obtained from the proposed amendments updating instructions to
provide conformity with CFTC's amendments to Form CPO-PQR, including
those that specify when advisers that are also CPOs should complete
particular sections of Form PF. See supra section II.E, see also
Proposed Instruction 18.
    \290\ See supra section II.A.1.
    \291\ See, e.g., Robert Harris, Tim Jenkinson, Steven Kaplan,
Ruediger Stucke, Financial Intermediation in Private Equity: How
Well Do Funds of Funds Perform?, 129 Journal of Financial Economics
2, 287-305 (Aug. 2018).
    \292\ See, e.g., Todd Ehret, Platinum Fraud Charges Shine Light
On Cayman Director Responsibilities, Reuters Financial Regulatory
Forum, March 30, 2017, available at https://www.reuters.com/article/bc-finreg-cayman-private-structure/platinum-fraud-charges-shine-light-on-cayman-director-responsibilities-idUSKBN17030J.
    \293\ See, e.g., Melvyn Teo, Lessons Learned from Hedge Fund
Fraud, Eureka Hedge, Oct. 2009, available at https://www.eurekahedge.com/Research/News/506/Lessons-Learned-From-Hedge-Fund-Fraud.
---------------------------------------------------------------------------

    Second, the proposal would amend the general instructions for
reporting for private funds that invest in other funds or trading
vehicles.\294\ Specifically, the proposal would revise Instructions 7
and 8 to require advisers to include information pertaining to their
trading vehicles when completing Form PF.\295\ Because private funds
may use trading vehicles for a wide variety of purposes, more complete
and accurate visibility into asset class exposures, position sizes, and
counterparty exposures relied on by trading vehicles can enhance the
SEC's and FSOC's systemic risk and financial stability assessment
efforts and the SEC's efforts to protect investors by identifying areas
in need of outreach, examination, or investigation.
---------------------------------------------------------------------------

    \294\ These proposed amendments would include requiring advisers
to include the value of a private fund's investments in other
private funds when determining whether the adviser must file Form
PF; requiring an adviser to include the value of a reporting fund's
investments in other private funds when responding to questions on
the fund, but to not look through its investments in other private
funds when responding to questions about the reporting fund's
investment and other activities; amending the general instructions
to explain how advisers would report information if the reporting
fund holds investments or conducts activities through a trading
vehicle; amending Instruction 8 to indicate that the instruction on
which investments to include in determining reporting thresholds and
responding to questions applies only to investments in funds that
are not private funds; and providing that advisers would not be
required to look through a reporting fund's investments in any other
fund that is not a private fund, other than a trading vehicle. See
supra section II.A.2.
    \295\ See supra section II.A.2.
---------------------------------------------------------------------------

    Third, the proposal would amend the general instructions for
reporting timelines by revising Instruction 9 to require large hedge
fund advisers and large liquidity fund advisers to update Form PF
within a certain number of days after the end of each calendar quarter,
rather than each fiscal quarter, as Form PF currently requires.\296\
The SEC anticipates that these amendments would improve the consistency
of reporting across different private fund advisers, across quarterly
and annual filings, and across different regulatory forms,\297\ which
may improve the ability of regulators to analyze filing data across
fund advisers and across different regulatory forms by resolving
reporting errors and issues of data quality. These data analyses are
important contributors to the SEC's and FSOC's efforts to assess
systemic risk and develop a complete picture of private fund markets.
The SEC anticipates that these improved reporting alignments may
enhance the SEC's and FSOC's abilities to assess potential risks
presented by private funds.\298\ For example, as discussed above,
academic research has used Form PF data and Form N-MPF data to study
rule 2a-7 risk limits and implications of money market reforms.\299\
Standardizing data across regulatory filings can lead to further
industry insights from combined regulatory filing data, and these
industry insights may improve systemic risk assessment and regulator
investor protection efforts. However, as discussed above, because
almost all large hedge fund advisers and large liquidity fund advisers
already effectively file on a calendar quarter basis because their
fiscal quarter ends on the calendar quarter, the SEC anticipates that
these benefits may be marginal.\300\
---------------------------------------------------------------------------

    \296\ See supra section II.A.3.
    \297\ See supra section II.A.3.
    \298\ While the amendments to general instructions associated
with reporting timelines would primarily offer economic benefits
associated with improvement in data quality and resolutions to data
gaps, the proposed amendments to reporting timelines would also
provide a potential improvement to regulators' ability to evaluate
markets for investor protection efforts and systemic risk
assessment, in that they accelerate the provision of data from
quarterly reporting. See supra section II.A.3. Moreover, as the
proposal would make reporting timelines more consistent, there could
be reduced costs associated with regulatory filings, as private fund
advisers reduce their need to track differentiated calendar quarter
and fiscal quarter data.
    \299\ See supra section III.B.1.
    \300\ See supra section II.A.3. Specifically, and as discussed
above, based on staff analysis of Form ADV data as of December 2021,
99.2 percent of private fund advisers already effectively file on a
calendar basis because their fiscal quarter or year ends on the
calendar quarter or year end, respectively. The 0.8 percent of
private fund advisers that have a non-calendar fiscal approach
represents approximately 274 private funds, totaling $200 billion in
gross asset value. See supra section II.A.3.
---------------------------------------------------------------------------

    Fourth, the proposal would issue a series of amendments that impact
several sections of Form PF and which would broadly enhance data
quality by potentially resolving reporting errors and issues of data
quality. These amendments would specify that reported percentages be
rounded to the nearest one hundredth of one percent, provide consistent
instruction for reporting of investment and counterparty exposures,
provide consistent instruction on the reporting of long and short
positions, and provide consistent instruction for reporting of
derivative values.\301\ We believe the resulting improved data quality
would improve the ability of the SEC and FSOC to evaluate market risk
and measure industry trends, thereby increasing the efficiency with
which regulatory responses are developed, improving systemic risk
assessment and regulator programs to protect investors.
---------------------------------------------------------------------------

    \301\ See supra section II.D.
---------------------------------------------------------------------------

    Lastly, the proposal would issue a series of additional amendments
that would amend instructions related to temporary hardship exemptions,
provide conformity with the CFTC's amendments to Form CPO-PQR
(including those that specify when advisers that are also CPOs should
complete particular sections of Form PF), and revise definitions of the
terms EEA and G10 within Form PF.\302\ The additional amendments
updating instructions to the temporary hardship exemption to Form PF,
by way of an amendment to rule 204(b)-1(f) under the Advisers Act,
would make it easier to submit a temporary hardship exemption and would
assist advisers in determining what constitutes a ``filed'' temporary
hardship exemption.\303\ These amendments may facilitate more
successful submissions of temporary hardship exemptions by private fund
advisers who require one, and may thereby reduce costs to those private
fund advisers. Similarly, by providing conformity with the CFTC's
amendments to Form CPO-PQR, including those that specify when advisers
that are also CPOs should complete particular sections of Form PF, and
revising definitions associated with the terms EEA and G10, the
proposal may reduce confusion for advisers filing Form PF, thereby
reducing the burden of filing.\304\
---------------------------------------------------------------------------

    \302\ See supra section II.E, Proposed Instruction 18.
    \303\ See supra section II.E.
    \304\ See supra section II.E, Proposed Instruction 18.

---------------------------------------------------------------------------

b. Proposed Amendments to Basic Information About the Adviser and the
Private Funds it Advises
    The proposed amendments to section 1, which requires all private
fund advisers to report information about the adviser and the private
funds they manage, include revisions to section 1a (concerning basic
identifying information),\305\ revisions to section 1b (concerning all
of a private fund adviser's private funds),\306\ and revisions to
section 1c (more specifically concerning all of a private fund
adviser's hedge funds).\307\ The proposed changes would provide greater
insight into all private funds' operations and strategies, and would
further assist in assessing industry trends. This section discusses how
the SEC believes the proposed changes would thereby enhance the SEC's
and FSOC's systemic risk assessment efforts and the SEC's efforts to
protect investors by identifying areas in need of outreach,
examination, or investigation. This would be accomplished in four key
ways.
---------------------------------------------------------------------------

    \305\ See supra section II.B.1.
    \306\ See supra section II.B.2.
    \307\ See supra section II.B.3.
---------------------------------------------------------------------------

    First, the proposed changes would provide more prescriptive
requirements to improve comparability across advisers and reduce
reporting errors and issues of data quality by aligning data across
filers and across regulatory filings, based on experience with the
form. This greater alignment could improve the efficiency with which
the SEC and FSOC evaluate market risk and measure industry trends,
thereby increasing the efficiency with which regulatory responses are
developed, improving systemic risk assessment and regulator programs to
protect investors. For example, revisions to section 1a (relating to
adviser reporting of identifying information for all private funds they
advise) would revise instructions on the use of LEIs and RSSD IDs for
advisers and related persons, and could help link data more efficiently
between Form PF and other regulatory filings that use these universal
identifiers.\308\ Several revisions to section 1b (relating to adviser
reporting of basic information for all private funds they advise) would
modify instructions and could prevent advisers from inadvertently
reporting different fund types on different regulatory filings (or,
when different reporting on two different forms is appropriate, the
revised instructions are designed to solicit the reason for
differentiated reporting), facilitating more robust data analyses that
use combined data from multiple regulatory forms.\309\ Revisions to
section 1c would require advisers to indicate which investment
strategies best describe the reporting fund's strategies on the last
day of the reporting period, addressing any ambiguity about how to
report information if the reporting fund changes strategies over
time.\310\ The SEC believes these revisions to section 1, and
others,\311\ would improve the accuracy and reliability of Form PF
data, thereby potentially improving the SEC's and FSOC's efforts to
assess developing systemic risks and FSOC's efforts to assess broader
financial instability, as well as potentially improving the SEC's
efforts to protect investors by identifying areas in need of outreach,
examination, or investigation.
---------------------------------------------------------------------------

