The Securities and Exchange Commission (SEC) recently announced settlements with 13 registered investment advisers (RIAs) who had repeatedly failed to complete Form PF (Private Fund) over multiple years.
Form PF, a non-public SEC filing, went into effect on June 15, 2012. It solicits managers to provide borrowings, transactions, performance and risk exposure statistics relative to the volume and types of assets held by private investment funds. Currently, SEC RIAs with a minimum of $150 million in private fund assets under management (AUM) must file Form PF annually. Additionally, large hedge fund advisors managing more than $1.5 billion are required to file a supplementary quarterly version of the form. Nonetheless, given Form PF’s non-public nature, some fund managers may still be unaware of its requirements or existence.
As a result, the SEC recently penalized 13 RIAs with a $75,000 civil penalty and demanded them to backfill all of their outstanding filings. Surprisingly however, the vast majority of the non-compliant funds in this group was dramatically over the $150 million threshold and included two “large” funds. Meanwhile, the breakdown of this group by ADV Fund Types (i.e. based on the managers’ funds’ most prevalent strategies), does not offer a specific fund type that is prevalently non-compliant; Hedge, Private Equity and Real Estate funds were present in similar proportions.
This is the first time we have seen the SEC publicly taking action against non-compliant funds, yet at a $75,000 price tag for multiple years of non-compliance these fines seem tame, especially when failing to file an 8-K typically results in a $25,000 fine. Therefore, we presume that as Form PF gains further public exposure the SEC may take harsher measures for severe cases of non-compliance. To avoid potential fines, RIAs should stay up to date with their Form PF obligations; there is still time before the close of the 2nd quarter for mangers to inform themselves and take action.
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