Recent SEC Programs Change Disclosure Requirements

October 2015

IN THIS ISSUE

— Growth of Form PF Usage Increases Hedge Fund Manager Disclosure
— Recent Requirements Stress Enforcement Over Disclosure

GREETINGS!

Welcome to the October edition of our newsletter! In this issue, we’ll examine recently enacted disclosure requirements put in place by the U.S. Securities and Exchange Commission, as well as the efficacy of some existing programs, and discuss what each could mean for you and your clients.

GROWTH OF FORM PF USAGE INCREASES HEDGE FUND MANAGER DISCLOSURE

Of the numerous regulatory reforms put in place after the 2007-2008 financial markets collapse, several have gained widespread attention, such as the increased protections for whistleblowers. But a less well-known provision, the establishment of Form PF in 2012, could also have a significant impact, and recently disclosed data indicates that it is becoming much more of an enforcement and disclosure tool.

Form PF requires advisers to private funds — including entities considered to be hedge funds — to report the total assets under management for their clients, and – for each hedge fund – describe the strategies it uses, including long or short biases. Such funds must also disclose the geographical region for any assets held outside of the United States, and in certain instances disclose whether the fund is subject to client redemptions.

RECENT REQUIREMENTS STRESS ENFORCEMENT OVER DISCLOSURE

As of this writing, there is no library from which members of the public can obtain Form PFs submitted by advisers, in the same way that investors can obtain a fund’s Form ADV filing. The number of advisers reporting on Form PF has grown steadily, from more than 2,400 at the beginning of 2013 to nearly 2,600 at the end of 2014; the number of funds retaining these advisers has also grown over that period, yet access to information about their activities remains limited.

While a researcher could submit a Freedom of Information request to the SEC, the information gathered on Form PF remains a somewhat guarded segment of data. In an era where more high net worth clients are relying on these advisers and the hedge funds with which they do business, greater disclosure and transparency requirements — structured to be distributed as broadly as possible — would aid investors, and enforcement officials, in making informed decisions and taking action.