    \308\ See supra section II.B.1. For example, the proposed
reporting of a fund's and its adviser's LEI is consistent with the
way fund relationships are reported in the Global LEI system. See,
e.g., LEI ROC, Policy on Fund Relationships and Guidelines for the
Registration of Investment Funds in the Global LEI System (May 20,
2019), available at https://www.leiroc.org/publications/gls/roc_20190520-1.pdf.
    \309\ See supra section II.B.2. For example, the Division of
Investment Management relies on Form PF and Form ADV filings in
providing quarterly summaries of private fund industry statistics
and trends. See, e.g., Division of Investment Management, Private
Fund Statistics, (Aug. 21, 2021), available at https://www.sec.gov/divisions/investment/private-funds-statistics.shtml.
    \310\ See supra section II.B.3.
    \311\ Other proposed revisions that would provide this benefit
include the proposal revising reporting of regulatory versus net
assets under management; reporting of assumptions the adviser makes
in responding to questions on Form PF; reporting of types of fund;
reporting of master-feeder arrangements, internal/external private
funds, and parallel fund structures; reporting of monthly gross and
net asset values; reporting of the value of unfunded commitments;
reporting on the value of borrowing activity; reporting of fair
value hierarchy; reporting of beneficial ownership; reporting of
fund performance; more granular reporting of hedge fund strategies;
more granular reporting of hedge fund counterparty exposures
including identification of counterparties representing a fund's
greatest exposure; and more granular reporting of hedge fund trading
and clearing mechanisms. See supra section II.B.
---------------------------------------------------------------------------

    Second, the proposal would expand the data collected by the forms
into newly emerging areas of risk. These expanded areas of reporting
broadly capture key trends in (i) private fund advisers' ownership
structures, and (ii) private fund advisers' investment and trading
strategies, including increasing exposures to new asset classes,
changing exposures across different categories of counterparties, and
increasing use of financial tools for increasing fund performance.
    With respect to updated reporting on ownership structures, as
discussed above, interconnected ownership structures have inherent
risks of spillovers in losses, as losses in a master fund or underlying
investment of a fund of funds cause losses in connected funds as well,
and so enhanced data on detailed ownership structures could improve
systemic risk assessment efforts.\312\ These improved data could also
contribute to efforts to protect investors from conflicts of interest
and other sources of potential harm.\313\ The types of enhancements to
Form PF's data on interconnected ownership structures include, for
example, requiring advisers to provide LEIs for themselves and any of
their related persons, such as reporting funds and parallel funds,\314\
and expanding the required reporting detail on the value of the
reporting fund's investments in funds of funds.\315\ Similar to the
amendments to general instructions, the SEC believes that these
revisions would improve measurement of these complex ownership
structures, thereby potentially improving the SEC's and FSOC's efforts
to assess developing systemic risks and FSOC's efforts to assess
broader financial instability, as well as potentially improving the
SEC's efforts to protect investors from conflicting arrangements and
identify other areas in need of outreach, examination, or
investigation.\316\
---------------------------------------------------------------------------

    \312\ See supra section III.C.1.a.
    \313\ Id.
    \314\ See supra section II.B.1.
    \315\ See supra section II.B.2.
    \316\ See supra section III.C.1.a.
---------------------------------------------------------------------------

    Many revisions would also keep Form PF filings up to date with key
developing trends among private fund advisers' investing and trading
practices. These revisions would improve consistency of reporting of
modern private fund issues across fund advisers, provide more complete
and accurate information on developing trends, and improve the SEC's
and FSOC's abilities to effectively and efficiently assess new systemic
risks and other potential sources of investor harm, as well as inform
the SEC's and FSOC's broader views on the private fund landscape.
    For example, in Form PF section 1c, the proposal would require
hedge funds to report whether their investment strategy includes
digital assets,\317\ which are a growing and increasingly important
area of hedge fund strategy.\318\ The proposal would

therefore help the SEC and FSOC to assess new sources of potential
systemic risk and develop regulatory responses, and would further allow
the SEC to analyze new areas of potential investor harm to determine
any necessary outreach, examination, or investigation.
---------------------------------------------------------------------------

    \317\ See supra section II.B.3.
    \318\ See, e.g., AIMA, PwC, and Elwood Asset Management, 3rd
Annual Global Crypto Hedge Fund Report 2021, available at https://www.aima.org/educate/aima-research/third-annual-global-crypto-hedge-fund-report-2021.html (concluding that approximately a fifth of
hedge funds were investing in such assets in 2021, with on average
three percent of their total hedge fund assets under management
invested, and 86 percent of those hedge funds intended to deploy
more capital into this asset class by the end of 2021); see also
supra footnote 111 and accompanying text.
---------------------------------------------------------------------------

    As another example, the proposal would introduce several questions
on counterparty exposures, corresponding to both CCP exposures and
bilateral counterparty (i.e., non-CCP) exposures. These additions to
Form PF include requiring advisers to report hedge fund borrowing,
lending, and collateral with respect to transactions involving both
their bilateral counterparties and CCPs, requiring reporting of hedge
fund derivative and repo activity that was cleared by a CCP (as well as
activity not cleared by a CCP), and instructing advisers on what
exposures to net.\319\ There are two economic considerations associated
with counterparty exposure reporting on Form PF. First and foremost,
bilateral exposures and CCP exposures have different risk profiles,
with CCPs offering risk reduction mechanisms and other economic
benefits by netting trading across counterparties and across different
assets within an asset class or by centralizing clearance and
settlement activities.\320\ The SEC therefore believes the proposal
could help Form PF provide insight into relative trends in bilateral
trading versus central counterparty trading and resulting systemic
risks from counterparty exposures. Second, while CCPs reduce the
systemic risk associated with the failure of any single hedge fund or
other private fund, the failure of a large CCP itself could potentially
represent a substantial systemic risk event in the future.\321\ While a
systemic risk event such as the failure of a CCP has never occurred in
the United States, CCPs in other countries have failed,\322\ and the
SEC believes the proposal could help Form PF provide new insights into
the potential for such systemic risk events in the future. FSOC has
also designated many CCP institutions as ``systemically important,''
\323\ and recommends that regulators continue to coordinate to evaluate
threats from both default and non-default losses associated with
CCPs.\324\
---------------------------------------------------------------------------

    \319\ See supra section II.B.3.
    \320\ Siro Aramonte and Wenqian Huang, Costs and Benefits of
Switching to Central Clearing, BIS Quarterly Review (Dec. 2019),
available at https://www.bis.org/publ/qtrpdf/r_qt1912z.htm; Albert
J. Menkveld & Guillaume Vuillemey, The Economics of Central
Clearing, 13 Ann. Rev. Fin. Econ. 153 (2021).
    \321\ Id.
    \322\ For example, the Hong Kong Futures Guarantee Corporation
failed during the stock market crash of 1987. See Menkveld &
Vuillemey, supra footnote 320.
    \323\ Financial Stability Oversight Council, 2012 Annual Report,
Appendix A, available at https://home.treasury.gov/system/files/261/2012-Annual-Report.pdf.
    \324\ Financial Stability Oversight Council, 2021 Annual Report,
p. 14, available at https://home.treasury.gov/system/files/261/FSOC2021AnnualReport.pdf.
---------------------------------------------------------------------------

    The SEC therefore believes these revisions, and others like
them,\325\ would help the SEC and FSOC better understand the modern
landscape of the private fund industry, thereby potentially improving
the SEC's and FSOC's efforts to assess developing systemic risks and
FSOC's efforts to assess broader financial instability, as well as
potentially improving the SEC's efforts to protect investors by
identifying areas in need of outreach, examination, or investigation.
---------------------------------------------------------------------------

    \325\ Other proposed revisions that would provide this benefit
include the proposal reporting of withdrawal and redemption rights;
reporting of other inflows and outflows; more granular reporting of
hedge fund strategies; more granular reporting of hedge fund
counterparty exposures including identification of counterparties
representing a fund's greatest exposure; and more granular reporting
of hedge fund trading and clearing mechanisms. See supra section
II.B.
---------------------------------------------------------------------------

    Third, there are revisions that would expand the scope of certain
questions from only covering qualifying hedge funds advised by large
hedge fund advisers to covering all hedge funds advised by any private
fund adviser. By expanding the universe of private funds that are
covered by several questions, the proposal would enhance the SEC's and
FSOC's ability to conduct broad, representative measurements regarding
the private fund industry. For example, the proposal would require all
advisers to report whether each reporting fund they advise provides
investors with withdrawal or redemption rights in the ordinary course,
rather than only requiring large hedge fund advisers to report it for
the qualifying hedge funds they advise, as Form PF currently
requires.\326\ Because the activities of private fund advisers may
differ significantly depending on their size, this enhanced coverage
would potentially enhance regulators' abilities to obtain a
representative picture of the private fund industry and lead to more
robust conclusions regarding emerging industry trends and
characteristics. The SEC believes these proposed amendments, and
others,\327\ would enhance regulator's picture of the private fund
industry, thereby potentially improving the SEC's and FSOC's efforts to
assess developing systemic risks and FSOC's efforts to assess broader
financial instability, as well as potentially improving the SEC's
efforts to protect investors by identifying areas in need of outreach,
examination, or investigation.
---------------------------------------------------------------------------

    \326\ See supra section II.B.2.
    \327\ The proposed revisions to reporting of base currency would
provide similar benefits. See supra section II.B.
---------------------------------------------------------------------------

    Lastly, certain proposed changes would streamline reporting and
reduce reporting burden by removing certain questions where other
questions provide the same or superseding information. For example, the
proposal would remove current Question 19, which requires advisers to
hedge funds to report whether the hedge fund has a single primary
investment strategy or multiple strategies, and would also remove
current Question 21, which requires advisers to hedge funds to
approximate what percentage of the hedge fund's net asset value was
managed using high frequency trading strategies.\328\ The SEC believes
that these revisions would directly lower the costs and help reduce
part of the burden on advisers of completing Form PF filings.\329\
---------------------------------------------------------------------------

