Private Fund Systemic Risk Reporting Regulation - Comment Letters

From MarketsReformWiki
Jump to: navigation, search
Admis logo.png


Gavel.png FINAL RULE: This page refers to the proposed rulemaking on private fund systemic risk reporting. The SEC final rule was issued at its October 26, 2011 open meeting.
Dodd-Frank Timeline, Investment Adviser Reporting, Joint SEC-CFTC Rulemaking
Final Rule Issue Effective Date Compliance Date
November 16, 2011 March 31 2012 June 15, 2012*

Comment letters addressing the reporting requirements of private funds, including commodity pools and commodity trading advisors. As the proposal is the result of joint CFTC-SEC rulemaking, the letters have been combined on this page.

Additionally, several comment letters were submitted subsequent to a CFTC Staff Roundtable on proposed changes to the registration and compliance regime for CPOs and CTAs, held in April 2012. Letters addressing the roundtable have been added to the bottom of this page.

Alternative Investment Management Association - July 1, 2011

CFTC Staff Roundtable on Proposed Changes to Registration and Compliance Regime for CPOs & CTAs
July 1, 2011

This letter was submitted in response to the announcement of a CFTC roundtable discussion on proposed changes to registration and compliance requirements for commodity pool operators (CPOs) andcommodity trading advisors (CTAs). From the letter:

"AIMA's comments may be summarized as follows:

  • "There are significant cost implications stemming from registering with multiple regulators, and conforming to different national and international reporting regimes.
  • "We recommend that the Commission and the SEC coordinate their registration and reporting scope and approach, and seek to combine their systemic risk reporting requirements into a single form and/or undertaken to share information from one report.
  • "We would encourage the Commission to provide exemptions for small CPOs/CTAs, US advisers registered with the SEC, and non-US funds/advisers with a limited nexus to the US market (e.g., limited U.S. assets under management, clients or swap activity). This may most easily be achieved by providing exemptions similar to those proposed by the SEC, thereby exempting many smaller and non-US advisers.

"We suggest the simplification of reporting Form CPO-PQR, and the introduction of reporting thresholds and tiering, including an $1bn AUM threshold for systemic risk reporting on both Forms CPO-PQR (Schedule C) and CTA-PR (Schedule B), (consistent with the approach proposed with respect to Form PF."

Read comment letter.png

Investment Company Institute - July 28, 2011

CFTC Staff Roundtable on Proposed Changes to Registration and Compliance Regime for CPOs & CTAs
July 28, 2011

Issues discussed and/or clarified in the comment letter:

  • "The use by some registered investment companies of wholly owned subsidiaries to invest in commodity interests;
  • How the Commission could collect and use data in connection with amending Rule 4.5;
  • How licensing and examination requirements would apply if an investment adviser were required to register as a commodity pool operator (“CPO”);
  • Why the scope of the definition of bona fide hedging under Rule 4.5 is not broad enough to encompass transactions in commodity interests investment company advisers engage in to further the management of their securities portfolios; and
  • Additional points on our requests for relief from the books and records and past performance requirements under the Commodity Exchange Act rules."
Read comment letter.png

SIFMA - August 4, 2011

CFTC Staff Roundtable on Proposed Changes to Registration and Compliance Regime for CPOs & CTAs
August 4, 2011 From the comment letter:

"As discussed at the Roundtable and in the Summary Remarks... the AMG believes that the Rule 4.5/4.13 Proposals should not be adopted because they would result in significant regulatory burdens and costs, which ultimately will be borne by investors, on otherwise regulated entities, without a corresponding benefit to investors, the markets or the general public. As discussed in the April Letter, RICs currently excluded under Rule 4.5 and most advisers to Private Funds currently exempt under Rule 4.13(a)(3) or (4) are already, or soon will be, subject to robust regulatory requirements and oversight by federal regulators."

Read comment letter.png

HedgeOp Compliance - July 27, 2011

CFTC Staff Roundtable on Proposed Changes to Registration and Compliance Regime for CPOs & CTAs
July 27, 2011

From the comment letter:

"The 4.13 Exemptions were originally instituted to encourage and facilitate participation in the commodity interest markets and benefit all market participants through increased liquidity, without jeopardizing the protection of investors. We are of the view that the 4.13 Exemptions continue to serve these policy purposes and should not be repealed."

