The Investment Adviser Association said in a comment letter that the Securities and Exchange Commission’s proposed amendments to expand private fund advisor reporting are overly broad and unrealistic in their attempt to force advisors to do one-day reporting in certain situations.
Gail Bernstein, the IAA’s general counsel, also said that pulling hedge fund and private equity fund advisors away from their jobs to do reporting on what might be mundane occurrences could harm investors.
The proposed amendments are to Form PF, which is used by investment advisors to private funds. The changes would require all hedge fund, private equity and liquidity fund advisors to provide additional information, including one-business-day reporting for certain events such as 20% reductions in a fund’s net asset value. The amendments also decrease the reporting threshold for large private equity advisors from $2 billion to $1.5 billion.
The SEC said the changes are designed to improve regulators’ oversight and ability to monitor systemic risk.
“The commission’s experiences with recent market events, like the March 2020 Covid-19 turmoil and the January 2021 market volatility in certain stocks, have highlighted the importance of receiving current and robust information from market participants,” the agency said in a fact sheet.
While the IAA supports the SEC’s efforts to monitor systemic risk, the trade group has a number of concerns, Bernstein said in her letter.
Currently, advisors must file Form PF months after their quarter and year ends. The new proposal, however, would require large hedge fund advisors to file current reports within one business day if they experience “extraordinary investment losses, significant margin and counterparty defaults … and events associated with withdrawals and redemptions,” the SEC said.
“The commission has not identified how each of the proposed reporting items fills an important data gap or addresses systemic risk concerns. Nor has the commission explained how it will use all of the information to achieve its goals,” Bernstein said.