    \328\ See supra section II.B.3.
    \329\ These benefits from streamlined reporting and reduced
reporting burden would be offset by increased costs associated with
the additional and more granular detail that would be required on
Form PF under the proposal. See infra section III.C.2, IV.A.3.
---------------------------------------------------------------------------

c. Proposed Amendments to Information About Hedge Funds Advised by
Large Private Fund Advisers
    The proposed changes to section 2 would provide greater insight
into operations and strategies into hedge funds advised by large
private fund advisers specifically, and would also assist in assessing
broader hedge fund industry trends. This section discusses how the SEC
believes the proposed changes would thereby enhance the SEC's and
FSOC's investor protection and systemic risk assessment efforts. This
would be accomplished in three key ways.
    As with section 1, first, the proposed changes would provide more
prescriptive requirements to improve comparability across advisers and
reduce reporting errors and issues of data quality, based on experience
with the form. This would be accomplished by standardizing reporting of
information across different advisers and across different regulatory
filings. For example, the proposed amendments to Question 30 (on
qualifying hedge fund exposures to different types of assets) would
replace the existing

complex table in Question 30 with reporting instructions that would use
a series of drop-down menu selections and provide additional narrative
reporting instructions and additional information on how to report
exposures.\330\ Similarly, advisers to qualifying hedge funds would now
be required to report the 10-year zero coupon bond equivalent for all
sub-asset classes with interest rate risk, rather than providing
advisers with a choice to report duration, WAT, or an unspecified 10-
year equivalent.\331\ Several revisions (relating to adviser reporting
of basic information for all hedge funds that it advises) would revise
instructions relating to reporting of adjusted long and short exposures
and market factor effects on a hedge fund's portfolio.\332\ These
revisions could potentially prevent, for example, data errors
associated with reporting of long and short components of a portfolio
or discrepancies across advisers in their choices of which market
factors to report (as Form PF currently allows advisers to omit a
response to any market factor that they do not regularly consider in
formal risk management testing).\333\ As another example, the proposal
would provide for a new sub-asset class in investment exposure
reporting for ADRs, in line with how ADRs are reported on the CFTC's
Form CPO-PQR, potentially improving assessment of currency risk across
regulatory filings.\334\ As a final example, the proposal would revise
reporting for positions held physically, synthetically, or through
derivatives and indirect exposure, and would require reporting turnover
on a per fund basis instead of in the aggregate as well as providing
for more granular reporting of turnover.\335\ The SEC believes these
revisions, and others,\336\ would align Form PF data across filers,
thereby potentially improving the efficiency with which the SEC and
FSOC evaluate market risk and measure industry trends, thereby
increasing the efficiency with which regulatory responses are
developed, improving systemic risk assessment and regulatory programs
to protect investors.
---------------------------------------------------------------------------

    \330\ See supra section II.C.2.
    \331\ Id.
    \332\ See supra section II.C.2.a; II.C.2.c.
    \333\ Id. For example, higher quality data on short positions
could facilitate more accurate and timely identification of
significant market participants during periods of volatility related
to shorting activity, such as the January 2021 ``meme stock''
episodes. See, e.g., Staff Report on Equity and Options Market
Structure Conditions in Early 2021 (Oct. 14, 2021), available at
https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-2021.pdf.
    \334\ See supra section II.C.2.a.
    \335\ As discussed above, when monitoring funds' activities
during recent market events like the March 2020 COVID-19 turmoil,
the existing aggregation of U.S. treasury securities with related
derivatives did not reflect the role hedge funds played in the U.S.
treasury market. See supra section II.C.2.a, III.B.1. Also during
the COVID-19 market turmoil, FSOC sought to evaluate the role hedge
funds played in disruptions in the U.S. treasury market by unwinding
cash-futures basis trade positions and taking advantage of the near-
arbitrage between cash and futures prices of U.S. treasury
securities. Because the existing requirement regarding turnover
reporting on U.S. treasury securities is highly aggregated, the SEC
staff, during retrospective analyses on the March 2020 market
events, was unable to obtain a complete picture of activity relating
to long treasuries and treasury futures. See supra section II.C.2.d,
III.B.1.
    \336\ Other proposed revisions that would provide this benefit
include the proposal revising reporting of reportable sub-asset
classes, including those for certain categories of listed equity
securities, repos, asset-backed securities and other structured
products, derivatives, and cash and commodities; revising reporting
of open and large position reporting; revising reporting of
counterparty exposures including reporting of significant
counterparties; revising currency reporting; requiring significant
country and industry exposure; requiring additional reporting on
fund portfolio risk profiles; requiring more granular reporting of
investment performance by strategy; amending reporting of portfolio
liquidity; and amending reporting of financing liquidity. See supra
section II.C.
---------------------------------------------------------------------------

    Second, the proposed changes would help Form PF provide greater
insight into newly emerging areas of risk, including increasing
exposures to new asset classes, changing exposures across different
categories of counterparties, and changing risk management practices
(such as changing practices around posting of collateral). The SEC
believes these proposed changes would help Form PF more completely and
accurately capture information relevant to ongoing trends in the
private fund industry. For example, in addition to the more general
investment strategy questions in section 1c described above,\337\
section 2b would define the term ``digital asset'' and would require
large advisers to qualifying hedge funds to report their total
exposures to digital assets.\338\ As another example, large advisers to
qualifying hedge funds would be required to report exposures to
additional commodity sub-asset classes (e.g., other (non-gold) precious
metals, agricultural commodities, and base metal commodities).\339\
They would also be required to report all other counterparties (by
name, LEI, and financial institution affiliation) to which a fund has
net mark-to-market exposure after collateral that equals or is greater
than either (1) five percent of a fund's net asset value or (2) $1
billion, facilitating regulators' abilities to understand the impact a
particular counterparty failure like those that occurred during the
2008 financial crisis and in the period since (e.g., the failure of MF
Global in 2011).\340\ Advisers would also be required to report certain
of their exposures to CCPs,\341\ and would be required to report each
CCP (or other third party) holding collateral in respect of cleared
exposures in excess of 5 percent of the fund's net asset value, or $1
billion.\342\ As discussed above, these (and other) new granular
reporting requirements would represent new possible sources of systemic
risk for the SEC and FSOC to evaluate, and also new areas of focus for
the SEC's regulatory outreach, examination, and investigation.\343\ The
SEC believes these revisions, and others,\344\ would improve the SEC's
and FSOC's efforts to assess developing systemic risks and FSOC's
efforts to assess broader financial stability, as well as potentially
improve the SEC's efforts to protect investors by identifying areas in
need of outreach, examination, or investigation.
---------------------------------------------------------------------------

    \337\ See supra section III.C.1.b.
    \338\ See supra section II.C.2.a.
    \339\ See supra section II.C.2.a.
    \340\ See supra section II.C.2.a, footnote 198 and accompanying
text.
    \341\ See supra section II.C.2.b.
    \342\ See supra section II.C.2.d.
    \343\ See supra section III.C.1.b. For example, the SEC believes
the addition of a base metal commodities sub-asset class would allow
for identification of large players in the base metals market (such
as those impacted by the March 2022 ``nickel squeeze,'' during which
the price of nickel rose unusually steeply and rapidly in response
to commodity price increases caused by Russia's invasion of
Ukraine). See supra footnote 176.
    \344\ Other proposed revisions that would provide this benefit
include revising reporting for positions held physically,
synthetically, or through derivatives and indirect exposure;
revising reportable sub-asset classes, including those for certain
categories of listed equity securities, repos, asset-backed
securities and other structured products, derivatives, and other
cash and commodities; further revising reporting of counterparty
exposures including reporting of significant counterparties (in
addition to the revisions to CCP exposures); revising currency
reporting; requiring more granular reporting of turnover; requiring
significant country and industry exposure; requiring additional
reporting on fund portfolio risk profiles; requiring more granular
reporting of investment performance by strategy; requiring new
reporting on portfolio correlation; amending reporting of portfolio
liquidity; and amending reporting of financing liquidity. See supra
section II.C.
---------------------------------------------------------------------------

    Lastly, the proposal would remove certain questions where other
questions provide the same or superseding information, which the SEC
believes would streamline reporting and reduce reporting burden. For
example, the proposal would remove section 2a entirely, proposing that
the aggregated information in section 2a is redundant to information
required to be reported in other sections,\345\ and would remove the
requirement from Question 38 for advisers to report the percentage of
the

total amount of collateral and other credit support that a fund has
posted to counterparties that may be re-hypothecated.\346\ The SEC
believes that these revisions, and others,\347\ would directly lower
the costs and reduce the burden to advisers of completing Form PF
filings.
---------------------------------------------------------------------------

    \345\ See supra section II.C.1.
    \346\ See supra section II.C.1.
    \347\ Other proposed revisions that would provide this benefit
include the proposal consolidating Question 47 into Question 36;
removing the requirement from Question 38 for advisers to report the
percentage of the total amount of collateral and other credit
support that a fund has posted to counterparties that may be re-
hypothecated; and requiring reporting turnover on a per fund basis
instead of in the aggregate. See supra section II.C.
---------------------------------------------------------------------------

2. Costs
    The proposed amendments to Form PF would lead to certain additional
costs for private fund advisers. Any portion of these costs that is not
borne by advisers would ultimately be passed on to private funds'
investors. These costs would vary depending on the scope of the
required information, which is determined based on the size and types
of funds managed by the adviser as well as each fund's investment
strategies, including choices of asset classes and counterparties.
These costs are quantified, to the extent possible, by examination of
the analysis in section IV.A.3.
    The SEC anticipates that the costs to advisers associated with Form
PF would be composed of both direct compliance costs and indirect
costs. Direct costs for advisers would consist of internal costs (for
compliance attorneys and other non-legal staff of an adviser, such as
computer programmers, to prepare and review the required disclosure)
and external costs (including filing fees as well as any costs
associated with outsourcing all or a portion of the Form PF reporting
responsibilities to a filing agent, software consultant, or other
third-party service provider).\348\
---------------------------------------------------------------------------

    \348\ See section IV.A.3 (for an analysis of the direct costs
associated with the new Form PF requirements for quarterly and
annual filings).
---------------------------------------------------------------------------

    The SEC believes that the direct costs associated with the proposed
amendments would be most significant for the first updated Form PF
report that a private fund adviser would be required to file because
the adviser would need to familiarize itself with the new reporting
form and may need to configure its systems to gather the required
information efficiently. In subsequent reporting periods, the SEC
anticipates that filers would incur significantly lower costs because
much of the work involved in the initial report is non-recurring and
because of efficiencies realized from system configuration and
reporting automation efforts accounted for in the initial reporting
period. This is consistent with the results of a survey of private fund
advisers, finding that the majority of respondents identified the cost
of subsequent annual Form PF filings at about half of the initial
filing cost.\349\
---------------------------------------------------------------------------

    \349\ See Wulf Kaal, Private Fund Disclosures Under the Dodd-
Frank Act, 9 Brooklyn Journal of Corporate, Financial, and
Commercial Law 428 (2015).
---------------------------------------------------------------------------

