Type: Law Bulletins
Date: 06/14/2018

SEC Fines Advisers For Missed Form PF Filings

The U.S. Securities and Exchange Commission (the “SEC”) recently entered into consent orders with 13 private fund advisers for failing to file annual reports on Form PF for multiple years. Each of the private fund advisers consented to pay a fine of $75,000 as a civil penalty for the oversight. Although these fines are not as large as the fines imposed by the SEC in marquee enforcement actions, they demonstrate that the SEC will enforce rules and punish infractions, even if an infraction appeared minimal or unintentional to the investment adviser.

Form PF is a report that certain private fund advisers are required by SEC Rule 204(b)-1(a) to file with the SEC. An adviser to hedge funds and/or private equity funds that has regulatory assets under management that exceed $150 million as of the end of the most recent completed fiscal year must submit Form PF annually. An adviser who advises solely private equity funds and has at least $2 billion in regulatory assets under management must submit Form PF and additional detailed information quarterly. An adviser who advises solely hedge funds and has at least $1.5 billion in regulatory assets under management must do the same.

The requirement that private fund advisers file Form PF originated with the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and has been in effect since July 2012. Although none of the information reported on Form PF is made publicly available, Form PF is an important information-gathering tool for the SEC because it helps the SEC monitor industry trends and informs rulemaking. In particular, information reported on Form PF informs the SEC about the amount of assets that are under management held by private funds, private fund advisers’ strategies and performance, compliance risks, and potential targets for examinations and enforcement actions.

The private fund advisers that were fined by the SEC had consistently not made their Form PF filings for the past two to five years. This group of private fund advisers ran the gamut from middle-market private equity fund advisers and venture capital fund advisers to real estate investment groups and included advisers from across the country, making it clear that all private fund advisers subject to the Form PF reporting requirement need to be diligent in complying with it. The individual consent orders can be viewed here

The fact that the SEC announced the entry of 13 such consent orders together should be taken as a clear statement that the SEC views Form PF as being integral to its mission of monitoring systemic risks in capital markets. Accordingly, private fund advisers should take this warning from the SEC as an opportunity to review their compliance programs and confirm that they have proper procedures in place to ensure that they are meeting their reporting obligations to the SEC. Attorneys in Taft’s Investment Funds Group can help you address any deficiencies in your filings and review your overall compliance program.

Schera Sampson, Taft summer associate, contributed to this article.

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