Read comment letter.png

Fidelity Investments - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

In the letter, Fidelity Investments comments on:

  • the frequency and timing of reporting, specifically stating that "the Commissions should delay any final ruling until the FSOC defines 'systemic risk' with greater specificity" and reconsider the frequency, timing and content of information required to be reported on Form PF;
  • "the minimum dollar threshold requiring additional disclosure for hedge funds;
  • the monthly data requested;
  • generally, the onerous nature and volume of the data requested; and
  • the proposed certification of Form PF by private fund advisers," including the proposition that the certification requirement should be removed entirely from Form PF.
Read comment letter.png

BlackRock - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

From the comment letter:

  • "The SEC and CFTC should adopt a single common reporting form."
  • "The scope of the Form is overly broad and unnecessarily burdensome."
  • "The time to file initially and after each reporting date should be extended."
  • "Advisers should report less frequently."
  • "Daily portfolio size monitoring is unnecessary and unduly burdensome."
  • "Advisers should be provided a de minimis exemption for small private funds and commodity pools."
  • "The individual certification should allow for good faith reporting based on the adviser's internal policies and procedures consistently applied."
  • "The initial report should be due no sooner than nine months after the Form is adopted."
  • "Reporting requirements should use industry standard metrics and conventions."
Read comment letter.png

Securities Industry and Financial Markets Association - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

From the comment letter:

  • The determination of systemic risk should be clarified.
  • Alternatives to implementation beginning January 15, 2012 should be considered.
  • "Certain private funds and hedge funds should be exempt from reporting obligations under Form PF."
  • Reporting requirements on Form PF are "unrealistic, burdensome and onerous based upon existing comparative reporting regimes imposed by the SEC and other comparative regulatory agencies."
  • Requiring the certification of private fund advisers is "unreasonable."
Read comment letter.png

Managed Funds Association - April 8, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 8, 2011

From the comment letter:

  • "The threshold for enhanced reporting for large managers should be increased to $5 billion of hedge fund assets under management, a level that would still capture 50-60% of industry assets.
  • Managers should have at least 120 calendar days from the end of the reporting period to submit the Form.
  • Managers should submit Form PF semi-annually and provide information as of the end of each reporting period.
  • The Commissions should provide managers with at least nine months from the publication of the final version of Form PF to the due date of the initial filing.
  • The SEC should propose related recordkeeping rules for private fund managers at the same time as it implements Form PF.
  • The Commissions should carefully consider further steps they should take to implement the confidentiality protections in Section 404 of the Dodd-Frank Act and prevent the inadvertent disclosure of the highly sensitive information managers will report on the Form.
  • Managers should be required to certify that they have completed the Form after reasonable inquiry and to the best of their knowledge, and based on consistent internal procedures for each question, provided that the Form does not explicitly specify a methodology.
  • Managers should have flexibility to provide information about funds and accounts in a manner that best represents their activities."
Read comment letter.png

Investment Adviser Association - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

According to the comment letter, the SEC should:

  • "modify the treatment of 'parallel managed accounts;'
  • narrow the definition of 'hedge fund;'
  • eliminate aggregation requirements for certain related persons for reporting threshold purposes;
  • exempt smaller private fund advisers;
  • permit flexibility in reporting data and methodologies;
  • require certain data proposed to be reported in Form ADV, Part 1 to be reported in Form PF instead;
  • reconsider the timeframes and frequency of filing Form PF; and
  • confirm treatment of non-U.S. funds under Form PF, among other changes."
Read comment letter.png

Investment Company Institute - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

In the letter, the Investment Company Institute:

  • comments on the effect of Form PF on registered investment companies, with specific regard to limitations on leverage, requirements for custody of investment securities, limitations on exposure to certain counterparties, and disclosure requirements; and
  • suggests "the SEC and CFTC to exclude all registered investment companies from the definition of 'parallel managed account.'”
Read comment letter.png