    The SEC anticipates that the proposed amendments aimed at improving
data quality and comparability would impose limited direct costs on
advisers given that advisers already accommodate similar requirements
in their current Form PF reporting and can utilize their existing
capabilities for preparing and submitting an updated Form PF. The SEC
expects that most of the costs would arise from the proposed
requirements to report additional and more granular information on Form
PF. These direct costs would mainly include an initial cost to setup a
system for collecting, verifying additional more granular information,
and limited ongoing costs associated with periodic reporting of this
additional information.\350\ We believe that the proposed amendment to
rule 204(b)-1(f) under the Advisers Act would have minimal costs
associated with it, as the proposed amendment only makes it easier to
submit a temporary hardship exemption and assists advisers in
determining what constitutes a ``filed'' temporary hardship
exemption.\351\ As discussed in the benefits section, the SEC believes
that part of the costs to advisers arising from the proposed amendments
would be mitigated by the cost savings resulting from reduced
ambiguities and inefficiencies that currently exist in the reporting
requirements, as this may reduce the amount of time and effort required
for some advisers to prepare and submit Form PF information.\352\
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    \350\ Based on the PRA analysis in section IV.A.3, initial costs
associated with filing the first updated Form PF report are
estimated to increase by $4,790 for smaller private fund advisers,
$15,557 for large hedge fund advisers, $8,780 for large liquidity
fund advisers, and $8,780 for large private equity advisers. These
figures are calculated as the cost of filing under the proposal
minus the cost of filing prior to the proposal for each category of
adviser. See Table 5. Direct internal compliance costs associated
with the proposal are estimated at $1,866.25 per quarterly filing or
$7,465 annually for smaller private fund advisers. Direct internal
compliance costs associated with the proposal are estimated at
$6,582.5 per quarterly filing or $26,330 annually for large hedge
fund advisers. Direct internal compliance costs associated with the
proposal are estimated at $3,172.5 per quarterly filing or $12,690
annually for large liquidity fund advisers. Direct internal
compliance costs associated with the proposal are estimated at
$3,885 per quarterly filing or $15,540 annually for large private
equity advisers. These figures are calculated as the cost of filing
under the proposal minus the cost of filing prior to the proposal
for each category of adviser, with an additional correction for
large liquidity fund advisers to incorporate the adjustment
explained in footnote 9 to Table 6 (yielding an estimate of costs
prior to the proposal of $29,216.25/105*70 = $19477.50). See Table
6. It is estimated that there will be no additional direct external
costs and no changes to filing fees associated with the proposed
amendments. See Table 8. The SEC anticipates that there may be
additional first-time filing costs for filers who do not currently
file on a calendar quarter basis, but that these costs are likely to
be small and not likely to impact subsequent filings beyond the
first. As discussed above, a 2018 industry survey of large hedge
fund advisers found filing costs that ranged from 35% to 72% higher
than SEC cost estimates. These industry cost estimates would
therefore suggest costs associated with the proposed changes to Form
PF that are potentially 35% to 72% higher than those estimated here.
See MFA Letter to Chairman Clayton, supra note 202, at 3. However, a
2015 survey of SEC-registered investment advisers to private funds
affirmed the SEC's cost estimates for smaller private fund advisers'
Form PF compliance costs, and found that the SEC overestimated Form
PF compliance costs for larger private fund advisers. These academic
literature cost estimates would therefore suggest that the costs
associated with the proposed changes to Form PF estimated here are
potentially conservatively large. See Wulf Kaal, Private Fund
Disclosures Under the Dodd-Frank Act, 9 Brooklyn Journal of
Corporate, Financial, and Commercial Law 428 (2015). See also supra
footnote 267.
    \351\ See supra section II.E.
    \352\ The proposal also seeks to limit unnecessary costs by
avoiding redundancies between new questions and existing questions.
For example, if the proposal is adopted, the SEC would remove
current Question 22, as it would be redundant in light of the
proposed expanded turnover reporting. See supra footnote 214.
---------------------------------------------------------------------------

    Indirect costs for advisers would include the costs associated with
additional actions that advisers may decide to undertake in light of
the additional reporting requirements on Form PF. Specifically, to the
extent that the proposed amendments provide an incentive for advisers
to improve internal controls and devote additional time and resources
to managing their risk exposures and enhancing investor protection,
this may result in additional expenses for advisers, some of which may
be passed on to the funds and their investors.
    Form PF collects confidential information about private funds and
their trading strategies, and the inadvertent public disclosure of such
competitively sensitive and proprietary information could adversely
affect the funds and their investors. However, the SEC anticipates that
these adverse effects would be mitigated by certain aspects of the Form
PF reporting requirements and controls and systems designed by the SEC
for handling the data. For example, because data on Form PF generally
could not, on its own, be used to identify individual investment
positions, the ability of a

competitor to use Form PF data to replicate a trading strategy or trade
against an adviser is limited. The SEC has controls and systems for the
use and handling of the proposed modified and new Form PF data in a
manner that reflects the sensitivity of the data and is consistent with
the maintenance of its confidentiality. The SEC has substantial
experience with the storage and use of nonpublic information reported
on Form PF as well as other nonpublic information that the SEC handles
in the course of business.

D. Reasonable Alternatives

1. Alternatives to Proposed Amendments to General Instructions,
Proposed Amendments To Enhance Data Quality, and Proposed Additional
Amendments
    The SEC has considered alternatives to the proposed amendments to
general instructions, proposed amendments to enhance data quality, and
the proposed additional amendments considered in this proposal
(including the amendments to the process for requesting temporary
hardship exemptions, by way of an amendment to rule 204(b)-1(f) under
the Advisers Act). The alternatives considered have been in the form of
different choices of framing, level of additional detail requested by
Form PF, level of detail removed from Form PF, and precise information
targeted.
    For example, in the general instructions, the SEC considered an
alternative that would require advisers to report only at the master
fund level or only at the feeder fund level. As another example, with
respect to trading vehicles, the proposal currently would require
advisers to report a trading vehicle as a separate reporting fund, the
adviser must report the trading vehicle as a hedge fund, qualifying
hedge fund, liquidity fund, private equity fund, or other type of fund,
if it meets certain requirements, but the SEC considered an alternative
that would only require advisers to report trading vehicles as
investments in another fund. As a final example, the SEC considered
requiring annual filers to file within 30 calendar days after the end
of their fiscal year, rather than 120 calendar days.
    While many alternatives may be able to capture more detailed
information, or may be able to capture relevant information with a
smaller reporting burden for advisers, the SEC believes that each of
the amendments to general instructions, amendments to enhance data
quality, and additional amendments as proposed improve data quality and
enhance the usefulness of reported data without imposing undue
reporting burden. As discussed above we request suggestions and
comments on each proposed revision and addition.\353\
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    \353\ See supra section II.A, II.D, II.E.
---------------------------------------------------------------------------

2. Alternatives to Proposed Amendments to Basic Information About the
Adviser and the Private Funds It Advises
    The SEC has also considered alternatives to the proposed amendments
to basic information about advisers and the private funds they advise.
As above, these alternatives are in the form of different choices of
framing, level of additional detail requested by Form PF, level of
detail removed from Form PF, and precise information targeted.
    For example, with respect to identifying information for private
funds in section 1a, the SEC considered an alternative that would
provide more granularity for advisers to list categories of funds, such
as differentiating between different types of funds of funds (for
example, differentiating between multi-manager funds of funds and
multi-asset funds of funds). As another example, with respect to basic
information reported for all private funds in section 1b, the SEC
considered alternatives that would limit reporting information about
withdrawal rights, redemption rights, and contributions to only funds
and advisers of a certain size. The SEC also considered various
alternatives with respect to reporting of digital assets, such as
distinguishing between digital assets that represent an ability to
convert or exchange the digital asset for fiat currency or another
asset, including another digital asset, and those that do not represent
such a right to convert or exchange; for digital assets that represent
a right to convert or exchange for fiat currency or another digital
asset, those where the redemption obligation is supported by an
unconditional guarantee of payment, such as some ``central bank digital
currencies,'' and those redeemable upon demand from the issuer, whether
or not collateralized by a pool of assets or a reserve; for digital
assets that do not represent any direct or indirect obligation of any
party to redeem; and for digital assets that represent an equity,
profit, or other interest in an entity. As a final example, with
respect to basic information reported for all hedge funds, the proposal
would currently require advisers to identify each creditor or other
counterparty (including CCPs) to which the reporting fund owes cash and
synthetic financing borrowing (before posted collateral) equal to or
greater than either (1) five percent of net asset value of the
reporting fund as of the data reporting date or (2) $1 billion, but the
SEC considered alternatives that would change the proposed thresholds,
either increasing or decreasing Form PF's definition of what
constitutes a significant counterparty.
    The SEC believes that each of the amendments as proposed improve
data quality and enhance the usefulness of reported data without
imposing undue reporting burden, but as discussed above we request
suggestions and comments on each proposed revision and addition.\354\
---------------------------------------------------------------------------

    \354\ See supra section II.B.
---------------------------------------------------------------------------

3. Alternatives to Proposed Amendments to Information About Hedge Funds
Advised by Large Private Fund Advisers
    The SEC has considered alternatives to the proposed amendments to
information about hedge funds advised by large private fund advisers.
As above, these alternatives are in the form of different choices of
framing, level of additional detail requested by Form PF, level of
detail removed from Form PF, and precise information targeted.
    For example, with respect to investment exposure reporting, the
proposal would continue to require reporting on qualifying hedge fund
exposures to different types of assets, but would revise the
instructions and format of this reporting. As an alternative, the SEC
considered a proposal that would require or permit large hedge fund
advisers to file portfolio position-level information for qualifying
hedge funds similar to what is required for large liquidity fund
advisers, and large hedge fund advisers who do so would be allowed to
forgo responding to certain specific investment exposure questions in
section 2, including Question 30. We believe that the questions as
currently proposed improve data quality and enhance the usefulness of
reported data without imposing undue reporting burden, but we request
comment on each proposed revision and addition.\355\
---------------------------------------------------------------------------

    \355\ See supra section II.C.
---------------------------------------------------------------------------

