[Federal Register Volume 87, Number 169 (Thursday, September 1, 2022)]
[Proposed Rules]
[Pages 53832-53985]
[FR Doc No: 2022-17724]

Vol. 87

Thursday,

No. 169

September 1, 2022

Part II

Commodity Futures Trading Commission

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Securities and Exchange Commission

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17 CFR Parts 275 and 279

Form PF; Reporting Requirements for All Filers and Large Hedge Fund
Advisers; Proposed Rule

Federal Register / Vol. 87 , No. 169 / Thursday, September 1, 2022 /
Proposed Rules

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COMMODITY FUTURES TRADING COMMISSION

RIN 3038-AF31

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 275 and 279

[Release No. IA-6083; File No. S7-22-22]
RIN 3235-AN13

Form PF; Reporting Requirements for All Filers and Large Hedge
Fund Advisers

AGENCIES: Commodity Futures Trading Commission and Securities and
Exchange Commission.

ACTION: Joint proposed rules.

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SUMMARY: The Commodity Futures Trading Commission (``CFTC'') and the
Securities and Exchange Commission (``SEC'') (collectively, ``we'' or
the ``Commissions'') are proposing to amend Form PF, the confidential
reporting form for certain SEC-registered investment advisers to
private funds, including those that also are registered with the CFTC
as a commodity pool operator (``CPO'') or commodity trading adviser
(``CTA''). The amendments are designed to enhance the Financial
Stability Oversight Council's (``FSOC's'') ability to monitor systemic
risk as well as bolster the SEC's regulatory oversight of private fund
advisers and investor protection efforts. In connection with the
amendments to Form PF, the SEC proposes to amend a rule under the
Investment Advisers Act of 1940 (the ``Advisers Act'') to revise
instructions for requesting a temporary hardship exemption. We also are
soliciting comment on the proposed rules and a number of alternatives,
including whether certain possible changes to the proposal should apply
to Form ADV.

DATES: Comments should be received on or before October 11, 2022.

ADDRESSES: Comments may be submitted by any of the following methods.
    CFTC: Comments may be submitted to the CFTC by any of the following
methods.
     CFTC Comments portal: https://comments.cftc.gov. Follow
the instructions for submitting comments through the website.
     Mail: Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.
     Hand Delivery/Courier: Follow the same instructions as for
Mail above.
    Please submit your comments using only one method. To avoid
possible delays with mail or in-person deliveries, submissions through
the CFTC website are encouraged. ``Form PF'' must be in the subject
field of comments submitted via email, and clearly indicated on written
submissions. All comments must be submitted in English, or if not,
accompanied by an English translation. Comments will be posted as
received to www.cftc.gov. You should submit only information that you
wish to make available publicly. If you wish the CFTC to consider
information that may be exempt from disclosure under the Freedom of
Information Act, a petition for confidential treatment of the exempt
information may be submitted according to the established procedures in
17 CFR 145.9.
    The CFTC reserves the right, but shall have no obligation, to
review, prescreen, filter, redact, refuse, or remove any or all of your
submission from www.cftc.gov that it may deem to be inappropriate for
publication, including, but not limited to, obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the public comment
file and will be considered as required under the Administrative
Procedure Act and other applicable laws, and may be accessible under
the Freedom of Information Act, 5 U.S.C. 552, et seq. (``FOIA'').
    SEC: Comments may be submitted to the SEC by any of the following
methods:

Electronic Comments

     Use the SEC's internet comment forms (https://www.sec.gov/regulatory-actions/how-to-submit-comments); or
     Send an email to [email protected]. Please include
File Number S7-22-22 on the subject line.

Paper Comments

     Send paper comments to Secretary, U.S. Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-22-22. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. The SEC will post all comments on the SEC's website (https://www.sec.gov/rules/proposed.shtml). Comments also are available for
website viewing and printing in the SEC's Public Reference Room, 100 F
Street NE, Washington, DC 20549, on official business days between the
hours of 10 a.m. and 3 p.m. Operating conditions may limit access to
the SEC's Public Reference Room. All comments received will be posted
without change. Persons submitting comments are cautioned that we do
not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly.
    Studies, memoranda, or other substantive items may be added by the
SEC or staff to the comment file during this rulemaking. A notification
of the inclusion in the comment file of any such materials will be made
available on the SEC's website. To ensure direct electronic receipt of
such notifications, sign up through the ``Stay Connected'' option at
www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: CFTC: Pamela Geraghty, Associate
Director; Michael Ehrstein, Special Counsel; Andrew Ruggiero, Attorney-
Advisor at<PHONE_NUMBER>, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street NW Washington, DC 20581. SEC: Alexis
Palascak, Lawrence Pace, Senior Counsels; Christine Schleppegrell,
Acting Branch Chief at<PHONE_NUMBER> or [email protected], Investment
Adviser Regulation Office, Division of Investment Management,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-8549.

SUPPLEMENTARY INFORMATION: The CFTC and SEC are requesting public
comment on the following under the Investment Advisers Act of 1940 [15
U.S.C. 80b] (``Advisers Act'').1 2
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    \1\ 15 U.S.C. 80b. Unless otherwise noted, when we refer to the
Advisers Act, or any section of the Advisers Act, we are referring
to 15 U.S.C. 80b, at which the Advisers Act is codified, and when we
refer to rules under the Advisers Act, or any section of these
rules, we are referring to title 17, part 275 of the Code of Federal
Regulations [17 CFR 275], in which these rules are published.
    \2\ Form PF is a joint form between the SEC and CFTC only with
respect to sections 1 and 2 of the Form.

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             Agency                    Reference         CFR citation
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CFTC & SEC......................  Form PF \2\.......  17 CFR 279.9.
SEC.............................  Rule 204(b)-1.....  17 CFR 275.204(b)-
                                                       1.
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Table of Contents

I. Introduction
II. Discussion
    A. Proposed Amendments to the General Instructions
    1. Reporting Master-Feeder Arrangements and Parallel Fund
Structures
    2. Reporting Private Funds that Invest in Other Funds
    3. Reporting Timelines
    B. Proposed Amendments Concerning Basic Information about the
Adviser and the Private Funds it Advises
    1. Proposed Amendments to Section 1a of Form PF--Identifying
Information
    2. Proposed Amendments to Section 1b of Form PF--Concerning All
Private Funds
    3. Proposed Amendments to Section 1c of Form PF--Concerning All
Hedge Funds
    C. Proposed Amendments Concerning Information about Hedge Funds
Advised by Large Private Fund Advisers
    1. Proposed Amendments to Section 2a
    2. Proposed Amendments to Section 2b
    D. Proposed Amendments To Enhance Data Quality
    E. Proposed Additional Amendments
III. Economic Analysis
    A. Introduction
    B. Economic Baseline and Affected Parties
    1. Economic Baseline
    2. Affected Parties
    C. Benefits and Costs
    1. Benefits
    2. Costs
    D. Reasonable Alternatives
    1. Alternatives to Proposed Amendments to General Instructions,
Proposed Amendments to Enhance Data Quality, and Proposed Additional
Amendments
    2. Alternatives to Proposed Amendments to Basic Information
about the Adviser and the Private Funds It Advises
    3. Alternatives to Proposed Amendments to Information about
Hedge Funds Advised by Large Private Fund Advisers
    4. Alternatives to the Definition of the Term ``Hedge Fund''
    E. Request for Comment
IV. Paperwork Reduction Act
    A. Form PF
    1. Purpose and Use of the Information Collection
    2. Confidentiality
    3. Burden Estimates
    B. Request for Comments
V. Regulatory Flexibility Act Certification
VI. Consideration of Impact on the Economy
VII. Statutory Authority

