Hedge fund law firm Holland & Knight reports:

On October 26, 2011, the Securities and Exchange Commission (the “SEC”) adopted Rule 204(b)-l under the Investment Advisers Act of 1940 (the “Advisers Act”) to require SEC registered investment advisers (“RIAs”) that advise more than $150 million in regulatory assets under management (“AUM”) in private funds to periodically complete and file the SEC’s new Form PF.  Although Form PF is filed confidentially and exempt from the Freedom of Information Act, the SEC is permitted to share this information with other federal agencies.

Form PF establishes different initial filing dates, frequency of filings and content of those filings based on the types of the private funds involved and the size of their advisers.

June 15, 2012 is the initial compliance date for any RIA with:

·         $5 billion in AUM attributable to hedge funds as of March 31, 2012;

·         $5 billion in AUM attributable to liquidity funds and registered money market funds as of March 31, 2012; and/or

·         $5 billion in AUM attributable to private equity funds as of December 31, 2012.

An adviser subject to the June 15, 2012 compliance date as a result of its advice to hedge funds and/or liquidity funds will need to file its initial Form PF for June 30, 2012 (which will be due August 29, 2012 for hedge fund advisers and July 15, 2012 for liquidity fund advisers).  An adviser subject to the June 15, 2012 compliance date as a result of its advice to private equity funds will need to file its initial Form PF for the fiscal year ending December 31, 2012 (which will be due April 30, 2013).  Note:  All dates assume a December 31 fiscal year end.

Private fund and AUM are defined in the same way as under new Form ADV rules.

Form PF also requires AUM to include (a) assets of managed accounts advised by the adviser that pursue substantially the same investment objective and invest in substantially the same positions as private funds advised by the firm unless the value of those accounts exceeds the value of the private funds; and (b) assets of private funds advised by any of the adviser’s “related persons” that are not separately operated.

Form PF defines a “hedge fund” as any private fund that is not a securitized asset fund – if it meets any of the three following criteria:

·         it is permitted to pay a performance fee or allocation calculated by taking into account unrealized gains;

·         it is permitted to borrow an amount in excess of one-half of its net asset value; and/or

·         it is permitted to sell short or enter into similar transactions (other than for the purpose of hedging currency exposure or managing duration).

Form PF defines a “liquidity fund” as any private fund “that seeks to generate income by investing in a portfolio of short term obligations in order to maintain a stable net asset value per unit or minimize principal volatility for investors” like a money market fund.

Form PF defines a “private equity fund” as any private fund that is not a hedge fund, liquidity fund, securitized asset fund, real estate fund, or venture capital fund and does not provide investors with a right to redeem their interests in the ordinary course.

For all RIAs that manage at least $150 million in private funds but less than $5 billion and therefore are not subject to the June 15, 2012 compliance date, the compliance date will be December 15, 2012.  Such advisers will be filing in 2013 with respect to December 31, 2012 and the deadline and content for such and future update filings will depend on the type of private funds advised and the amount of AUM.