120 days of each fiscal year end.

5.  What constitutes the Form PF? 

The Form PF, in its entirety, contains sixty pages, and is divided into four sections with corresponding subsections.  Most advisers will not have to complete all four sections.  The four sections feature reporting on, among other things: identifying information about the adviser; fund-by-fund reporting by all advisers about items such as fund identification, performance and valuation; fund-by-fund reporting by hedge fund advisers about items such as strategies, counterparties, and trading practices; aggregated private fund reporting for large hedge fund advisers; fund-by-fund reporting by large hedge fund advisers about items such as asset classes, portfolio liquidity, and risk metrics; fund-by-fund reporting for large liquidity fund advisers; and, fund-by-fund reporting for large private equity fund advisers. 

6.  What about the confidentiality of information reported?

Because of the nature of governmental sharing of the data provided on the Form PF, advisers should consider the options available to them with regard to preserving confidentiality.  Consequently, advisers should consider changing their overall recordkeeping practices so that they routinely identify funds solely by numerical or alphabetical designations.  

7.  How is the Form PF filed? 

The Form PF will be filed using the same IARD system on which advisers make the Form ADV filing.

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Written by Louis A. Bevilacqua, Joseph R. Tiano, Jr., David S. Baxter, Ali Panjwani and K. Brian Joe

This article summarizes various legislation introduced in Congress that would make it easier for smaller companies to raise capital and would lessen the regulatory burden on those companies. 

Legislators have introduced eight different proposals in Congress to make it easier for smaller companies to raise money and lessen the regulatory burden on those companies. These proposed acts are the following:

􀂄 H.R. 1070 – Small Company Capital Formation Act of 2011

􀂄 S. 1544 – Small Company Capital Formation Act of 2011

􀂄 H.R. 2930 – Entrepreneur Access to Capital Act

􀂄 S. 1791 – Democratizing Access to Capital Act

􀂄 S. 1970 – Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2011 or the Crowdfund Act

􀂄 H.R. 2940 – Access to Capital for Job Creators Act

􀂄 S. 1933 – Reopening American Capital Markets to Emerging Growth Companies Act of 2011

􀂄 H.R. 2167 – Private Company Flexibility and Growth Act

Two of these proposed acts already have passed through the House of Representatives: H.R. 1070 (Small Company Capital Formation Act of 2011), which passed through the House on November 2, 2011 by a vote of 421 to 1, and H.R. 2930 (Entrepreneur Access to Capital Act), which passed through the House on November 3, 2011 by a vote of 407 to 17. The overwhelming support by representatives in the House for these proposed acts is a very positive sign. Versions of these two proposed acts are now navigating their way through the Senate. The remaining legislative initiatives remain under debate in the House or the Senate and have not been passed by either chamber. 

This article summarizes all of these proposed acts. Appendix A to this article is a chart that summarizes the major provisions of these proposed acts, and Appendix B to this article is a chart that compares the proposed “crowdfunding” acts described in more detail below.

MORE… 

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Written by Jay Gould and Peter Chess

On January 18, 2012, the Office of Investment Adviser Regulation, part of the Division of Investment Management, issued a no-action letter (the “2012 Letter”) in response to a request for guidance from the American Bar Association’s Subcommittee on Hedge Funds on issues regarding the registration of certain investment advisers that are related to investment advisers registered with the Securities and Exchange Commission (the “SEC”).  The 2012 Letter both reaffirms previous positions of the SEC and provides additional guidance, as discussed below.

Special Purpose Vehicles (“SPVs”).  In a December 8, 2005 letter, the SEC stated that it would not recommend enforcement action against a registered adviser and an SPV if the SPV did not separately register as an investment adviser, subject to conditions.  The 2012 Letter reaffirms this position.  The conditions in such a situation require that:

  • the investment adviser to a private fund establishes the SPV to act as the private fund’s general partner or managing member;
  • the SPV’s formation documents designate the investment adviser to manage the private fund’s assets;
  • all of the investment advisory activities of the SPV are subject to the U.S. Investment Advisers Act of 1940, as amended (the “Advisers Act”); and
  • the registered adviser subjects the SPV, its employees and persons acting on its behalf to the registered adviser’s supervision and control and, therefore, the SPV, all of its employees and the persons acting on its behalf are “persons associated with” the registered adviser.

SPVs with Independent Directors.  The 2012 Letter states that an SPV that relies on the above conditions may also have “independent directors” and therefore would not be required to meet the uniformity of personnel requirement.

Groups of Related Advisers.  The 2012 Letter notes that for a variety of reasons, advisers to private funds may be part of a group of related advisers.  In some situations these advisers, although organized as separate legal entities, conduct a single advisory business because they, among other things, are subject to a unified compliance program and use the same or similar names.  The 2012 Letter states that a filing adviser and one or more relying advisers would be conducting a single advisory business and thus a single registration would be appropriate under the following circumstances:

  • The filing adviser and each relying adviser advise only private funds and separate account clients that are qualified clients and are otherwise eligible to invest in the private funds advised by the filing adviser or a relying adviser and whose accounts pursue investment objectives and strategies that are substantially similar or otherwise related to those private funds. 
  • Each relying adviser, its employees and the persons acting on its behalf are subject to the filing adviser’s supervision and control and, therefore, each relying adviser, its employees and the persons acting on its behalf are “persons associated with” the filing adviser. 
  • The filing adviser has its principal office and place of business in the United States and, therefore, all of the substantive provisions of the Advisers Act and the rules thereunder apply to the filing adviser’s and each relying adviser’s dealings with each of its clients, regardless of whether any client or the filing adviser or relying adviser providing the advice is a United States person. 
  • The advisory activities of each relying adviser are subject to the Advisers Act and the rules thereunder, and each relying adviser is subject to examination by the SEC.
  • The filing adviser and each relying adviser operate under a single code of ethics and a single set of written policies and procedures, administered by a single chief compliance officer.
  • The filing adviser discloses in its Form ADV (Miscellaneous Section of Schedule D) that it and its relying advisers are together filing a single Form ADV in reliance on the 2012 Letter and identifies each relying adviser by completing a separate Section 1.B., Schedule D, of Form ADV for each relying adviser and identifying it as such by including the notation “(relying adviser).”