Committee on Capital Markets Regulation - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

Included in the comment letter:

  • a cost-benefit analysis of Form PF;
  • an address of the scope of the firms required to report according to Form PF; and
  • a look at the coordination of Form PF with both FSOC and foreign regulators.
Read comment letter.png

Center for Capital Markets Competitiveness - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

From the comment letter:

  • "The proposal sets too low a threshold to differentiate small private fund advisers from large private fund advisers that will be subject to enhanced reporting.
  • The proposal uses an inappropriate metric to differentiate between small and large private fund advisers. At-risk assets are a better measure of an investment firm's potential impact on the fmancial system and should be used to determine reporting requirements.
  • The large private fund advisers' quarterly filing requirement within a 15-day timeframe is impracticable. The filing frequency is too often, and the time period to file is too short, particularly for funds' hard-to-value assets where there is no readily available market with current pricing information. Additionally, all fund advisers should be given ample time to prepare for the initial filing.
  • Required certification by private fund advisers is unreasonable given the frequency of reporting, the short window to file, and the nature and complexity of some information included in Form PF."
Read comment letter.png

Alternative Investment Management Association - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

In the comment letter, the association addresses the following categories:

  • hedge funds as a source of system risk;
  • the definition of “hedge fund;"
  • large private fund adviser thresholds and aggregation;
  • foreign private advisers and exempt reporting advisers;
  • the frequency of reports under Form PF;
  • the content of reports under Form PF;
  • the confidentiality of reports under Form PF;
  • international comparisons using the IOSCO template; and
  • the implementation of reporting obligations.
Read comment letter.png

Coalition of Private Investment Companies - March 31, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
March 31, 2011

According to the comment letter, the coalition:

  • "supports detailed reporting of information to regulators by registered investment advisers to private funds;"
  • "supports detailed reporting by large private funds on Form PF; however, the proposed filing deadline for larger private fund advisers may be unworkable for initial reports;"
  • "[believes] the Commission should not create broad exemptions for advisers to private equity firms;" and
  • "[recognizes] that Congress understood the critical importance of protecting confidential proprietary information of private investment funds."
Read comment letter.png

Private Equity Growth Capital Council - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

From the comment letter:

  • "Private equity funds and their sponsors do not present systemic risk concerns that justify the amount of reporting required by proposed Form PF."
  • "The Form PF reporting obligation need not apply to all registered private fund advisers."
  • "The definitions of various types of private funds are fundamentally flawed and should be modified."
  • "The Commission should not require quarterly or monthly performance calculations by private equity sponsors."
  • "The Commission should not require that every private fund (no matter its investment strategy or size) identify each creditor with respect to borrowings equal to at least 5% of the fund’s net asset value."
  • "Quarterly filing requirements impose disproportionate burdens on private equity sponsors that are large private fund advisers."
  • "If it does not exempt private equity sponsors from the obligation to report on From PF, the Commission should, at a minimum, delay the effective date of the reporting requirements for a year."
  • "Given the hasty filing schedule, investment advisers should be given flexibility to amend their filings to correct inaccuracies promptly upon discovery."
  • The Commission "should allow an adviser to base the certification on knowledge and materiality qualifiers and should only require the certification at most annually."
Read comment letter.png

American Federation of Labor and Congress of Industrial Organizations - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

From the comment letter:

  • "At minimum, mid-size private funds should be required to complete all applicable sections of Form PF on a semi-annual basis."
  • The SEC should omit the definition of hedge fund in Form PF and "simply require that all advisers managing in excess of $1 billion in private fund assets (regardless of strategy) complete section 2 of Form PF."
  • The Commissions should "require all private fund advisers to complete all sections of Form PF. If certain portions do not apply, the private fund adviser should be permitted to respond that those sections or questions are not applicable."
  • The Commissions "should require that the assets under management in hedge funds, liquidity funds and private equity funds be combined for purposes of determining a managers' filing status on Form PF."
  • The Commissions should "require more frequent and timely filing by private fund advisers."
  • The Commissions should require "all private fund advisers to complete the disclosure requirement in Section 1c of Form PF, as applicable, and add a requirement that private fund advisers disclose the gross notional value of their derivatives exposures and the amount and types of capital they have posted for the uncleared derivatives exposures."
  • It is "inappropriate to limit disclosure requirements to hedge funds with $500 million or more in net assets."
  • "The Commissions should require private equity fund advisers to disclose the debt-to-equity ratios of all portfolio companies in which they own equity."
Read comment letter.png