I. Introduction

    The Commissions are proposing to amend sections of Form PF, the
form that certain SEC-registered investment advisers, including those
that also are registered with the CFTC as a CPO or CTA, use to report
confidential information about the private funds that they advise.\3\
The proposed amendments are designed to enhance FSOC's monitoring and
assessment of systemic risk and to provide additional information for
FSOC's use in determining whether and how to deploy its regulatory
tools. The proposed amendments also are designed to collect additional
data for use in the Commissions' regulatory programs, including
examinations, investigations and investor protection efforts relating
to private fund advisers.\4\ Finally, the proposed amendments also are
designed to improve the usefulness of this data.\5\
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    \3\ Specifically, the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (``Dodd-Frank Act''), mandated that the SEC
and the CFTC, in consultation with the FSOC, jointly promulgate
rules governing the form and substance of reports required by
investment advisers to private funds to be filed with the SEC, and
with the CFTC for those that are dually-registered with both
Commissions. Public Law 111-203, 124 Stat. 1376 (2010). See, 15
U.S.C. 80b-11. See also, 17 CFR 4.27(d). The result was Sections 1
and 2 of Form PF, which were jointly promulgated. See Reporting by
Investment Advisers to Private Funds and Certain Commodity Pool
Operators and Commodity Trading Advisors on Form PF, Advisers Act
Release No. 3308 (Oct. 31, 2011), [76 FR 71128 (Nov. 16, 2011)]
(``2011 Form PF Adopting Release'') at section I. In 2014, the SEC
amended Form PF section 3 in connection with certain money market
fund reforms. See Money Market Fund Reform; Amendments to Form PF,
Advisers Act Release No. 3879 (July 23, 2014), [79 FR 47736 (Aug.
14, 2014)] (``2014 Form PF Amending Release'').
    \4\ Any reference to the ``Commissions'', or ``we'', as it
relates to the collection and use of Form PF data are meant to refer
to the agencies in their separate or collective capacities, and such
data from filings made pursuant to 17 CFR 275.204(b)-1, by and
through Private Fund Reporting Depository, a subsystem of the
Investment Adviser Registration Depository (``IARD''), and reports,
analysis, and memoranda produced pursuant thereto. Further, as the
collection is being made pursuant to the Advisers Act and the IARD
is subject to the authority and control of the SEC, as of the date
of this proposal, it should not be assumed that the CFTC has direct,
or timely access to such data. The Commissions will continue to
engage in interagency discussions on the sharing of portions of Form
PF data relevant to the CFTC consistent with the terms of existing
interagency agreements or arrangements related to the sharing of
data.
    \5\ Additionally, the Federal Reserve Board uses this data for
research and analysis.
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    An adviser must file Form PF if (1) it is registered or required to
register with the SEC as an investment adviser, (2) it manages one or
more private funds, and (3) the adviser and its related persons
collectively had at least $150 million in private fund assets under
management as of the last day of its most recently completed fiscal
year.\6\ A CPO or CTA that also is registered or required to register
with the SEC as an investment adviser and satisfies the other
conditions described above must file Form PF with respect to any
commodity pool it manages that is a private fund. Most private fund
advisers file annually to report general information such as the types
of private funds advised (e.g., hedge funds, private equity funds, or
liquidity funds), fund size, use of borrowings and derivatives,
strategy, and types of investors. Certain larger advisers provide more
information on a more frequent basis, including more detailed
information on particular hedge funds and liquidity funds.
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    \6\ See 17 CFR 275.204(b)-1. Advisers Act section 202(a)(29)
defines the term ``private fund'' as an issuer that would be an
investment company, as defined in section 3 of the Investment
Company Act of 1940 (``Investment Company Act''), but for section
3(c)(1) or 3(c)(7) of that Act. Section 3(c)(1) of the Investment
Company Act provides an exclusion from the definition of
``investment company'' for any issuer whose outstanding securities
(other than short-term paper) are beneficially owned by not more
than one hundred persons (or, in the case of a qualifying venture
capital fund, 250 persons) and which is not making and does not
presently propose to make a public offering of its securities.
Section 3(c)(7) of the Investment Company Act provides an exclusion
from the definition of ``investment company'' for any issuer, the
outstanding securities of which are owned exclusively by persons
who, at the time of acquisition of such securities, are qualified
purchasers, and which is not making and does not at that time
propose to make a public offering of such securities. The term
``qualified purchaser'' is defined in section 2(a)(51) of the
Investment Company Act.
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    Form PF provides the Commissions and FSOC with important
information about the basic operations and strategies of private funds
and has helped establish a baseline picture of the private fund
industry for use in assessing systemic risk. We now have almost a
decade of experience analyzing the information collected on Form PF. In
that time, the private fund industry has grown in size and evolved in
terms of business practices, complexity of fund structures, and
investment strategies and exposures.\7\ For example,

certain investment strategies, including credit, digital asset,\8\
litigation finance,\9\ and real estate strategies, have become more
common since the form was adopted.\10\ Similarly, we understand that
qualifying hedge fund exposures to repurchase agreements (``repos''),
reverse repurchase agreements (``reverse repos''), and U.S. treasury
securities have increased in recent years.\11\ Experience with Form PF
data also has identified potential ways to improve data quality,
including in instances where existing reporting may not identify fully
the potential risks, such as in the reporting of certain master-feeder
arrangements.
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    \7\ The value of private fund net assets reported on Form PF has
more than doubled, growing from $5 trillion (net) in 2013 to $12
trillion (net) by the end of the third quarter of 2021, while the
number of private funds reported on the form has increased by nearly
55 percent in that time period. Unless otherwise noted, the private
funds statistics used in this Release are from the Private Funds
Statistics Third Quarter 2021. Division of Investment Management,
Private Fund Statistics Third Quarter 2021, (Mar. 30, 2022),
available at https://www.sec.gov/divisions/investment/private-funds-statistics/private-funds-statistics-2021-q3.pdf (``Private Fund
Statistics Q3 2021''). Any comparisons to earlier periods are from
the private funds statistics from that period, all of which are
available at https://www.sec.gov/divisions/investment/private-funds-statistics.shtml. SEC staff began publishing the private fund
statistics in 2015, including data from 2013. Therefore, many
comparisons in this Release discuss the almost nine year span from
the beginning of 2013 through third quarter 2021. Some discussion in
this Release compares data from a shorter time span, because the SEC
staff published such data later than 2013. Staff reports,
statistics, and other staff documents (including those cited herein)
represent the views of SEC staff and are not a rule, regulation, or
statement of the SEC. The SEC has neither approved nor disapproved
the content of these documents and, like all staff statements, they
have no legal force or effect, do not alter or amend applicable law,
and create no new or additional obligations for any person.
    \8\ See Zuckerman, Gregory, Mainstream Hedge Funds Pour Billions
of Dollars Into Crypto, The Wall Street Journal (March 2022)
available at https://www.wsj.com/articles/mainstream-hedge-funds-
pour-billions-of-dollars-into-crypto-
11646808223#:~:text=Brevan%20Howard%20launched%20a%20cryptocurrency,a
nd%20investing%20in%20blockchain%20technology.
    \9\ See Burnett, David and Pierce, John, The Emerging Market for
Litigation Funding, The Hedge Fund Journal (June 2013) available at
https://thehedgefundjournal.com/the-emerging-market-for-litigation-funding/.
    \10\ See Private Fund Statistics Q3 2021, supra footnote 7, at
p. 24.
    \11\ A qualifying hedge fund is defined in Form PF as ``any
hedge fund that has a net asset value (individually or in
combination with any feeder funds, parallel funds and/or dependent
parallel managed accounts) of at least $500 million as of the last
day of any month in the fiscal quarter immediately preceding [the
adviser's] most recently completed fiscal quarter.'' See Form PF
Glossary of Terms. From 2015 through the end of 2020, qualifying
hedge fund exposure to repos doubled to $2 trillion, while from 2013
through the end of 2020, qualifying hedge fund borrowings
attributable to reverse repos more than doubled to $1.3 trillion.
For the same period, qualifying hedge fund exposure to U.S. treasury
securities increased by almost 70 percent to $1.7 trillion in
aggregate qualifying hedge fund gross notional exposure.
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    Based on this experience and in light of these changes, the
Commissions and FSOC have identified information gaps and situations
where revised information would improve our understanding of the
private fund industry and the potential systemic risk within it. We
believe more detailed information, including with respect to strategies
and exposures, would provide better empirical data to FSOC with which
it may assess better the extent to which the activities of private
funds or their advisers pose systemic risks. We expect that FSOC would
use the new information collected on Form PF, together with market data
from other sources, to assist in determining whether and how to deploy
its regulatory tools.\12\ This may include, for instance, identifying
private fund advisers that merit further analysis or deciding whether
to recommend to a primary financial regulator, like the SEC or CFTC,
more stringent regulation of the financial activities that FSOC
determines may create or increase systemic risk. This revised
information also would improve our ability to protect investors.\13\
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    \12\ Under the Dodd-Frank Act, FSOC must monitor emerging risks
to U.S. financial stability and employ its regulatory tools to
address those risks. S. REP. NO. 111-176, at 2-3 (2010).
    \13\ The SEC also recently proposed amendments to the SEC-only
sections of Form PF (sections 3, 4, 5, and newly proposed section 6)
that would (1) require current reporting for large hedge fund
advisers and advisers to private equity funds, (2) decrease the
reporting threshold for large private equity advisers and amend
reporting requirements for large private equity advisers, and (3)
amend reporting requirements for large liquidity fund advisers.
Amendments to Form PF to Require Current Reporting and Amend
Reporting Requirements for Large Private Equity Advisers and Large
Liquidity Fund Advisers, Investment Advisers Act Release No. 5950
(Jan. 26, 2022), [87 FR 9106 (Feb. 17, 2022)] (``2022 SEC Form PF
Proposal'').
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    The Commissions have consulted with FSOC to gain input on this
proposal, and to help ensure that Form PF continues to provide FSOC
with information it can use to carry out its monitoring obligations and
assess systemic risk in light of changes in the private fund industry
over the past decade. The Commissions are jointly proposing amendments
to the form's general instructions, as well as section 1 of Form PF,
which would apply to all Form PF filers. The Commissions also are
jointly proposing amendments to section 2 of Form PF, which would apply
to large hedge fund advisers who advise qualifying hedge funds (i.e.,
hedge funds that have a net asset value of at least $500 million).\14\
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    \14\ Unless stated otherwise, terms in this release that are
defined in the Form PF Glossary of Terms are as defined therein.
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II. Discussion