    As another example, the SEC considered alternative approaches for
instructing reporting advisers on how to net long and short positions
for each sub-asset class. One prong of the proposed instructions for
netting long and short positions relies on a newly defined term
``reference asset,'' with which we propose to define as ``a security or
other investment asset to which the reporting fund is exposed

through direct ownership, synthetically, or indirect ownership,'' \356\
and instructs advisers to net positions that have the same underlying
reference asset across instrument types. The SEC has considered instead
tailoring these instructions to different asset classes. For example,
the SEC considered instructing advisers to net repo exposures in
accordance with GAAP rules for balance sheet netting, or instructing
advisers with exposures whose underlying reference assets are treasury
securities to net within predefined maturity buckets. However, the SEC
believes that providing netting instructions through the proposed
single definition of ``reference asset'' improves data quality and
enhances the usefulness of report data without imposing undue
burden.\357\
---------------------------------------------------------------------------

    \356\ See Proposed Form PF Glossary of Terms. The proposal would
also instruct advisers to net fixed income positions that fall
within certain predefined maturity buckets. See supra section II.C.
    \357\ See supra section II.C.
---------------------------------------------------------------------------

    As final example, the SEC also considered requiring advisers to
report DV01 instead of the 10-year zero coupon bond equivalent. We
understand that the 10-year zero coupon bond equivalent is the most
widely used duration measure currently applied in the industry, and
would require the fewest number of private funds to update their
calculations of duration to comply with the reporting requirement, but
as discussed above the SEC requests comment on whether DV01 would be a
more appropriate reporting requirement.\358\
---------------------------------------------------------------------------

    \358\ See supra section II.C.
---------------------------------------------------------------------------

    Broadly, the SEC believes that each of the amendments as proposed
improve data quality and enhance the usefulness of reported data
without imposing undue reporting burden, but as discussed above we
request suggestions and comments on each proposed revision and
addition.\359\
---------------------------------------------------------------------------

    \359\ See supra section II.C.
---------------------------------------------------------------------------

4. Alternatives to the Definition of the Term ``Hedge Fund''
    The SEC has also considered amending the definition of ``hedge
fund'' which is defined in the Glossary of Terms as any private fund
(other than a securitized asset fund) (a) with respect to which one or
more investment advisers (or related persons of investment advisers)
may be paid a performance fee or allocation calculated by taking into
account unrealized gains (other than a fee or allocation the
calculation of which may take into account unrealized gains solely for
the purpose of reducing such fee or allocation to reflect net
unrealized losses); (b) that may borrow an amount in excess of one-half
of its net asset value (including any committed capital) or may have
gross notional exposure in excess of twice its net asset value
(including any committed capital); or (c) that may sell securities or
other assets short or enter into similar transactions (other than for
the purpose of hedging currency exposure or managing duration).\360\ As
noted above, the current definition of ``hedge fund'' is designed to
include any private fund having any one of three common characteristics
of a hedge fund: (1) a performance fee, (2) leverage, or (3) short
selling. In particular, this existing definition in Form PF of ``hedge
fund'' focuses on a reporting fund's ability to engage in certain
borrowing and short selling, rather than actual or intended borrowing
and short selling. Some reporting funds may consider themselves
``private equity funds,'' but advisers report them as hedge funds,
because the reporting fund's governing documents permit the fund to
engage in certain borrowing and short selling (even though it did not
do so at any time in the past 12 months).
---------------------------------------------------------------------------

    \360\ See supra section II.C.
---------------------------------------------------------------------------

    As discussed above, hedge funds and private equity funds are two
separate categories of private funds, and typically differ in their
characteristics, such as a hedge fund being more likely to engage in
extensive use of (non-subscription lines of credit) leverage,
derivatives, complex structured products, and short selling, and a
private equity fund being more likely to focus on long-term returns and
engage actively in the management and direction of the companies it
invests in.\361\ Under the existing definition, an adviser to a fund
that holds itself out as a private equity fund and is permitted in its
fund governing documents to engage in certain short-selling, but has
not done so in the past 12 months, would be reported in Form PF data as
a hedge fund with zero short exposure. Depending on how widespread this
definitional mismatch is, it could have an impact on data quality.\362\
---------------------------------------------------------------------------

    \361\ See supra section III.B.2.
    \362\ The SEC does not have data on how many reporting funds
would be considered deemed hedge funds, but the SEC estimates that
up to 30 percent of qualifying hedge funds could be deemed hedge
funds that advisers should report as private equity funds. See Form
PF data from current Question 49(a), as of the third quarter of
2021.
---------------------------------------------------------------------------

    Accordingly, the SEC is requesting additional information on the
issue.\363\ In doing so, the SEC is requesting comment on a potential
alternative definition of ``hedge fund,'' under which, to qualify as a
hedge fund under the leverage prong of the potential alternative
definition, a fund would have to satisfy subsection (b) of the
definition (the leverage prong), as it does today, but also must have
actually borrowed or used any leverage during the past 12 months,
excluding any borrowings secured by unfunded commitments (i.e.,
subscription lines of credit). Additionally, to qualify as a hedge fund
under the short selling prong of the potential alternative definition
(the short selling prong), the fund must have actually engaged in
certain short selling during the past 12 months. The SEC also
considered alternative definitions requiring, for example, longer or
shorter time periods, different time periods for borrowing versus short
selling, or requirements for the reporting fund to provide redemption
rights in the ordinary course.
---------------------------------------------------------------------------

    \363\ See supra section II.C.
---------------------------------------------------------------------------

    A revised definition could better ensure advisers report
information in closer accordance with their characteristics.\364\ For
example, an adviser to a private fund that has actually engaged in
short selling in the preceding 12 months would meet this alternative
definition of hedge fund and thus report the value of its short
positions as part of section 2, Item B.\365\ Meanwhile, for example, an
adviser to a private fund that holds itself out as a private equity
fund, has not borrowed or used any leverage during the preceding 12
months (excluding subscription lines of credit), and has not sold
securities or other assets short (or entered into similar transactions)
would not meet this alternative definition of a hedge fund, and would
report information more relevant for a private equity fund such as,
among other items, the average debt-to-equity ratio of its portfolio
investments.\366\ The SEC also believes an alternative definition would
reduce the unnecessary reporting burden faced by advisers to deemed
hedge funds that

hold themselves out as private equity funds but currently comply with
instructions to report information on Form PF section 2; however, this
benefit would be partially mitigated by the impacted private fund
advisers who would now need to report on necessary Form PF sections for
private equity fund advisers.\367\
---------------------------------------------------------------------------

    \364\ This benefit may be mitigated to the extent that any
private fund advisers deliberately seek to fill hedge fund reporting
requirements because they believe their burden of reporting the
hedge fund sections of Form PF is lower than the burden they would
face from reporting the private equity sections of Form PF. Any such
private fund advisers could, under the proposed definition, have
their funds take on de minimis leverage or short selling, and
therefore still be instructed to report as a hedge fund. However, we
estimate that Form PF filing is on average more burdensome for large
hedge fund advisers than for large private equity advisers, and so
there may be very few, if any, private fund advisers deliberately
filing as a hedge fund adviser instead of as a private equity
adviser. See infra section IV.A.3
    \365\ See supra section II.C.2.
    \366\ See supra section II.C.2; see also Form PF, section 4.
    \367\ See supra section II.C.2; III.C.2; see also infra section
IV.A.3. We estimate that for advisers who would be required to file
an initial filing as a large private equity adviser instead of a
large hedge fund adviser because of the potential alternative
definition of ``hedge fund,'' the impact on their filing costs would
be the difference in the proposed new cost of filing for large
private equity advisers minus the current cost of filing for large
hedge fund advisers. We estimate this figure would be negative,
reflecting a cost savings. Thus, the potential alternative
definition would reduce the costs for initial filers who would be
impacted by the definition of ``hedge fund'' by approximately
$30,883. See infra section IV.A.3, Table 5. We estimate that for the
advisers who would be impacted by the potential alternative
definition of ``hedge fund'' and would have to make ongoing annual
filings as a large private equity adviser instead of ongoing
quarterly filings as a large hedge fund adviser, the impact of the
alternative definition on their filing costs would be the difference
in the proposed new cost of filing for large private equity advisers
minus four times the cost of filing prior to the proposal for large
hedge fund advisers. We again estimate this figure to be negative,
and estimate an ongoing annual cost savings to these advisers of
$135,240. See infra section IV.A.3, Table 6. Because Form PF defines
large hedge fund advisers by considering a threshold of $1.5 billion
in assets under management but defines large private equity advisers
by considering a threshold of $2 billion in assets under management,
there may be private fund advisers who, under the potential
alternative definition, would no longer be required to file as a
large hedge fund adviser, and would also not be required to instead
report as a large private equity adviser.
---------------------------------------------------------------------------

    A potential unintended consequence of the existing reporting
approach for hedge funds could be incomplete data sets for private
equity funds, as well as less accurate reporting about hedge funds.
However, a revised definition that focuses on actual or contemplated
use may also result in incomplete data sets for hedge funds, which are
a class of funds that may be systemically significant. In particular,
when first adopting the definition, the Commissions reasoned that even
a reporting fund for which leverage or short selling is an important
part of its strategy may not engage in that practice during every
reporting period.\368\ Because a reporting fund may vary from year to
year in its use of leverage or short selling, a revised definition that
focuses on actual or contemplated use would also cause fluctuations in
the data from year to year, depending on which funds use leverage or
short selling in a particular year, potentially impacting the quality
or usefulness of resulting data. The potential costs of this
alternative definition also include transition filing costs for
advisers impacted by the definition, who would be required to update
their reporting methods to capture information from their funds
relevant for reporting on Form PF as a private equity fund instead of
as a hedge fund, and completing corresponding sections of the form
targeted at each category.\369\
---------------------------------------------------------------------------

    \368\ See supra footnote 3; see also 2011 Form PF Adopting
Release, at text accompanying footnote 78.
    \369\ We estimate that the average cost of a transition filing
is $19.25. See Table 7.
---------------------------------------------------------------------------

    The SEC has also considered conforming changes to the definition of
``hedge fund'' for the purposes of Form ADV.\370\ Form ADV relies on a
definition of ``hedge fund'' for the purposes of only one question,
which requires advisers to identify the type of private fund they
advise by selecting from a list of funds, including hedge funds.\371\
As a result, we do not believe there would be any substantial
additional economic effects of making conforming changes to Form ADV.
By amending the definition in Form ADV so that it would be consistent
with how the proposal would define it in Form PF, this alternative
would maintain the baseline consistency of information between Form PF
and Form ADV. The SEC anticipates that the costs associated with a
potential alternative definition of ``hedge fund'' on Form ADV would be
de minimis, as private fund advisers would not be required to complete
any more or fewer questions on Form ADV, at any more or fewer
intervals.
---------------------------------------------------------------------------