National Association of Real Estate Investment Managers - March 24, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
March 24, 2011

In the letter, the association questions:

  • "whether or not the investment adviser is obligated to report only fund level borrowings;
  • "the intention underlying the request to list the creditors of the fund;"
  • Form PF's "asking that fund managers specify the total number of beneficial owners of the reporting fund's equity,"
  • "what is to be provided as to the percentage change in the net asset value for the other months [outside the end of the quarter];"
  • "the definition of 'private fund' for the purposes of Form PF requirements;"
  • "the definition of 'real estate fund' as it refers to a private fund that does not provide investors with redemption rights;"
  • "[whether] the proposed rule covers most large real estate private funds that are closed ended, (such as Reg D funds), since such funds typically do not provide investors with non-restricted redemption rights;"
  • "how the proposed rule would be applied to Global Reg D funds with non-U.S. high net worth individual investors and how application of the law could potentially conflict with regulations from other countries;"
  • the time and strain the implementation of the proposed rule requires; and
  • the confidentially of Form PF.
Read comment letter.png

American Bar Association - April 11, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 11, 2011

In the letter, the association addresses the following categories:

  • the coordination of the Commission with the Office of Financial Research and with Foreign Regulators;
  • the coordination of Form PF with Recordkeeping Rules;
  • the frequency of filings and measurement periods under Form PF;
  • potential systemic risk posed by private funds;
  • the certification, monthly performance reports and data required by Form PF;
  • confidentiality; and
  • the potential duplication of data points in proposed Form PF.
Read comment letter.png

Seward & Kissel - April 12, 2011

Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF
April 12, 2011

From the comment letter:

  • "The SEC should ensure that the information disclosed on Form PF remains confidential."
  • "The SEC should consider making form PF a voluntary filing for an initial pilot period."
  • "Form PF imposes significant burdens."
  • "Information disclosed on a good faith basis on Form PF should not be used in a prejudicial manner."
  • "The proposed definition of hedge fund should be revised."
  • "The SEC should continually assess the effectiveness of Form PF in accomplishing the goals mandated by the Dodd-Frank Act."
  • "[The SEC should] arrange for the relevant portions of Form PF be provided to the CFTC on an as needed basis."
Read comment letter.png

Alternative Investment Management Association - July 1, 2011

CFTC Staff Roundtable on Proposed Changes to Registration and Compliance Regime for CPOs & CTAs
July 1, 2011

This letter was submitted in response to the announcement of a CFTC roundtable discussion on proposed changes to registration and compliance requirements for commodity pool operators (CPOs) andcommodity trading advisors (CTAs). From the letter:

"AIMA's comments may be summarized as follows:

  • "There are significant cost implications stemming from registering with multiple regulators, and conforming to different national and international reporting regimes.
  • "We recommend that the Commission and the SEC coordinate their registration and reporting scope and approach, and seek to combine their systemic risk reporting requirements into a single form and/or undertaken to share information from one report.
  • "We would encourage the Commission to provide exemptions for small CPOs/CTAs, US advisers registered with the SEC, and non-US funds/advisers with a limited nexus to the US market (e.g., limited U.S. assets under management, clients or swap activity). This may most easily be achieved by providing exemptions similar to those proposed by the SEC, thereby exempting many smaller and non-US advisers.

"We suggest the simplification of reporting Form CPO-PQR, and the introduction of reporting thresholds and tiering, including an $1bn AUM threshold for systemic risk reporting on both Forms CPO-PQR (Schedule C) and CTA-PR (Schedule B), (consistent with the approach proposed with respect to Form PF."