A. Proposed Amendments to the General Instructions

    We are proposing amendments to the Form PF general instructions
designed to improve data quality and comparability and to enhance
investor protection efforts and systemic risk assessment.\15\
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    \15\ Additional proposed changes to the General Instructions
concerning amendments to enhance data quality concerning
methodologies and additional amendments are discussed in sections
II.D and II.E of this Release, as well as the proposal to amend
Instruction 3 to reflect our proposal to remove section 2a, which is
discussed in footnote 138, and accompanying text.
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1. Reporting Master-Feeder Arrangements and Parallel Fund Structures
    Private funds often use complex structures to invest, including
master-feeder arrangements and parallel fund structures.\16\ We are
proposing amendments to Form PF that generally would require advisers
to report separately each component fund of a master-feeder arrangement
and parallel fund structure.\17\ However, an adviser would continue to
aggregate these structures for purposes of determining whether the
adviser meets a reporting threshold.\18\
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    \16\ A ``master-feeder arrangement'' is an arrangement in which
one or more funds (``feeder funds'') invest all or substantially all
of their assets in a single private fund (``master fund''). A
``parallel fund structure'' is a structure in which one or more
private funds (each, a ``parallel fund'') pursues substantially the
same investment objective and strategy and invests side by side in
substantially the same positions as another private fund. See Form
PF Glossary of Terms.
    \17\ Proposed Instruction 6. We also propose to amend
Instruction 3 to reflect the proposed approach for reporting master-
feeder arrangements and parallel fund structures. See infra footnote
18.
    \18\ Proposed Instruction 5. For example, an adviser would
aggregate private funds that are part of the same master-feeder
arrangement in determining whether the adviser is a large hedge fund
adviser that must complete section 2 of Form PF. In connection with
these proposed changes, we propose to amend the term ``reporting
fund'' and Instruction 3 so they would no longer discuss reporting
aggregated information. Additionally, we propose to reorganize
current Instruction 5 and current Instruction 6 so they reflect the
proposed approach for when to aggregate certain funds. Current
Instruction 5 instructs advisers about when to aggregate information
about certain funds for purposes of reporting thresholds and
responding to questions. Current Instruction 6 instructs advisers
about how to aggregate information about certain funds. Proposed
Instruction 5 would instruct advisers on when to aggregate
information about certain funds for purposes of determining whether
they meet reporting thresholds. Proposed Instruction 6 would
instruct advisers about how to report information about certain
funds when responding to questions.
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    Currently, Form PF provides advisers with flexibility to respond to
questions regarding master-feeder arrangements and parallel fund
structures either in the aggregate or separately, as long as they do so
consistently throughout Form PF.\19\ In adopting this approach in 2011,
the Commission stated that requiring advisers to aggregate or
disaggregate funds in a manner inconsistent with their internal
recordkeeping and

reporting may impose additional burdens and that, as long as the
structure of those arrangements is adequately disclosed, a prescriptive
approach to aggregation was not necessary.\20\ However, based on
experience reviewing Form PF data, we observed that when some advisers
report in aggregate and some advisers report separately, this can
result in obscured risk profiles (e.g., asset size, counterparty
exposure, investor liquidity) and made it difficult to compare complex
structures, undermining the utility of the data collected. We believe
prescribing the way advisers report a master-feeder arrangement and
parallel fund structure would provide better insight into the risks and
exposures of these arrangements.
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    \19\ Current Instruction 5.
    \20\ 2011 Form PF Adopting Release, supra footnote 3, at text
following n.332.
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    Accordingly, we propose to require an adviser to report each
component fund of a master-feeder arrangement and parallel fund
structure, except where a feeder fund invests all its assets in a
single master fund and/or ``cash and cash equivalents'' (i.e., a
disregarded feeder fund).\21\ In the case of a disregarded feeder fund
in Question 6, advisers instead would identify the disregarded feeder
fund and look through to any disregarded feeder fund's investors in
responding to certain questions regarding fund investors on behalf of
the applicable master fund. The master fund effectively is a conduit
through which a disregarded feeder fund invests and we do not believe
separate reporting for such a feeder fund is necessary for data
analysis purposes.
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    \21\ See proposed Instruction 6. The proposal would revise the
term ``cash and cash equivalents,'' as described in section II.B.2
in this Release.
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    In addition, we propose to no longer allow advisers to report any
``parallel managed accounts,'' (which is distinguished from ``parallel
fund structure''), except advisers would continue to be required to
report the total value of all parallel managed accounts related to each
reporting fund.\22\ We continue to believe that including parallel
managed accounts in the reporting may reduce the quality of data while
imposing additional burdens on advisers.\23\ Data regarding the total
value of parallel managed accounts, however, allow FSOC to take into
account the greater amount of assets an adviser may be managing using a
given strategy for purposes of analyzing the data reported on Form
PF.\24\
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    \22\ Proposed Instruction 6. A ``parallel managed account'' is
any managed account or other pool of assets managed by the adviser
that pursues substantially the same investment objective and
strategy and invests side by side in substantially the same
positions as the identified private fund. See Form PF Glossary of
Terms. Currently, advisers may, but are not required to, report
information regarding parallel managed accounts in response to
certain questions, except they must report the total value of all
parallel managed accounts related to each reporting fund. See
current Instruction 5.
    \23\ See 2011 Form PF Adopting Release, supra footnote 3, at
n.334, and accompanying text (the Commission was persuaded that
aggregating parallel managed accounts for reporting purposes would
be difficult and ``result in inconsistent and misleading data''
because the characteristics of parallel managed accounts are often
somewhat different from the funds with which they are managed). For
example, in a separately managed account a client generally selects
an adviser's strategy but tailors it to the client's own investment
guidelines.
    \24\ Id. at text following n.336.
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    We request comment on the proposed amendments.
    1. Should we amend Form PF to require advisers to report component
funds of master-feeder arrangements and parallel fund structures
separately except for disregarded feeder funds, as proposed? Would the
proposed amendments lead to more accurate data regarding the risk
profiles of reporting funds and improve comparability? Would the
proposed amendments enhance investor protection efforts and systemic
risk assessment? Are there better ways to meet these objectives? For
example, should Form PF require advisers to report only at the master
fund level or the feeder fund level?
    2. Do you agree that the master fund is effectively a conduit
through which a disregarded feeder fund invests and that separate
reporting for such a feeder fund is not necessary for data analysis
purposes? Should we require advisers to report additional information
regarding disregarded feeder funds? For example, should we require
advisers to report the total cash holdings of such funds?
    3. Are there other exceptions for reporting each component of a
master-feeder arrangement or parallel fund structures separately that
we should adopt?
    4. Should we continue to require advisers to report only limited
information on parallel managed accounts? If we should require
additional reporting from parallel managed accounts, what additional
information should we require? Should reporting of any such additional
information be mandatory or voluntary?
    5. Should we continue to require advisers to aggregate structures
when determining whether they meet reporting thresholds?
    6. Form PF currently does not require an adviser to report
information regarding a private fund advised by any of the adviser's
related persons, unless the adviser identified that related person as
one for which the adviser is filing Form PF. Should we take a different
approach and require an adviser to include information regarding
private funds advised by any of the adviser's related persons if they
are part of a master-feeder arrangement or parallel fund structure
managed by the adviser? Or, would an adviser have difficulty gathering
the information necessary to report this information for private funds
managed by the adviser's related persons whose operations are genuinely
independent of the adviser's own operations?
    7. Could ``parallel managed accounts,'' be interpreted as
overlapping with ``parallel fund structure?'' If so, should we remove
the phrase ``or other pool of assets'' in the definition of ``parallel
managed account'' to prevent that?
2. Reporting Private Funds That Invest in Other Funds
    We are proposing amendments to Form PF regarding how advisers
report private fund investments in other private funds, trading
vehicles, and other funds that are not private funds.
    Investments in other private funds. We propose to amend Instruction
7, which addresses how advisers treat private fund investments in other
private funds (e.g., a ``fund of funds''). Currently, advisers include
the value of private fund investments in other private funds in
determining whether the adviser meets the filing threshold to file Form
PF.\25\ We believe this requirement is implicit in the current form and
we propose to amend Instruction 7 to make it explicit. Current Form PF
permits an adviser to disregard the value of a private fund's equity
investments in other private funds for purposes of both the form's
reporting thresholds (e.g., whether it qualifies as a large hedge fund
adviser) and responding to questions on Form PF, as long as it does so
consistently throughout Form PF, subject to certain exceptions.\26\
Under the proposal, the form would continue to permit an adviser to
include or exclude the value of investments in other private funds
(including internal and external private funds) when determining
whether the

adviser meets the thresholds for reporting as a large hedge fund
adviser, large liquidity fund adviser, or large private equity adviser,
and whether a hedge fund is a qualifying hedge fund.\27\ The
Commissions continue to believe that allowing this flexibility for
these reporting thresholds avoids duplicative reporting, which reduces
the burden of reporting for advisers and improves the quality of the
data reported.\28\ For example, under these instructions an adviser may
exclude an investment in an external private fund that would already be
counted through another adviser's reporting obligations.
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    \25\ Form PF Instruction 1 provides that certain advisers meet
the filing threshold if they and their related persons,
collectively, had at least $150 million in private fund assets under
management as of the last day of their most recently completed
fiscal year.
    \26\ For example, under the current instructions, an adviser is
not permitted to disregard any liabilities of the private fund, even
if incurred in connection with an investment in other private funds.
See current Instruction 7.
    \27\ See current Instruction 7 and proposed Instruction 7.
    \28\ See 2011 Form PF Adopting Release, supra footnote 3, at
n.128, and accompanying text.
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    However, we believe the form's current flexibility on whether to
disregard underlying funds when responding to questions has undermined
the utility of the data collected, as it provides unclear, inconsistent
data on the scale of reporting funds' exposures. Therefore, we propose
to amend Instruction 7 to require an adviser to include the value of a
reporting fund's investments in other private funds when responding to
questions on Form PF, unless otherwise directed by the instructions to
a particular question.\29\ We believe that requiring advisers to report
fund of funds arrangements in a consistent manner would allow the
Commissions and FSOC to understand better these fund structures by
providing greater insight into the scale and exposures of reporting
funds.
---------------------------------------------------------------------------