    \370\ See supra section II.C. Form ADV filers include advisers
registered with the SEC and those applying for registration with the
SEC, as well as exempt reporting advisers. Some private fund
advisers that are required to report on Form ADV are not required to
file Form PF (for example, exempt reporting advisers and advisers
with less than $150 million in private fund assets under
management). Other advisers are required to file Form PF and are not
required to file Form ADV (for example, advisers to commodity pools
that are not private funds). Based on the staff review of Form ADV
filings and the Private Fund Statistics, less than 10 percent of
funds reported on Form ADV but not on Form PF in 2020.
    \371\ See Form ADV: Instructions for Part 1A, Instruction 6 and
Form ADV Part 1A, Schedule D, section 7.B.(1), Question 10
(``Question 10'') (defining the term ``hedge fund,'' and specifying
that the definition applies for purposes of Question 10). Form ADV
also uses the term ``hedge fund'' in Part 2A, but does not refer to
the definition provided for Question 10.
---------------------------------------------------------------------------

E. Request for Comment

    The SEC requests comment on all aspects of our economic analysis,
including the potential costs and benefits of the proposed amendments
and alternatives thereto, and whether the amendments, if the SEC were
to adopt them, would promote efficiency, competition, and capital
formation. In addition, the SEC requests comments on our selection of
data sources, empirical methodology, and the assumptions the SEC has
made throughout the analysis. Commenters are requested to provide
empirical data, estimation methodologies, and other factual support for
their views, in particular, on costs and benefits estimates. In
addition, the SEC requests comment on:
    214. Whether there are any additional costs and benefits associated
with the proposed amendments to Form PF that we should include in our
analysis? What additional materials and data should the SEC consider
for estimating these costs and benefits?
    215. Whether our assumptions about costs associated with the
proposal are accurate? For example, is it accurate to assume that
certain costs may be mitigated given that advisers already accommodate
similar requirements in their current Form PF and Form ADV reporting
and can utilize their existing capabilities for preparing and
submitting an updated Form PF?
    216. Whether there are any additional benefits or costs that should
be included associated with the reasonable alternatives considered?

IV. Paperwork Reduction Act

    CFTC:
    The information collection titled ``Form PF and Rule 204(b)-1''
(OMB Control No. 3235-0679) was issued to the SEC and implements
sections 404 and 406 of the Dodd-Frank Act by requiring private fund
advisers that have at least $150 million in private fund assets under
management to report certain information regarding the private funds
they advise on Form PF. The SEC makes information on Form PF available
to the CFTC, subject to the confidentiality provisions of the Dodd-
Frank Act, and the CFTC may use information collected on Form PF in its
regulatory programs, including examinations, investigations and
investor protection efforts relating to private fund advisers.
    CFTC rule 4.27 \372\ does not impose any additional burden upon
registered CPOs and CTAs that are dually registered as investment
advisers with the SEC (``dual registrants''). There is no requirement
to file Form PF with the CFTC, and any filings made by dual registrants
with the SEC are made pursuant to the Advisers Act. While

CFTC rule 4.27(d) states that dually registered CPOs and CTAs that file
Form PF with the SEC will be deemed to have filed Form PF with the CFTC
for purposes of any enforcement action regarding any false or
misleading statement of material fact in Form PF, the CFTC is not
imposing any additional burdens herein. Therefore, any burden imposed
by Form PF on entities registered with both the CFTC and the SEC has
been fully accounted for within the SEC's calculations regarding the
impact of this collection of information under the PRA, as set forth
below.\373\
---------------------------------------------------------------------------

    \372\ CFTC rule 4.27, 17 CFR 4.27, was adopted pursuant to the
CFTC's authority set forth in section 4n of the Commodity Exchange
Act (``CEA''), 7 U.S.C. 6n. CFTC regulations are found at Title 17
Chapter I of the Code of Federal Regulations (``CFR'').
    \373\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

    SEC:
    The proposal would revise an existing ``collection of information''
within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\374\ The SEC is submitting the collection of information to
the Office of Management and Budget (``OMB'') for review in accordance
with the PRA.\375\ The title for the collection of information is
``Form PF and Rule 204(b)-1'' (OMB Control Number 3235-0679), and
includes both Form PF and rule 204(b)-1 (``the rules'').\376\ An agency
may not conduct or sponsor, and a person is not required to respond to,
a collection of information unless it displays a currently valid OMB
control number.
---------------------------------------------------------------------------

    \374\ 44 U.S.C. 3501 through 3521.
    \375\ 44 U.S.C. 3507(d); 5 CFR 1320.11.
    \376\ The SEC also submitted the collection of information to
OMB in connection with the 2022 SEC Form PF Proposal (ICR Reference
No.<PHONE_NUMBER>-026) (conclusion date May 17, 2022) available at
https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202202-3235-026; 2022 SEC Form PF Proposal, supra footnote 3.
---------------------------------------------------------------------------

A. Form PF

    Compliance with the information collection titled ``Form PF and
Rule 204(b)-1'' is mandatory. The respondents are investment advisers
that (1) are registered or required to be registered under Advisers Act
section 203, (2) advise one or more private funds, and (3) managed
private fund assets of at least $150 million at the end of their most
recently completed fiscal year (collectively, with their related
persons).\377\ Form PF divides respondents into groups based on their
size and types of private funds they manage, requiring some groups to
file more information more frequently than others. The types of
respondents are (1) smaller private fund advisers, that report annually
(i.e., private fund advisers that do not qualify as large private fund
advisers), (2) large hedge fund advisers, that report more information
quarterly (i.e., advisers with at least $1.5 billion in hedge fund
assets under management), (3) large liquidity fund advisers, that
report more information quarterly (i.e., advisers that manage liquidity
funds and have at least $1 billion in combined money market and
liquidity fund assets under management), and (4) large private equity
advisers, that report more information annually (i.e., advisers with at
least $2 billion in private equity fund assets under management). As
discussed more fully in section II above and as summarized in sections
IV.A.1 and IV.A.3.a below, the proposal would revise how all types of
respondents report certain information on Form PF.
---------------------------------------------------------------------------

    \377\ See 17 CFR 275.204(b)-1.
---------------------------------------------------------------------------

1. Purpose and Use of the Information Collection
    The rules implement provisions of Title IV of the Dodd-Frank Act,
which amended the Advisers Act to require the SEC to, among other
things, establish reporting requirements for advisers to private
funds.\378\ The information collected on Form PF is designed to
facilitate FSOC's monitoring of systemic risk in the private fund
industry and assist FSOC in determining whether and how to deploy its
regulatory tools with respect to nonbank financial companies.\379\ The
SEC also may use information collected on Form PF in its regulatory
programs, including examinations, investigations, and investor
protection efforts relating to private fund advisers.\380\
---------------------------------------------------------------------------

    \378\ See 15 U.S.C. 80b-4(b) and 15 U.S.C. 80b-11(e).
    \379\ See Form PF.
    \380\ Id.
---------------------------------------------------------------------------

    The proposed amendments are designed to enhance FSOC's ability to
monitor systemic risk as well as bolster the SEC's regulatory oversight
of private fund advisers and investor protection efforts. The proposal
would amend the form's general instructions, as well as section 1 of
Form PF, which would apply to all Form PF filers. The proposal also
would amend section 2 of Form PF, which would apply to large hedge fund
advisers that advise qualifying hedge funds (i.e., hedge funds with a
net asset value of at least $500 million).
2. Confidentiality
    Responses to the information collection will be kept confidential
to the extent permitted by law.\381\ Form PF elicits non-public
information about private funds and their trading strategies, the
public disclosure of which could adversely affect the funds and their
investors. The SEC does not intend to make public Form PF information
that is identifiable to any particular adviser or private fund,
although the SEC may use Form PF information in an enforcement action
and FSOC may use it to assess potential systemic risk.\382\ SEC staff
issues certain publications designed to inform the public of the
private funds industry, all of which use only aggregated or masked
information to avoid potentially disclosing any proprietary
information.\383\ The Advisers Act precludes the SEC from being
compelled to reveal Form PF information except (1) to Congress, upon an
agreement of confidentiality, (2) to comply with a request for
information from any other Federal department or agency or self-
regulatory organization for purposes within the scope of its
jurisdiction, or (3) to comply with an order of a court of the United
States in an action brought by the United States or the SEC.\384\ Any
department, agency, or self-regulatory organization that receives Form
PF information must maintain its confidentiality consistent with the
level of confidentiality established for the SEC.\385\ The Advisers Act
requires the SEC to make Form PF information available to FSOC.\386\
For advisers that are also commodity pool operators or commodity
trading advisers, filing Form PF through the Form PF filing system is
filing with both the SEC and CFTC.\387\ Therefore, the SEC makes Form
PF information available to FSOC and the CFTC, pursuant to Advisers Act
section 204(b), making the information subject to the confidentiality
protections applicable to information required to be filed under that
section. Before sharing any Form PF information, the SEC requires that
any such department, agency, or self-regulatory organization represent
to the SEC that it has in place controls designed to ensure the use and
handling of Form PF information in a manner consistent with the
protections required by the Advisers Act. The SEC has instituted
procedures to protect the confidentiality of Form PF information in a
manner consistent with the protections required in the Advisers
Act.\388\
---------------------------------------------------------------------------

    \381\ See 5 CFR 1320.5(d)(2)(vii) and (viii).
    \382\ See 15 U.S.C. 80b-10(c) and 15 U.S.C. 80b-4(b).
    \383\ See e.g., Private Funds Statistics, issued by staff of the
SEC Division of Investment Management's Analytics Office, which we
have used in this PRA as a data source, available at https://www.sec.gov/divisions/investment/private-funds-statistics.shtml.
    \384\ See 15 U.S.C. 80b-4(b)(8).
    \385\ See 15 U.S.C. 80b-4(b)(9).
    \386\ See 15 U.S.C. 80b-4(b)(7).
    \387\ See 2011 Form PF Adopting Release, supra footnote 3 at
n.17.
    \388\ See 5 CFR 1320.5(d)(2)(viii).

