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SEC Meeting

Securities and Exchange Commission

Open Meeting

Wednesday, August 10, 2022

Topline

  • Commissioners discussed whether to adopt Form Private Fund (Form PF) amendments to amend reporting requirements for all filers, with a focus on large hedge fund advisers.
  • Commissioners voted 3-2 to approve the amendments recommended by the Division of Investment Management.

Opening Statements

William Birdhistle, Director of the Division of Investment Management

In his opening statement, Birdhistle urged the SEC to impose the amendments to Form PF that were recommended by the Division of Investment Management. He said the proposed amendments would address identified information gaps by requiring additional and more detailed reporting from all private fund advisers who file Form PF.

Christine Schleppegrell, Acting Private Funds Branch Chief, Division of Investment Management

In her opening statement, Schleppegrell said the proposal would address Section One of Form PF and require advisors to provide basic information regarding any private funds they advise, including information about private fund assets under management and the performance of funds. Schleppegrell concluded that the amendments would provide the SEC with additional identifying information about the advisor, the related person, and their private fund assets under management.

Jessica Wachter, SEC Chief Economist

In her opening statement, Wachter said the amendments would require large hedge fund advisers to separately report certain provisions that are currently reported on an aggregated basis.

Commissioner Discussion

Commissioner Hester M. Peirce noted that while she has called for changes to Form PF, the recommendations before the Commission were not what she had in mind. She added that she was unable to support the proposal, as it represented overreach and stretched a limited data collection tool beyond its intended purpose. Peirce said private funds are capable of making their own assessments and that the SEC’s investor protection mission should not extend to protecting investors from fully disclosed risk. She also noted that collecting more information could lead to increased threats of stolen data. Peirce concluded that the proposal represented a greater effort to regulate the private market, which she could not support.

Commissioner Caroline A. Crenshaw said the proposal would provide the SEC, Commodity Futures Trading Commission (CFTC), and the Financial Stability Oversight Council (FSOC) with important information to keep pace with changes in the private fund space. She noted Congress authorized the SEC to require private fund advisers to file reports that were necessary for the public interest and the protection of investors. Crenshaw added that she supported the proposal, as it served the SEC’s mission. She said that the private fund industry has changed significantly since Form PF was adopted in 2011, adding that investor funds are flowing to new and emerging spaces, like digital assets. Crenshaw concluded that the proposal would improve the quality of data collected from private fund advisers and help the SEC better protect investors.

Commissioner Mark T. Uyeda stressed the importance of a robust market for private funds. He noted that the recommendations would impose additional and more granular disclosures on advisers and could reshape an industry that is already dominated by large advisers. Uyeda said the proposed changes would impose additional costs on advisers, which would predominantly fall on smaller fund advisers. He concluded by saying he was unable to support the proposal, as it blurs the line between public and private funds.

Commissioner Jaime Lizarraga said the proposed amendments would improve the SEC’s oversight and investor protection efforts over the $20 trillion private fund industry. He added that the proposal would also improve the collection of data and help inform the SEC’s understanding of potential systemic risks in the private fund industry. Lizarraga cited the significant implications of the increase in the exposure to private funds for individual Americans, particularly for retail investors. He concluded by stressing the importance of public feedback for the proposal and said he was pleased to support the proposal.

Commissioner Chair Gary Gensler said he was pleased to support the proposal, as it would improve the quality of information the SEC receives from Form PF filers, particularly large hedge fund advisers. He also said the proposal would help the SEC gain transparency with an important sector of the financial marketplace, which would allow the Commission to better assess risk. Gensler concluded by saying the proposal would help investors maintain orderly markets.

Chairman Gensler, Commissioner Crenshaw, and Commissioner Lizarraga voted in favor of the recommendations. Commissioners Peirce and Uyeda voted against the recommendations. The proposal was approved by a vote of 3-2.

For more information on this hearing, please click here.

For an archive of past SIFMA hearing coverage, please click here.