    \29\ For example, an adviser would report the value of the
reporting fund's investments in other private funds when reporting
its gross asset value and net asset value in proposed Questions 11
and 12; however, Question 3 would specify that advisers must exclude
the value of the reporting fund's investment in other internal
private funds when providing a breakdown of their regulatory assets
under management and net assets under management.
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    Currently, advisers are not required to, but nonetheless have the
option to, ``look through'' a reporting fund's investments in any other
entity (including other private funds), except in instances when the
form directs otherwise.\30\ As a result, some advisers may ``look
through'' a reporting fund's investments in other entities, while
others do not, leading to unclear data, inconsistent comparisons, and
less precise analysis across advisers. Therefore, we propose to amend
Instruction 7 to provide that, when responding to questions, advisers
must not ``look through'' a reporting fund's investments in internal
private funds or external private funds (other than a trading vehicle,
as described below), unless the question instructs the adviser to
report exposure obtained indirectly through positions in such funds or
other entities.\31\ We also propose to take the same approach with
regard to a reporting fund's investments in funds or other entities
that are not private funds or trading vehicles.\32\ These proposed
amendments are designed to improve data quality and comparisons, so the
Commissions and FSOC understand what Form PF data is from advisers
``looking through'' a reporting fund's investments, which we believe
would lead to more effective systemic risk assessments and investor
protection efforts.
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    \30\ See current Instruction 8.
    \31\ See proposed Instruction 7. For example, advisers would not
``look through'' to the creditors of or counterparties to other
private funds in responding to questions that ask about a reporting
fund's borrowings and counterparty exposures. See proposed Question
18 (concerning borrowings) and proposed Questions 27 and 28
(concerning counterparty exposures). However, selected questions in
section 2 of the form would require advisers to report indirect
exposure resulting from positions held through other entities
including private funds, and advisers would ``look through'' the
reporting fund's investments in internal private funds and external
private funds in responding to those questions. See e.g., proposed
Question 32 (concerning reporting fund exposures).
    \32\ See proposed Instruction 8 and supra footnote 31 (which
provides examples that also apply to advisers to reporting funds
that invest in funds and other entities that are not private funds
or trading vehicles).
---------------------------------------------------------------------------

    Trading vehicles. Some private funds wholly own separate legal
entities that hold assets, incur leverage, or conduct trading or other
activities as part of the private fund's investment activities, but do
not operate a business (each, a ``trading vehicle'').\33\ We propose to
amend Form PF's general instructions to explain how advisers would
report information if the reporting fund uses a trading vehicle.\34\
Specifically, if the reporting fund uses a trading vehicle, and the
reporting fund is its only equity owner, the adviser would either (1)
identify the trading vehicle in section 1b, and report answers on an
aggregated basis for the reporting fund and such trading vehicle, or
(2) report the trading vehicle as a separate reporting fund. An adviser
would have to report the trading vehicle separately if the trading
vehicle holds assets, incurs leverage, or conducts trading or other
activities on behalf of more than one reporting fund. If reporting
separately, (1) advisers would report the trading vehicle as a hedge
fund if a hedge fund invests through the trading vehicle; (2) advisers
would report the trading vehicle as a qualifying hedge fund if a
qualifying hedge fund invests through the trading vehicle; (3)
otherwise, advisers would report the trading vehicle as a liquidity
fund, private equity fund, or other type of fund based on its
activities.\35\
---------------------------------------------------------------------------

    \33\ We propose to add ``trading vehicle'' to the Form PF
Glossary of Terms.
    \34\ See proposed Instruction 7. We propose to make a conforming
change to Instruction 8 to reference this new instruction.
    \35\ See proposed Instruction 7.
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    Private funds may use trading vehicles for various purposes,
including (1) for jurisdictional, tax, or other regulatory purposes, or
(2) to ``ring-fence'' assets in light of liability or bankruptcy
concerns associated with a particular investment (i.e., structure
assets so counterparties would only have recourse against the trading
vehicle and not against the private fund). Currently, Form PF does not
require advisers to identify trading vehicles. As a result, Form PF
does not provide a clear window into the use of trading vehicles and
the risks they present. For example, if a trading vehicle is ring-
fenced, current Form PF does not provide a view into the assets or
collateral on which a counterparty to such trading vehicle relies or
the size and nature of the trading vehicle's exposure. In addition,
where more than one reporting fund invests through a particular trading
vehicle, the activities of multiple reporting funds are blended and
potentially obscured. The proposed amendments are designed to address
these concerns by providing more information on the extent private
funds use trading vehicles to conduct investment activities. The
proposed amendments also are designed to provide improved visibility
into position sizes and counterparty exposures through trading
vehicles. Having a clear, unobscured view into position sizes and
counterparty exposures through trading vehicles is designed to help
ensure accurate systemic risk assessment and analysis to further
investor protection efforts, by providing the Commissions and FSOC with
a view into the assets or collateral on which a counterparty to such
trading vehicle relies and the size and nature of the trading vehicle's
exposure.
    Investments in funds that are not private funds. Under the
proposal, advisers would continue to include the value of the reporting
fund's investments in funds and other entities that are not private
funds, in determining reporting thresholds and responding to questions,
unless otherwise directed, as Form PF currently requires.\36\ For the
reasons discussed above, we are proposing that, when responding to
questions, however,

advisers must not ``look through'' a reporting fund's investments in
funds or other entities that are not private funds, or trading
vehicles, unless the question instructs the adviser to report exposure
obtained indirectly through positions in such funds or other
entities.\37\
---------------------------------------------------------------------------

    \36\ See Instruction 8.
    \37\ See supra footnote 32, and accompanying text (discussing
proposed amendments to Instruction 8).
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    8. Would the proposed amendments concerning reporting fund
investments in other private funds, trading vehicles, and other funds
that are not private funds provide a better understanding of the
structure of private funds, and improve data quality and comparability?
Is there a better way to meet these objectives? Should Form PF provide
more or less flexibility to advisers in how they treat these types of
private fund investments? For example, instead of allowing advisers the
flexibility to include or exclude a private fund's investments in other
private funds (including internal private funds and external private
funds) in determining whether they meet thresholds for filing as a
large hedge fund adviser, large liquidity adviser, or large private
equity adviser, and whether a reporting fund is a qualifying hedge
fund, should we require advisers to include or exclude such
investments? Should we require external qualifying hedge funds to be
excluded, to avoid receiving duplicate data? If Form PF should provide
more flexibility, how would we help ensure data is understandable and
comparable across advisers?
    9. Would the proposed amendments regarding trading vehicles provide
a clearer picture of how private funds use trading vehicles and their
market risks? Would the proposed amendments provide improved visibility
into position sizes and counterparty exposures? Is there a better way
to meet these objectives? For example, should Form PF require advisers
to report whether a trading vehicle is ring-fenced for liability
purposes?
    10. Under the proposal, if an adviser reports 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. Would
this proposed requirement help ensure advisers could not avoid
reporting the trading vehicle as a private fund that is subject to
additional reporting, such as a qualifying hedge fund? Is there a
better way to meet this objective? Should Form PF instead only require
advisers to report trading vehicles as investments in another fund?
    11. Are the ``look through'' requirements concerning how to report
a reporting fund's investments in other entities clear? Should we
require advisers to not look through a reporting fund's investments in
other entities, unless the question instructs the adviser to report
exposure obtained indirectly through positions in such funds or other
entities, as proposed?
3. Reporting Timelines
    We propose to amend 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 after each fiscal quarter, as Form PF currently requires.\38\ All
other advisers would continue to file annual updates within 120
calendar days after the end of their fiscal year.\39\ Form PF would
continue to require all advisers to use fiscal quarters and years to
determine filing thresholds because advisers already make such
calculations under 17 CFR 279.1 (``Form ADV''), which requires annual
updates based on fiscal year.\40\
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    \38\ Large hedge fund advisers generally would file within 60
calendar days after the end of each calendar quarter and large
liquidity fund advisers generally would file within 15 days after
the end of each calendar quarter. See proposed Instruction 9.
    \39\ We also propose to amend the term ``data reporting date''
to reflect this proposed approach. See Form PF Glossary of Terms.
    \40\ See Form PF Instructions 1 and 3; Form ADV and [17 CFR
275.204-1] Advisers Act rule 204-1 (amendments to Form ADV).
---------------------------------------------------------------------------