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3. Burden Estimates
    We are revising our total burden estimates to reflect the proposed
amendments, updated data, and new methodology for certain
estimates.\389\ The tables below map out the Form PF requirements as
they apply to each group of respondents and detail our burden
estimates.
---------------------------------------------------------------------------

    \389\ For the previously approved estimates, see ICR Reference
No.<PHONE_NUMBER>-019 (conclusion date Apr. 1, 2021), available at
https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202011-3235-019.
---------------------------------------------------------------------------

a. Proposed Form PF Requirements by Respondent
BILLING CODE 8011-01-P
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b. Annual Hour Burden Estimates
    Below are tables with annual hour burden estimates for (1) initial
filings, (2) ongoing annual and quarterly filings, and (3) transition
filings, final filings, and temporary hardship requests.
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c. Annual Monetized Time Burden Estimates

    Below are tables with annual monetized time burden estimates for
(1) initial filings, (2) ongoing annual and quarterly filings, and (3)
transition filings, final filings, and temporary hardship
requests.\390\
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    \390\ The hourly wage rates are based on (1) SIFMA's Management
& Professional Earnings in the Securities Industry 2013, modified by
SEC staff to account for an 1,800-hour work-year and inflation, and
multiplied by 5.35 to account for bonuses, firm size, employee
benefits and overhead; and (2) SIFMA's Office Salaries in the
Securities Industry 2013, modified by SEC staff to account for an
1,800-hour work-year and inflation, and multiplied by 2.93 to
account for bonuses, firm size, employee benefits and overhead.
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d. Annual External Cost Burden Estimates
    Below is a table with annual external cost burden estimates for
initial filings as well as ongoing annual and quarterly filings. There
are no filing fees for transition filings, final filings, or temporary
hardship requests and we continue to estimate there would be no
external costs for those filings, as previously approved.

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e. Summary of Estimates and Change in Burden

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BILLING CODE 8011-01-C

B. Request for Comments

    We request comment on whether our estimates for burden hours and
external costs as described above are reasonable. Pursuant to 44 U.S.C.
3506(c)(2)(B), the SEC solicits comments in order to (1) evaluate
whether the proposed collection of information is necessary for the
proper performance of the functions of the SEC, including whether the
information will have practical utility; (2) evaluate the accuracy of
the SEC's estimate of the burden of the proposed collection of
information; (3) determine whether there are ways to enhance the
quality, utility, and clarity of the information to be collected; and
(4) determine whether there are ways to minimize the burden of the
collection of information on those who are to respond, including
through the use of automated collection techniques or other forms of
information technology.
    Persons wishing to submit comments on the collection of information
requirements of the proposed amendments should direct them to the OMB
Desk Officer for the Securities and Exchange Commission,
[email protected], and should send a copy to
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090, with reference to File No. S7-22-22. OMB is
required to make a decision concerning the collections of information
between 30 and 60 days after publication of this release; therefore a
comment to OMB is best assured of having its full effect if OMB
receives it within 30 days after publication of this release. Requests
for materials submitted to OMB by the Commission with regard to these
collections of information should be in writing, refer to File No. S7-
22-22, and be submitted to the Securities and Exchange Commission,
Office of FOIA Services, 100 F Street NE, Washington, DC 20549-2736.

V. Regulatory Flexibility Act Certification

    CFTC:
    The Regulatory Flexibility Act (the ``RFA'') \391\ requires that
Federal agencies consider whether the rules they propose will have a
significant economic impact on a substantial

number of ``small entities'' \392\ whenever an agency publishes a
general notice of proposed rulemaking for any rule, pursuant to the
notice-and-comment provisions of the Administrative Procedure Act.\393\
---------------------------------------------------------------------------

    \391\ 5 U.S.C. 601, et. seq.
    \392\ See 5 U.S.C. 603(a) and 5 U.S.C. 605(b).
    \393\ 5 U.S.C. 553. The Administrative Procedure Act is found at
5 U.S.C. 551 et seq.
---------------------------------------------------------------------------

    Registered CPOs and CTAs that are dually registered as investment
advisers with the SEC are only required to file Form PF with the SEC
pursuant to the Advisers Act. CFTC rule 4.27(d) provides that dually
registered CPOs and CTAs that file Form PF with the SEC will be deemed
to have filed Form PF with the CFTC, for purposes of any enforcement
action regarding any false or misleading statement of material fact in
Form PF. The CFTC is not imposing any additional obligation herein
beyond what is already required of these entities when filing Form PF
with the SEC.
    Entities impacted by the Form PF are the SEC's regulated entities
and no small entity on its own would meet the Form PF's minimum
reporting threshold of $150 million in regulatory assets under
management attributable to private funds. Also, any economic impact
imposed by Form PF on small entities registered with both the CFTC and
the SEC has been accounted for within the SEC's initial regulatory
flexibility analysis regarding the impact of this collection of
information under the RFA. Accordingly, the Chairman, on behalf of the
CFTC, hereby certifies pursuant to 5 U.S.C. 605(b) that the proposed
rules will not have a significant economic impact on a substantial
number of small entities.
    SEC:
    The Regulatory Flexibility Act of 1980 (``Regulatory Flexibility
Act'') \394\ requires the SEC to prepare and make available for public
comment an initial regulatory flexibility analysis of the impact of the
proposed rule amendments on small entities, unless the SEC certifies
that the rules, if adopted would not have a significant economic impact
on a substantial number of small entities.\395\ For the purposes of the
Advisers Act and the Regulatory Flexibility Act, an investment adviser
generally is a small entity if it (1) has assets under management
having a total value of less than $25 million, (2) did not have total
assets of $5 million or more on the last day of the most recent fiscal
year, and (3) does not control, is not controlled by, and is not under
common control with another investment adviser that has assets under
management of $25 million or more, or any person (other than a natural
person) that had total assets of $5 million or more on the last day of
its most recent fiscal year.\396\
---------------------------------------------------------------------------

    \394\ 5 U.S.C. 601, et. seq.
    \395\ See 5 U.S.C. 603(a) and 5 U.S.C. 605(b).
    \396\ 17 CFR 275.0-7.
---------------------------------------------------------------------------

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the
SEC hereby certifies that the proposed amendments to Advisers Act rule
204(b)-1 and Form PF would not, if adopted, have a significant economic
impact on a substantial number of small entities. By definition, no
small entity on its own would meet rule 204(b)-1 and Form PF's minimum
reporting threshold of $150 million in regulatory assets under
management attributable to private funds. Based on Form PF and Form ADV
data as of December 2021, the SEC estimates that no small entity
advisers are required to file Form PF. The SEC does not have evidence
to suggest that any small entities are required to file Form PF but are
not filing Form PF. Therefore, there would be no significant economic
impact on a substantial number of small entities. The SEC encourages
written comments on the certifications. Commentators are asked to
describe the nature of any impact on small entities and provide
empirical data to support the extent of the impact.

VI. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996 (``SBREFA''),\397\ the SEC must advise OMB whether a
proposed regulation constitutes a ``major'' rule. Under SBREFA, a rule
is considered ``major'' where, if adopted, it results in or is likely
to result in the following:
---------------------------------------------------------------------------

    \397\ Public Law 104-121, Title II, 110 Stat. 857 (1996)
(codified in various sections of 5 U.S.C., 15 U.S.C. and as a note
to 5 U.S.C. 601).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more;
     A major increase in costs or prices for consumers or
individual industries; or
     Significant adverse effects on competition, investment, or
innovation.
    The SEC requests comment on whether the proposal would be a ``major
rule'' for purposes of SBREFA. The SEC solicits comment and empirical
data on the following:
     The potential effect on the U.S. economy on an annual
basis;
     Any potential increase in costs or prices for consumers or
individual industries; and
     Any potential effect on competition, investment, or
innovation.
    Commenters are requested to provide empirical data and other
factual support for their views to the extent possible.

VII. Statutory Authority

    CFTC:
    The CFTC is not proposing any amendments to its rules in this
rulemaking.
    SEC:
    The SEC is proposing amendment to rule 204(b)-1 [17 CFR 275.204(b)-
1] pursuant to its authority set forth in sections 204(b) and 211(e) of
the Advisers Act [15 U.S.C. 80b-4 and 15 U.S.C. 80b-11], respectively.
    The SEC is proposing amendments to rule 279.9 pursuant to its
authority set forth in sections 204(b) and 211(e) of the Advisers Act
[15 U.S.C. 80b-4 and 15 U.S.C. 80b-11], respectively.

List of Subjects in 17 CFR Parts 275 and 279

    Reporting and recordkeeping requirements, Securities.

    For the reasons set forth in the preamble, title 17, chapter II of
the Code of Federal Regulations is proposed to be amended as follows.

PART 275--RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940

0
1. The general authority citation for part 275 continues to read as
follows.

    Authority: 15 U.S.C. 80b-2(a)(11)(G), 80b-2(a)(11)(H), 80b-
2(a)(17), 80b-3, 80b-4, 80b-4a, 80b-6(4), 80b-6a, and 80b-11, unless
otherwise noted.
* * * * *
0
2. Amend Sec.  275.204(b)-1 by:
0
a. Revising paragraph (f)(2)(i) to remove the phrases ``in paper
format,'' and ``, Item A of Section 1a and Section 5 of Form PF,
checking the box in Section 1a indicating that you are requesting a
temporary hardship exemption'';
0
b. Redesignating paragraph (f)(4) as paragraph (f)(5); and
0
c. Adding new paragraph (f)(4).
    The addition reads as follows:

Sec.  275.204(b)-1  Reporting by investment advisers to private funds.

* * * * *
    (f) * * *
    (4) A request for a temporary hardship exemption is considered
filed upon the earlier of the date the request is postmarked or the
date it is received by the Commission.
* * * * *

PART 279--FORMS PRESCRIBED UNDER THE INVESTMENT ADVISERS ACT OF
1940

0
3. The authority citation for part 279 continues to read as follows:

    Authority: The Investment Advisers Act of 1940, 15 U.S.C. 80b-1,
et seq., Pub. L. 111-203, 124 Stat. 1376.

0
4. Sec.  279.9 Form, PF, reporting by investment bankers to private
funds. Form PF [referenced in Sec.  279.9] is revised to read as
follows. The revised version of Form PF is attached as Appendix A.

    Note: The text of Form PF does not, and the amendments will not,
appear in the Code of Federal Regulations.

    By the Commissions.

    Dated: August 10, 2022.
Christopher Kirkpatrick,
Secretary, Commodity Futures Trading Commission.
Vanessa A. Countryman,
Secretary, Securities and Exchange Commission.
BILLING CODE 8011-01-P

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BILLING CODE 8011-01-C

    Note: The following Commodity Futures Trading Commission (CFTC)
appendices will not appear in the Code of Federal Regulations.