Read comment letter.png

National Futures Association - April 24, 2012

CFTC Staff Roundtable on Proposed Changes to Registration and Compliance Regime for CPOs & CTAs
April 24, 2012

NFA requests that the Commission “provide additional clarity regarding the entity that must either register as a CPA because it offers a RIC that does not meet the operating restrictions or claim an exclusion from the CPO definition (and thus not have to register) because it operates a qualifying RIC.” Additionally, in the registration area, NFA requests that the Commission “clarify either via formal guidance or in the Federal Register that adopts the harmonization requirements that an individual who solicits investments in these funds will not have to register as an associated person if the person meets the requirements of Regulation 3.12(h)(ii)’s exemption from AP registration.”

Read comment letter.png

Investment Company Institute - April 24, 2012

CFTC Staff Roundtable on Proposed Changes to Registration and Compliance Regime for CPOs & CTAs
April 24, 2012

From the comment letter:

“If the CFTC concludes that SEC filings by funds and advisers do not provide it with adequate information about funds’ derivatives trading, the Commission should explain what information is missing, why the information is necessary, propose tailored requirements designed to obtain such information in a manner that does not interfere with current SEC requirements, and provide interested parties with the opportunity to comment on those specific proposals. Alternatively, the CFTC should engage in a true harmonization effort jointly with the SEC. Such an effort by the two agencies should include developing an integrated disclosure document for funds advised by registered CPOs that is focused on the informational needs of investors in such funds, as well as disclosure filing and review, reporting, and recordkeeping requirements and procedures designed to provide effectively and efficiently both regulators with the information they need to conduct the appropriate oversight.”

Read comment letter.png

Invesco - April 24, 2012

CFTC Staff Roundtable on Proposed Changes to Registration and Compliance Regime for CPOs & CTAs
April 24, 2012

In their comment letter, Invesco addresses the following concerns:

  • CFTC rule requirements that are not addressed in the Proposal;
  • The cost-benefit analysis and estimate of time spent;
  • Lack of a gap analysis to identify material CFTC disclosure elements missing in the current SEC disclosure regime;
  • Prior performance disclosure requirement is inconsistent with SEC regulation;
  • Break-even calculations and tables;
  • Placement of CFTC disclosure elements in the SEC prospectus document; and
  • Coordinating dual regulator disclosure review.
Read comment letter.png

Managed Funds Association - April 24, 2012

CFTC Staff Roundtable on Proposed Changes to Registration and Compliance Regime for CPOs & CTAs
April 24, 2012

From the comment letter:

“We believe that the Harmonization Proposal should also harmonize regulations for operators of privately-offered funds as many such funds with investment advisers registered with the SEC will likely have to register with the Commission as a result of the rescission of § 4.13(a)(4) and other changes in law and regulation.” In particular, they provide a few comments and recommendations in the following areas:

  1. Delivery of Disclosure Documents and Periodic Reports
  2. Concerns with Prospectus and Disclosure Documents
  3. Harmonization of Filing Deadline for Audited Financial Statements; and Quarterly Account Statements
  4. Location of Books and Records
Read comment letter.png

Asset Management Group of SIFMA - April 24, 2012

CFTC Staff Roundtable on Proposed Changes to Registration and Compliance Regime for CPOs & CTAs
April 24, 2012

The Asset Management Group of SIFMA provides, among others, the following recommendations:

  • Relief should be provided so that the timing and method for filing, updating and amending Disclosure Documents by registered CPOs of RICs is consistent with the requirements under the securities laws and SEC rules.
  • The CFTC should recognize the comprehensive disclosure that RICs are already required to provide to investors under the securities laws and SEC rules and should not require RICs that are commodity pools to provide duplicative, inconsistent, unnecessary or potentially misleading information in Disclosure Documents.
  • RICs that are commodity pools should not be required to comply with the Account Statement and Annual Report requirements under CFTC rules, and instead should be permitted to fulfill their reporting obligations to investors by complying with the requirements of the securities laws and SEC rules.
  • RICs should be exempted from the requirement to provide investors with access to trading information.
Read comment letter.png

References

MarketsReformWiki Sponsors

McGladrey ADM Investor Services DTCC Fidessa