    Currently, fiscal quarter reporting significantly delays the time
at which the Commissions and FSOC receive a complete data set for a
calendar quarter. For example, large hedge fund advisers whose first
fiscal quarter ends on the calendar quarter end of March, would file
data covering January, February, and March by the end of May.\41\
However, large hedge fund advisers whose fiscal quarter ends in May
would not file their March data until the end of July, delaying
Commission and FSOC access to full calendar quarter data by all large
hedge fund advisers by four months. The proposed changes are designed
to provide a more complete data set sooner to improve the efficiency
and effectiveness of investor protection efforts and systemic risk
assessment. Based on Form ADV data as of December 2021, 99.2 percent of
private fund advisers already effectively file Form PF on a calendar
basis because their fiscal quarter or year ends on the calendar quarter
or year end, respectively.\42\ The 0.8 percent of private fund advisers
that have a non-calendar fiscal approach, which could cause a temporary
data gap, represents approximately 274 private funds, totaling $200
billion in gross asset value. Calendar quarter reporting also would
more closely align with reporting on [17 CFR pt. 4, app. A] Form CPO-
PQR, which requires calendar quarterly reporting, allowing easier
integration of these data sets.
---------------------------------------------------------------------------

    \41\ See current Instruction 9 (requiring large hedge fund
advisers to update Form PF within 60 calendar days after the end of
their first, second, and third fiscal quarters, among other things).
    \42\ We are presenting data from all private fund advisers, not
just those who would file on a quarterly basis (i.e., large hedge
fund advisers and large liquidity fund advisers), to avoid
potentially disclosing proprietary information of individual Form PF
filers, and to be inclusive considering that the population of
quarterly filers versus annual filers may change over time.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    12. Should we revise the reporting timelines, as proposed?
    13. Should Form PF continue to require advisers to determine filing
thresholds by fiscal year given corresponding Form ADV requirements?
Alternatively, should Form PF require all Form PF filers to use
calendar years and quarters for all Form PF purposes, including in
determining filing thresholds and when to update Form PF?
    14. Should we reduce the number of days by which filers must update
Form PF to receive data sooner? How would this relieve or increase
burdens? For example, should Form PF require large hedge fund advisers
to update Form PF within 30 calendar days after the end of each
calendar or fiscal quarter, rather than 60 calendar days? Should Form
PF require large liquidity fund advisers to report within 10 calendar
days after the end of each calendar quarter, rather than 15 calendar
days? Should annual filers file within 30 calendar days after the end
of their fiscal year, rather than 120 calendar days?
    15. Should Form PF reporting timelines be more or less consistent
with Form CPO-PQR?

B. Proposed Amendments Concerning Basic Information About the Adviser
and the Private Funds it Advises

    Each adviser required to file Form PF must complete all or part of
section 1. The proposed amendments to section 1 are designed to provide
greater insight into private funds' operations and strategies, and
assist in identifying trends, including those that could create
systemic risk, which in turn is designed to enhance investor protection
efforts and systemic risk assessment. The

proposed changes are designed to improve comparability across advisers,
improve data quality, and reduce reporting errors, based on our
experience with Form PF filings.
1. Proposed Amendments to Section 1a of Form PF--Identifying
Information
    Section 1a requires an adviser to report identifying information
about the adviser and the private funds it manages. We are proposing
several amendments to collect additional identifying information
regarding the adviser, its related persons, as well as their private
fund assets under management.
    LEI for advisers and related persons. Legal entity identifiers, or
``LEIs,'' help identify entities and link data from different sources
that use LEIs.\43\ Currently, Form PF requires advisers to report the
LEI for certain entities, if they have one, such as for the reporting
fund and any parallel funds.\44\ Form PF's current definition of
``LEI'' provides that, in the case of a financial institution that has
not been assigned an LEI, advisers must provide the RSSD ID assigned by
the National Information Center of the Board of Governors of the
Federal Reserve System (``Federal Reserve Board''), if the financial
institution has an RSSD ID.\45\ We propose to remove this requirement
and, instead, provide that advisers must not substitute any other
identifier that does not meet the definition of an LEI.\46\ However,
advisers would use the RSSD ID, if the financial institution has one,
for questions that specifically request an RSSD ID, and for questions
that require advisers to report any other identifying information where
the type of information is not specified.\47\ These proposed amendments
are designed to improve data quality because, based on experience with
the current form, reporting RSSD IDs as LEIs makes it more difficult
for staff to link data efficiently and effectively.
---------------------------------------------------------------------------

    \43\ Form PF generally defines ``LEI'' as: the ``legal entity
identifier'' assigned by or on behalf of an internationally
recognized standards setting body and required for reporting
purposes by the U.S. Department of the Treasury's Office of
Financial Research or a financial regulator. See Form PF Glossary of
Terms.
    \44\ See current Question 5(d) and current Question 7(e).
Current Form PF also requires large liquidity advisers to report the
LEI for each security and repo held by the reporting fund, if they
have one. See current Question 63(d) and current Question 63(g),
respectively. Current Form PF also requires large private equity
advisers to report the LEI for each of the reporting fund's
controlled portfolio companies that constitute a financial industry
portfolio company. See current Question 76.
    \45\ See current Form PF Glossary of Terms. Currently, if an LEI
has not been assigned and there is no RSSD ID, then the adviser
would leave that line blank.
    \46\ See proposed Form PF Glossary of Terms.
    \47\ See e.g., proposed Question 9. We also would add ``RSSD
ID'' to the Form PF Glossary of Terms and define it as the
identifier assigned by the National Information Center of the
Federal Reserve Board, if any. See Form PF Glossary of Terms.
---------------------------------------------------------------------------

    While Form PF currently requires advisers to provide the LEI for
entities such as reporting funds and parallel funds, if the entities
have one, it does not require advisers to report the LEI for itself and
its related persons.\48\ We propose to require advisers to provide the
``LEI'' for themselves and their ``related persons,'' if they have an
LEI.\49\ This proposed amendment is designed to help identify advisers
and their related persons and link data from other data sources that
use this identifier.
---------------------------------------------------------------------------

    \48\ See e.g., current Question 5 and current Question 7.
    \49\ See Proposed Question 1. We also propose to require
advisers to provide the LEI for other entities, if the other
entities have one, including internal private funds (see proposed
Question 7 and proposed Question 15), trading vehicles (see proposed
Question 9), and counterparties (see proposed Question 27 and
proposed Question 28). A ``related person'' has the meaning provided
in Form ADV. See Form PF Glossary of Terms. Form ADV defines a
``related person'' as any advisory affiliate and any person that is
under common control with the adviser. See Form ADV Glossary of
Terms.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    16. Should we require advisers to report ``LEI'' for financial
institutions that have one and only report ``RSSD ID'' as a secondary
identification where asked, as proposed? Would the proposed amendments
help us improve data quality and help link data more efficiently and
effectively from other sources that use LEIs and RSSD IDs? Is there a
better way to meet these objectives?
    17. Should Form PF require advisers to report the LEI for certain
entities, if they have one, as proposed, such as the adviser and each
related person, as well as internal private funds, trading vehicles,
creditors, and counterparties, or others? Alternatively, should Form PF
require any entities to obtain LEIs if they do not have them? Would
those entities seek to obtain LEIs in the future absent any regulatory
requirement to do so?
    18. Are there other data sources we also should use that would
allow us to link entities across forms?
    19. Should we amend the term ``LEI'' in Form PF to match Form ADV
or any other forms that use the term or a similar term?
    Assets under management. We are proposing to revise how advisers
report assets under management attributable to certain private funds.
Current Question 3 requires advisers to provide a breakdown of
regulatory assets under management and net assets under management.
These data are designed to show the size of the adviser and the nature
of the adviser's activities. We propose to amend the instructions to
direct advisers to exclude the value of private funds' investments in
other internal private funds to avoid double counting of fund of funds
assets.\50\ Advisers would include the value of trading vehicle assets
because, under the proposed definition, they would be wholly owned by
one or more reporting funds.\51\ These proposed amendments are designed
to provide a more accurate view of the assets managed by the adviser
and its related persons, as well as the general distribution of those
assets among various types of private funds, because accurately viewing
the scale of these managed assets is important to effectively assess
systemic risk and further investor protection efforts.
---------------------------------------------------------------------------

    \50\ See proposed Question 3.
    \51\ See proposed Question 3. See proposed Form PF Glossary of
Terms.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    20. Would the proposed amendments prevent double counting fund of
funds assets? Is there a better way to meet this objective? Should we
include private funds managed by the adviser's related persons in the
definition of internal private fund for these purposes? Are there other
types of investments that should be disregarded in order to prevent
double counting? Are there other approaches to trading vehicles?
    21. Form PF currently requires advisers to provide a breakdown of
assets under management and regulatory assets under management based on
certain categories of private funds. Should we require advisers to
provide a breakdown for more, fewer, or different categories of private
funds than Form PF currently provides? For example, should Question 3
include categories such as special purpose vehicles, private credit
funds, or types of fund of funds?
    Explanation of assumptions. We are proposing to amend current
Question 4, which advisers use to explain assumptions that they make in
responding to questions on Form PF. Specifically, we propose to add an
instruction directing advisers to provide the question number when the
assumptions relate to a particular question.\52\ This amendment is
designed to help assess data more efficiently and

improve comparability, based on experience with the form.
---------------------------------------------------------------------------

    \52\ See proposed Question 4.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    22. Is there a better way to achieve our objectives of assessing
data more efficiently and improving comparability?