CFTC Appendices to Amendments to Form PF To Amend Reporting
Requirements for All Filers and Large Hedge Fund Advisers--CFTC Voting
Summary and Commissioners' Statements

CFTC Appendix 1--Voting Summary

    On this matter, Chairman Behnam and Commissioners Johnson and
Goldsmith Romero voted in the affirmative. Commissioners Mersinger
and Pham voted in the negative.

CFTC Appendix 2--Statement of Chairman Rostin Behnam

    I appreciate all of the hard work of the staff in the Commodity
Futures Trading Commission's Market Participants Division as well as
the staff at the Securities and Exchange Commission, the Department
of the Treasury, the Federal Reserve Board, and the Financial
Stability Oversight Council for their work on this proposal. I look
forward to the public's thoughtful comments on the proposal to
improve the usefulness of Form PF.

CFTC Appendix 3--Statement of Commissioner Kristin N. Johnson

    Transparency is an integral component of the regulatory
framework that ensures the safety and soundness and enduring
preeminence our financial markets.
    Working in collaboration with our colleagues at the Securities
and Exchange Commission (SEC) to enhance oversight and improve
visibility through thoughtfully designed and well-calibrated
collection approaches is consistent with our mission and statutory
mandate--to ``insure the financial integrity of all transactions
subject to this Act and the avoidance of systemic risk.'' \398\
---------------------------------------------------------------------------

    \398\ Section 3(b) of the Commodity Exchange Act, 7 U.S.C. 5(b).
---------------------------------------------------------------------------

    The Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act) \399\ incorporated innovative regulatory features
for promoting the stability of the US financial system, including
establishing the Financial Stability Oversight Council (FSOC) to
monitor for emerging systemic risks that could significantly impact
our financial markets and American consumers.\400\
---------------------------------------------------------------------------

    \399\ Public Law 111-203, 124 Stat. 1376 (2010).
    \400\ See Sections 111 and 120 of the Dodd-Frank Act.
---------------------------------------------------------------------------

    Today's proposal seeks to further our commitment to achieving
these values. Consequently, I support issuing for comment the
proposal to amend Form PF, and look forward to the thoughtful,
substantive contributions that the proposed amendments will
engender.
    Congress in drafting the Dodd-Frank Act recognized that risks
with systemic import are best monitored through collaboration
amongst the US financial regulators, each with distinct regulatory
mandates, and leveraging their resources and expertise to support
FSOC's overarching responsibilities. Form PF reflects these
statutory qualities. As directed by the Dodd-Frank Act, the
Commission and SEC in 2011 jointly issued rules to provide FSOC with
important information about private fund operations and strategies
through Form PF.\401\
---------------------------------------------------------------------------

    \401\ Reporting by Investment Advisers to Private Funds and
Certain Commodity Pool Operators and Commodity Trading Advisors on
Form PF, 76 FR 71128, 71129 (Nov. 16, 2011).
---------------------------------------------------------------------------

    The private fund industry has only grown in size and importance
since 2011. In the third quarter of 2021, private funds reported a
staggering $12 trillion of assets on Form PF.\402\ The sheer
aggregate size of private funds signifies the potential for events
in this industry to produce reverberating effects on the integrity
of our financial markets and, in turn, remarkably influence the
welfare of American consumers. Form PF over the last decade has
provided financial regulators with needed transparency into this
potentially systemically significant sector of the financial
system.\403\
---------------------------------------------------------------------------

    \402\ Amendments to Form PF to Amend Reporting Requirements for
All Filers and Large Hedge Fund Advisers (Voting Copy--As approved
by the Commodity Futures Trading Commission on 8/10/2022) (Proposed
Rules) at 8 n.7, https://www.cftc.gov/media/7536/votingdraft081022Parts275and279/download.
    \403\ See Proposed Rules at 150.
---------------------------------------------------------------------------

    I support the Commissions' endeavor to build on data collection
points that need clarity and to propose revisions in response to
changes in financial markets as well as market participants and
regulators' experience with Form PF as a tool for gathering
information. Over the last decade, private funds have adopted new
practices, investment strategies and an appetite for investing in
non-traditional assets.\404\ The proposed revisions to Form PF aim
to adapt to these developments as informed by experience in
administering Form PF.
---------------------------------------------------------------------------

    \404\ Proposed Rules at 7-8.
---------------------------------------------------------------------------

    Notwithstanding these important gains, I note that it will be
important to hear from and consider the concerns raised by all
stakeholders, including for example, concerns regarding the costs
and challenges of reporting, particularly for smaller entities. I
anticipate the proposal to amend Form PF will engender important
substantive contributions that will refine our understanding of the
benefits of data collection, enhance transparency, and improve our
ability to preserve the integrity of our markets.

CFTC Appendix 4--Statement of Commissioner Christy Goldsmith Romero

    As a U.S. financial markets regulator and a member of the
Financial Stability Oversight Council (``FSOC''), the Commission has
a

critical responsibility to monitor, identify, and respond to
systemic risks and emerging threats to U.S. financial stability. I
support the proposed amendments to Form PF because they will enhance
one of the Commission's tools to fulfill that critical
responsibility and facilitate our regulatory oversight of private
funds.\1\
---------------------------------------------------------------------------

    \1\ The data collected also supports the CFTC's supervision,
examinations, enforcement investigations, and customer protections.
---------------------------------------------------------------------------

    One lesson from the financial crisis was the risk of contagion
to U.S. financial markets from private-fund activities, strategies,
and exposures, including those related to novel or complex
derivatives. This was evident with the failure of Bear Stearns'
structured credit funds in the lead-up to the financial crisis, and
more recently, with the failure of Archegos Capital Management.
These examples, and others, highlight the necessity for U.S.
financial regulators to have visibility into funds' activities and
exposures to fulfill their regulatory responsibilities and
ultimately, to prevent or mitigate the buildup of systemic risk in
the U.S. financial system.
    This proposal marks important coordination with the Securities
and Exchange Commission (``SEC'') to enhance joint reporting
requirements and guard against hidden risks in the U.S. financial
system.
    The CFTC and SEC embark on this proposed rulemaking after nearly
a decade of experience of private fund reporting.\2\ It is
particularly appropriate to revisit our reporting framework given
that, as U.S. financial markets have evolved over the past decade,
the private fund space has grown and evolved in tandem. This is why
we seek public comment on new or revised areas of data--including
those intended to provide further insight into complex structures,
new types of instruments, identification data, redemption and
withdrawal rights, ownership, and counterparty exposures, among
other subjects. It is also important that we collect information on
fund exposure to digital assets in order to understand evolving
market risk.
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    \2\ The Dodd-Frank Wall Street Reform and Consumer Protection
Act, section 112, Public Law 111-203, 124 Stat. 1376 (2010) (the
``Dodd-Frank Act''), required the SEC and CFTC to establish joint
rules in furtherance of the FSOC's critical mission to monitor
systemic risk through the creation of Form PF. See Section 406 of
the Dodd-Frank Act. Since 2012, private fund advisers, including
certain commodity pool operators and commodity trading advisors that
are dually-registered with both the CFTC and SEC, have been required
to file reports regarding their operations and holdings through Form
PF. See also Reporting by Investment Advisers to Private Funds and
Certain Commodity Pool Operators and Commodity Trading Advisors on
Form PF, 76 FR 71128 (Nov. 16, 2011).
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    Our objective is to increase the usefulness of the data
collected; to ensure that it is actually used as Congress intended
to bring transparency to risk previously hidden. I look forward to
reviewing public comment on whether the proposal would meet our
objective.
    Thank you to Commission staff for working with my office to
improve the proposal to facilitate effective oversight by the CFTC.
I commend staff from both agencies on this proposal, and on future
information sharing, that will promote the financial stability of
U.S. financial markets.

CFTC Appendix 5--Dissenting Statement of Commissioner Summer K.
Mersinger

    I am respectfully voting to dissent on the joint SEC/CFTC
proposed rulemaking to amend Form PF, the confidential reporting
form for certain SEC-registered investment advisers to private
funds. The class of registered investment advisers required to
submit Form PF includes those that also are registered with the CFTC
as commodity pool operators or commodity trading advisors.
    As I previously stated in my concurrence to the CFTC's recent
Request for Information on Climate-Related Financial Risk (``Climate
RFI''),\1\ I support efforts to engage market participants,
industry, and the general public in our policy-making process. And I
agree that after a decade of experience with Form PF, it is
appropriate to evaluate possible amendments. If improvements can be
made that would enable us to collect more efficiently data that we
truly need to fulfill our responsibilities, while reducing
unnecessary burdens on those required to supply that data, we should
consider them.
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    \1\ See Concurring Statement of Commissioner Summer K. Mersinger
Regarding Request for Information on Climate-Related Financial Risk
(June 2, 2022), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement060222.
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    However, I do not support this particular proposal. Data and
information that federal regulators request from market participants
should be narrowly tailored to the purpose intended under our
governing statutes, and unfortunately, that does not appear to be
the overall approach in this proposal. I am even more concerned that
constructive input the agencies already have received over the years
from market participants that actually complete Form PF receives
little attention in the proposal.
    I look forward to receiving the public's comments, which I hope
will inform the Commissions' consideration of final amendments to
Form PF that provide for the collection of necessary data as
efficiently as possible.

CFTC Appendix 6--Dissenting Statement of Commissioner Caroline D. Pham

    I respectfully dissent from the proposed amendments to the
Reporting Form for Investment Advisers to Private Funds and Certain
Commodity Pool Operators and Commodity Trading Advisors (Form PF).
The proposed joint amendments, an action of the CFTC as well as the
SEC, seem to impose overly broad obligations that would be
unnecessarily burdensome and would present potentially significant
operational challenges and costs without a persuasive cost-benefit
analysis under the Commodity Exchange Act (CEA).\1\ In a time of
economic challenges, including rising inflation, we must be careful
when considering proposals that could inhibit positive economic
activity that supports American businesses and jobs. I look forward
to hearing from commenters as to the proposed amendments, including
practical implementation issues and the relative costs and benefits
of the proposal.
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    \1\ 7 U.S.C. 19.

[FR Doc. 2022-17724 Filed 8-31-22; 8:45 am]
BILLING CODE 8011-01-P 6351-01-P