2. Proposed Amendments to Section 1b of Form PF--Concerning All Private
Funds

    Section 1b requires advisers to report certain identifying and
other basic information about each private fund the adviser manages.
The proposal would amend section 1b to require advisers to report
additional identifying information about the private funds they manage
as well as the private funds' assets, financing, investor
concentration, and performance. The proposed changes are designed to
provide greater insight into private funds' operations and strategies
and assist in identifying trends that we believe would enhance investor
protection efforts and FSOC's systemic risk assessment. At the same
time, we believe the proposed amendments would help improve data
quality and comparability, based on experience with Form PF.
    Type of private fund. We are proposing several amendments to
identify different types of reporting funds better, and help isolate
data according to fund type, to allow for more targeted analysis.
Currently, advisers indicate a reporting fund's type on the Private
Fund Reporting Depository (``PFRD'') filing system, and by filling out
particular sections of the form.\53\ We have found instances, however,
where advisers have identified a reporting fund differently on Form PF
than on Form ADV, even though the definitions of each fund type are the
same on both forms. This may be due to error, or may be due to the
fund's characteristics changing between deadlines for Form ADV and Form
PF. Accordingly, to help prevent reporting errors and help ensure
accuracy concerning the reporting fund's type, we propose to require
advisers to identify the reporting fund by selecting one type of fund
from a list: hedge fund that is not a qualifying hedge fund, qualifying
hedge fund, liquidity fund, private equity fund, real estate fund,
securitized asset fund, venture capital fund, or ``other.'' \54\ If an
adviser identifies the reporting fund as ``other,'' the adviser would
describe the reporting fund in Question 4, including why it would not
qualify for any of the other options.
---------------------------------------------------------------------------

    \53\ For advisers that are also CPOs or CTAs, filing Form PF
through PFRD is filing with both the SEC and CFTC. See Instruction 3
(instructing advisers to file particular sections of Form PF,
depending on their circumstances. For example, all Form PF filers
must file section 1 and large hedge fund advisers also must file
section 2).
    \54\ Proposed Question 6(a).
---------------------------------------------------------------------------

    In addition, we propose to require an adviser to indicate whether
the reporting fund is a ``commodity pool,'' which is categorized as a
hedge fund on Form PF.\55\ Although the CFTC does not, as of the date
of this proposal, consider Form PF reporting on commodity pools as
constituting substituted compliance with CFTC reporting requirements,
some CPOs may continue to report such information on Form PF.\56\ This
proposed amendment would allow for analysis of hedge fund data both
with and without commodity pools reported on the form.
---------------------------------------------------------------------------

    \55\ Proposed Question 6(b). Form PF defines ``commodity pool''
as defined in section 1a(10) of the U.S. Commodity Exchange Act, as
amended. See Form PF Glossary of Terms.
    \56\ Previously, the CFTC permitted dually registered CPO-
investment advisers to submit Form PF in lieu of certain CFTC
reporting requirements. See Compliance Requirements for Commodity
Pool Operators on Form CPO-PQR, (Oct. 9, 2020) [85 FR 71772 (Nov.
10, 2020)] (``Form CPO-PQR Release'').
---------------------------------------------------------------------------

    Finally, we propose to require advisers to report whether a
reporting fund operates as a UCITS or AIF, or markets itself as a money
market fund outside the United States, and in which countries (if
applicable).\57\ These proposed amendments are designed to allow the
Commissions and FSOC to filter data for more targeted analysis to
better understand the potential exposure to beneficial owners outside
the United States and to avoid double counting when Form PF data is
aggregated with other data sets that include UCITS, AIFs, and money
market funds that are marketed outside the United States.
---------------------------------------------------------------------------

    \57\ See proposed Question 6(c) through (h). We propose to
define the term ``UCITS'' as Undertakings for Collective Investment
in Transferable Securities, as defined in the UCITS Directive of the
European Parliament and of the Council (No. 2009/65/EC), as amended,
or as captured by the Collective Investment Schemes (Amendment etc.)
(EU Exit) Regulations 2019, as amended. We propose to define ``AIF''
as an alternative investment fund that is not regulated under the
UCITS Directive, as defined in the Directive of the European
Parliament and of the Council on alternative investment fund
managers (No. 2011/61/EU), as amended, or an alternative investment
fund that is captured by the Alternative Investment Fund Managers
(Amendment etc.) (EU Exit) Regulations 2019, as amended. See Form PF
Glossary of Terms.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    23. Should Form PF require advisers to report additional
identifying information about the private funds they advise, as
proposed? Would the proposed amendments help identify each type of
reporting fund, allow the Commissions and FSOC to filter data
concerning types of funds, and conduct more targeted analysis? Is there
a better way to meet these objectives?
    24. Should proposed Question 6 include more, fewer, or different
categories of private funds? For example, should the form include a
category for funds that may be ``hybrid'' funds that may have
characteristics of different types of private funds? Should proposed
Question 6 include an ``other'' category, as proposed? Alternatively,
should proposed Question 6 not include an ``other'' category and
instead require that advisers select the best fit among the specific
categories? Are there other ways to limit the types of funds that may
report as ``other?''
    25. Should Form PF require advisers to explain in Question 4 why
they choose ``other'' as a category, as proposed? Would this proposed
requirement clarify what type of fund the reporting fund is, if it does
not fit within the other categories? Is there a better way of
identifying what type of fund the reporting fund is? Should Form PF
require the adviser to include more, less, or different information in
the explanation?
    26. Should Form PF require advisers to identify if the reporting
fund is a commodity pool, as proposed? Are any CPOs currently reporting
information regarding any commodity pools, even if they are not private
funds? If so, why? Alternatively, should we revise the definition of
``hedge fund'' so it would not include commodity pools? If we exclude
commodity pools from the definition of ``hedge fund,'' should we amend
Form PF to require advisers to report the same or different information
about commodity pools as they do for hedge funds?
    27. Should Form PF require advisers to report whether and in which
countries the reporting company operates as a UCITS or AIF, or markets
itself as a money market fund outside the United States, as proposed?
Would the proposed amendment allow us and FSOC to filter data for more
targeted analysis to better understand the potential exposure to
beneficial owners outside the United States and to avoid double
counting when Form PF data is aggregated with other data sets that
include UCITS and AIFs? Is there a better way to meet these objectives?
    28. Should Form PF define UCITS and AIF, as proposed? Would the
proposed definitions keep the terms evergreen if directives change or
new ones apply? If not, how should we define these terms? For example,
should we provide less detail in the definition

about the directives to keep the definitions evergreen?
    Master-feeder arrangements, internal private funds, external
private funds, and parallel fund structures. To reflect that advisers
would report components of master-feeder arrangements and parallel fund
structures separately, we propose to amend Form PF to require advisers
to report identifying information about master-feeder arrangements and
other private funds (e.g., funds of funds), including internal private
funds, and external private funds.\58\ Form PF currently requires
advisers to report identifying information about parallel funds, and
would continue to do so under the proposal.\59\ The proposal also would
require advisers to report the value of the reporting fund's
investments in other private funds (e.g., funds of funds), as current
Question 10 requires, but with more detail.\60\ Specifically, the
proposal would require advisers to report the value of the reporting
fund's equity investments in external private funds and internal
private funds (including the master fund and each internal private
fund), which would comprise the total investments in other private
funds.\61\ These amendments are designed to help map complex fund
structures and cross reference private fund information across Form PF
filings, to provide more complete and accurate information about each
fund's risk profile.
---------------------------------------------------------------------------

    \58\ For master-feeder arrangements, advisers would report the
name of the feeder fund, its private fund identification number, and
whether the feeder fund is a separate reporting fund or a
disregarded feeder fund. For internal private funds that invest in
the reporting fund, advisers would report the name of the internal
private fund, its LEI, if it has one, and its private fund
identification number. See proposed Question 7. If the reporting
fund invests in external private funds, advisers would report the
name of the master fund, its private fund identification number, and
the master fund's LEI, if it has one. If the reporting fund invests
in internal private funds, advisers would report the internal
private fund's name, its private fund identification number, and its
LEI, if it has one. Proposed Question 15.
    \59\ See current Question 7 and proposed Question 8.
    \60\ This requirement would be part of proposed Question 15.
    \61\ See proposed Question 15.
---------------------------------------------------------------------------

    In connection with these proposed amendments, in the Form PF
Glossary of Terms, we propose to remove the terms ``investments in
external private funds'' and ``investments in internal private funds,''
and replace them with ``external private funds'' (private funds that
neither the adviser nor the adviser's related persons advise) and
``internal private funds'' (private funds that the adviser or any of
the adviser's related persons advise), respectively. The proposed
definitions would not direct advisers to exclude ``cash management
funds,'' as is currently the case under the terms being removed,
because we observed that advisers determine whether a fund is a cash
management fund inconsistently. Therefore, this proposed amendment is
designed to improve data quality.
    We request comments on the proposed amendments.
    29. Would the proposed amendments help to map complex fund
structures and cross reference them to private fund information across
Form PF filings? Would the proposed amendments provide more complete
and accurate information about each fund's risk profile? Is there a
better way to meet these objectives?
    30. Should the form require different or additional identifying
information to identify a master fund, feeder fund, internal private
fund, or external private fund?
    31. Should Form PF require advisers to report the private fund
identification number for any feeder funds, as proposed, even though
advisers annually report the private fund identification number of any
feeder funds that invest in a private fund they advise on Form ADV?
\62\
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    \62\ Form ADV, section 7.B.(1).A.6.
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    32. Should Form PF define ``internal private funds,'' ``external
private funds,'' and ``trading vehicle,'' as proposed? Are there
alternative definitions we should adopt? For example, should we define
``internal private funds'' and ``external private funds'' to exclude
cash management funds as the current definitions of ``investments in
internal private funds'' and ``investments in external private funds''
do?
    Withdrawal or redemption rights. The proposal would change how
advisers report withdrawal and redemption rights. Form PF currently
requires only large hedge fund advisers to report whether each
qualifying hedge fund provides investors with withdrawal or redemption
rights in the ordinary course.\63\ We propose to require all advisers
to provide this information for each reporting fund to inform the
Commissions and FSOC better of all reporting funds' susceptibility to
stress through investor redemptions, to help identify how widespread
the stress is.\64\ If the reporting fund provides investors with
withdrawal or redemption rights in the ordinary course, we propose to
require advisers to indicate how often withdrawals or redemptions are
permitted by selecting from a list of categories.\65\ Advisers would
report this information regardless of whether there are notice
requirements, gates, lock-ups, or other restrictions on withdrawals or
redemptions.\66\ We believe these proposed amendments would allow us
and FSOC to identify better reporting funds that may be affected by
investor withdrawals during certain market events, or vulnerable to
failure as a result of investor redemptions. We believe this
information also would provide insight into other data that all
reporting funds report. For example, we understand that private equity
funds that do not typically offer redemption rights in the ordinary
course likely have certain patterns of subscriptions and withdrawals,
and also report performance to investors and prospective investors as
an internal rate of return, rather than reporting based on changes in
the portfolio market value. We propose to define ``internal rate of
return'' in the proposed Form PF Glossary of Terms as the discount rate
that causes the net present value of all cash flows throughout the life
of the fund to be equal to zero. Analyzing reported information about
investor withdrawal or redemption rights together with reported
information about subscriptions and withdrawals or performance is
designed to help us identify developing trends relevant to identifying
systemic risk and would help us further investor protection efforts. We
request comment on the proposed amendments.
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    \63\ Current Question 49(a).
    \64\ To implement this, the proposal would move current Question
49(a) from section 2b, which requires large hedge fund advisers to
report information about qualifying hedge funds, to section 1b which
requires all advisers to report information about all the reporting
funds they advise, and redesignate it as Question 10. To accommodate
moving the question, the proposal would make corresponding
amendments to the instructions in current Question 49, which we
would redesignate as Question 52.
    \65\ Proposed Question 10(b). The categories would be (1) any
business day, (2) at intervals of at least two business days and up
to a month, (3) at intervals longer than monthly up to quarterly,
(4) at intervals longer than quarterly up to annually, and (5) at
intervals of more than one year.
    \66\ For example, if the reporting fund allows quarterly
redemptions that are subject to a gate, then the adviser would
select ``at intervals longer than monthly up to quarterly.''
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    33. Should we require all advisers to report information about
withdrawal and redemption rights about all the reporting funds they
advise, as proposed? Alternatively, should only certain advisers report
this information for only certain reporting funds? If so, which ones
and why?
    34. Should Form PF include more, fewer, or different categories for
the schedule of withdrawal or redemption

rights? As an alternative, should advisers be able to select ``other''
as a schedule category? Under what circumstances would an adviser
select ``other?''
    35. Should we define ``internal rate of return'' as proposed? If
not, what alternative definitions should we use?
    Trading vehicles. We are proposing to require advisers to provide
identifying information for any trading vehicle in which the reporting
fund holds investments or conducts activities.\67\ Advisers would
disclose the trading vehicle's legal name; LEI, if it has one; and any
other identifying information about the trading vehicle, such as the
RSSD ID, if it has one. This proposed amendment is designed to help the
Commissions and FSOC understand the reporting fund's activities,
including how it interacts with the market if the fund trades through a
trading vehicle and related counterparty exposures. The identifying
information also is designed to allow comparisons of Form PF data with
data from other sources that use such information to identify entities.
Enhancing the ability to compare Form PF data in this way is designed
to provide a more comprehensive view of the market, and therefore,
enhance investor protection efforts and systemic risk assessment.
---------------------------------------------------------------------------

    \67\ Proposed Question 9.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    36. Should all advisers provide identifying information for a
trading vehicle, including an LEI if it has one, as proposed?
Alternatively, should only certain advisers report it for certain
reporting funds?
    37. Do any trading vehicles not have an LEI?
    38. Should Form PF require more, less, or different identifying
information for the trading vehicle?
    Gross asset value and net asset value. We propose several
amendments to the way advisers report gross asset value and net asset
value. We propose to require advisers who are filing quarterly updates
to report gross asset value and net asset value as of the end of each
month of the reporting period, rather than only reporting the
information as of the end of the reporting period, as Form PF currently
requires.\68\ This proposed amendment is designed to facilitate
analysis of other monthly Form PF data, including certain fund
performance and risk metrics.\69\
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    \68\ See current Questions 8 and 9, and proposed Questions 11
and 12. We also propose to make amendments to the instructions in
current Question 8 (which we would redesignate as proposed Question
11) to correspond with the proposed instructions that would no
longer allow advisers to aggregate master-feeder arrangements, as
discussed above.
    \69\ See e.g., proposed Question 23 (requiring all private fund
advisers to report monthly performance data, to the extent such
results are calculated for the reporting fund), supra footnote 98,
and accompanying text, and proposed Question 48 (requiring large
hedge funds to report monthly data concerning the reporting fund's
portfolio correlation), infra section II.C.2 of this Release.
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    We also propose to add new Question 13 to require advisers to
separately report the value of unfunded commitments included in the
gross and net asset value reported in proposed Questions 11 and 12.\70\
Current Questions 8 and 9 require valuations based on the instruction
in Form ADV for calculating regulatory assets under management, which
requires advisers to include the amount of any unfunded
commitments.\71\ This approach reflects that, in the early years of a
private fund's life, its adviser typically earns fees based on the
total amount of capital commitments, which we presume reflects
compensation for efforts expended on behalf of the fund in preparation
for the investments.\72\ We continue to believe that net asset value
and gross asset value should include unfunded commitments so Form PF
data is comparable to Form ADV data. However, there are circumstances
where understanding the amount represented by unfunded commitments
would enhance our understanding of changes to a reporting fund's net
and gross asset value over time, inform us of trends, and improve data
comparability over the life of the fund. For example, knowing the value
of uncalled commitments would help the Commissions and FSOC more
accurately identify how much leverage a fund with uncalled commitments
has. Currently, the Commissions and FSOC only can infer this
information but it is unclear whether such inferences are correct.
Therefore, this proposed amendment is designed to improve data accuracy
and comparability, which is important for effective systemic risk
assessment and investor protection efforts.
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    \70\ Form PF currently defines ``unfunded commitments'' as
``committed capital'' that has not yet been contributed to the
private equity fund by investors. We propose to amend the definition
so it refers to all reporting funds, not only private equity funds.
Form PF defines ``committed capital'' as any commitment pursuant to
which a person is obligated to acquire an interest in, or make
capital contributions to, the private fund. See Form PF Glossary of
Terms.
    \71\ Form PF requires advisers to calculate gross asset value
and net asset value using regulatory assets under management, a
regulatory metric from Form ADV. See ``gross asset value'' and ``net
asset value'' as defined in Form PF Glossary of Terms; Form ADV:
Instructions for Part 1A, Instruction 5.b. An adviser must calculate
its regulatory assets under management on a gross basis, that is,
without deduction of any outstanding indebtedness or other accrued
but unpaid liabilities. In addition, an adviser must include the
amount of any uncalled capital commitments made to a private fund
managed by the adviser.
    \72\ Rules Implementing Amendments to the Investment Advisers
Act of 1940, Advisers Act Release No. 3221 (June 22, 2011) [76 FR
42950, 42956 (July 19, 2011)], at text accompanying n.90.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    39. Should Form PF require advisers who are filing quarterly
updates to report information as of the end of each month of the
reporting period, as proposed? Would this requirement facilitate our
and FSOC's analysis of such advisers' other monthly Form PF data? Is
there a better way to meet this objective?
    40. Should Form PF require advisers to report the value of unfunded
commitments included in the gross asset value and net asset value, as
proposed? Would the proposed amendment improve data accuracy and
comparability? Would the proposed amendment more accurately identify
how much leverage a fund with uncalled commitments has? Is there a
better way to meet this objective?
    Inflows and outflows. We propose to add a question requiring
advisers to report information concerning the reporting fund's
activity, including contributions to the reporting fund, as well as
withdrawals and redemptions, which would include all withdrawals,
redemptions, or other distributions of any kind to investors.\73\ Form
PF would specify that, for purposes of the question, advisers must
include all new contributions from investors, but exclude contributions
of committed capital that they have already included in gross asset
value calculated in accordance with Form ADV instructions.\74\
Quarterly filers would provide this information for each month of the
reporting period. This proposed requirement is designed to facilitate
analysis of other monthly Form PF data, including certain fund
performance and risk metrics.\75\ Therefore, this amendment is designed
to improve data accuracy, and allow the Commissions and FSOC to analyze
data more efficiently. Inflows and outflows inform the Commissions and
FSOC of the relationship between flows and performance, changes to net
and gross asset value, as well as trends in the private fund industry.
Accordingly, this question is designed to provide a more accurate
baseline understanding of

inflows and outflows, so the Commissions and FSOC can, for example,
more accurately assess how much the private fund industry has grown
from flows versus performance. Inflows and outflows also can indicate
funding fragility, which can have systemic risk implications.
Therefore, this amendment also is designed to provide more accurate
data of inflows and outflows for systemic risk assessment and investor
protection efforts, including identifying activity that may not match
investor disclosures.
---------------------------------------------------------------------------

    \73\ See proposed Question 14.
    \74\ Form PF would cite to Form ADV, Part 1A Instruction
6.e.(3).
    \75\ See supra footnote 69.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    41. Should proposed Question 14 apply to advisers to all reporting
funds, as proposed, or only certain advisers to only certain reporting
funds?
    42. Should proposed Question 14 instruct advisers to include or
exclude any other information? Would proposed Question 14 raise
operational challenges? For example, should the instructions specify
whether to include or exclude distributions that may be recallable by
the fund (i.e., ``recyclable capital commitments'' or capital that can
be recalled to invest during a portion of the investment period)?
    43. Should Form PF require advisers to provide the amount of new
redemptions or subscriptions based on notices that would be payable or
expected after Form PF is due? If so, should all advisers submit such
data for all reporting funds, or should only certain advisers submit it
for only certain reporting funds?
    Base currency. The proposal would require all advisers to identify
the base currency of all reporting funds, rather than only large hedge
fund advisers identifying this information for only qualifying hedge
funds.\76\ When a reporting fund uses a base currency other than U.S.
dollars in the current Form PF, the adviser must convert all monetary
values to U.S. dollars, unless otherwise specified, to complete Form
PF, which may cause inconsistencies in the data.\77\ Currently, the
Commissions and FSOC can identify such inconsistencies only for
qualifying hedge funds from current Question 31. Therefore, this
proposed change is designed to allow us and FSOC to interpret more
accurately responses to questions regarding foreign exchange exposures
and the effect of changes in currency rates on all reporting fund
portfolios to aid systemic risk assessment and investor protection
efforts across all reporting fund portfolios.
---------------------------------------------------------------------------

    \76\ To implement this, the proposal would move current Question
31 from current section 2b, which requires large hedge fund advisers
to report information about qualifying hedge funds, to section 1b
which requires all advisers to report information about all the
reporting funds they advise. See proposed Question 17.
    \77\ See current Instruction 15. We also propose to revise
Instruction 15 to provide additional instructions concerning
currency conversions. See section II.D of this Release.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    44. Should we expand reporting of base currency information for all
reporting funds, as proposed? Would the proposed change allow us and
FSOC to interpret responses to questions regarding foreign exchange
exposures and the effect of changes in currency rates for these funds?
    45. Would the proposed amendment improve efficiency?
    Borrowings and types of creditors. The proposal would revise how
advisers report the reporting fund's ``borrowings.'' We propose to
revise the term ``borrowings'' to (1) specify that it includes
``synthetic long positions,'' which Form PF would define in the
Glossary of Terms, and (2) provide a non-exhaustive list of types of
borrowings.\78\ This proposed reporting approach is consistent with SEC
staff guidance from Form PF Frequently Asked Questions.\79\ This
proposed amendment is designed to improve data quality, based on
experience with the form. Current Question 12 requires advisers to
report the value of the reporting fund's borrowings and the types of
creditors. We propose to amend this question to require advisers to
indicate whether a creditor is based in the United States and whether
it is a ``U.S. depository institution,'' rather than a ``U.S. financial
institution'' as is currently required.\80\ This proposed amendment is
designed to make the categories more consistent with the categories the
Federal Reserve Board uses in its reports and analysis, to enhance
systemic risk assessment. The proposal would not require advisers to
distinguish between non-U.S. creditors that are depository institutions
and those that are not. We understand that it is difficult for advisers
to distinguish non-U.S. creditors by type, resulting in inconsistent
data that is less valuable for analysis.
---------------------------------------------------------------------------

    \78\ ``Borrowings'' would include, but would not be limited to
(1) cash and cash equivalents received with an obligation to repay;
(2) securities lending transactions (count cash and cash equivalents
and securities received by the reporting fund in the transaction,
including securities borrowed by the reporting fund for short
sales); (3) repo or reverse repo (count the cash and cash
equivalents and securities received by the reporting fund); (4)
negative mark-to-market of derivative transactions from the
reporting fund's point of view; and (5) the gross notional value of
``synthetic long positions.'' We propose to define a ``synthetic
long position'' in the Form PF Glossary of Terms (see the proposed
Form PF Glossary of Terms for the proposed definition.) We are
proposing this definition based on our understanding of the
instruments and to help ensure data quality to aid comparability.
    \79\ See SEC staff Form PF Frequently Asked Questions, available
at https://www.sec.gov/divisions/investment/pfrd/pfrdfaq.shtml
(``Form PF Frequently Asked Questions''). See Form PF Frequently
Asked Question 12.1 (which provides a non-exhaustive list of types
of borrowings).
    \80\ See proposed Question 18. Form PF would define ``U.S.
depository institution'' as any U.S. domiciled depository
institution, including any of the following: (1) a depository
institution chartered in the United States, including any federally-
chartered or state-chartered bank, savings bank, cooperative bank,
savings and loan association, or an international banking facility
established by a depositary institution chartered in the United
States; (2) banking offices established in the United States by a
financial institution that is not organized or chartered in the
United States, including a branch or agency located in the United
States and engaged in banking not incorporated separately from its
financial institution parent, United States subsidiaries established
to engage in international business, and international banking
facilities; (3) any bank chartered in any of the following United
States affiliated areas: U.S. territories of American Samoa, Guam,
and the U.S. Virgin Islands; the Commonwealth of the Northern
Mariana Islands; the Commonwealth of Puerto Rico; the Republic of
the Marshall Islands; the Federated States of Micronesia; and the
Trust Territory of the Pacific Islands (Palau); or (4) a credit
union (including a natural person or corporate credit union). Form
PF defines ``U.S. financial institution'' as any of the following:
(1) a financial institution chartered in the United States (whether
federally-chartered or state-chartered); (2) a financial institution
that is separately incorporated or otherwise organized in the United
States but has a parent that is a financial institution chartered
outside the United States; or (3) a branch or agency that resides
outside the United States but has a parent that is a financial
institution chartered in the United States. See proposed Form PF
Glossary of Terms.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    46. Should Form PF define or redefine any terms related to proposed
Question 18? For example, should Form PF define ``U.S. depository
institution,'' ``synthetic long positions,'' and revise the term
``borrowings,'' as proposed? Could the definitions be clearer? Should
Form PF define the terms differently? For example, should ``synthetic
long position'' provide a different list of assets to be included or
excluded? Does the reference to deep-in-the-money options in the
definition of ``synthetic long position'' need further clarification?
If so, what clarifications should we make?
    47. Would advisers find it difficult to distinguish among different
types of non-U.S. creditors? Should Form PF require advisers to
distinguish between non-U.S. creditors that are depository institutions
and those that are not, or non-U.S. creditors that are financial
institutions and those that are not?
    Fair value hierarchy. Current Question 14 requires advisers to
report the assets and liabilities of each

reporting fund broken down using categories that are based on the fair
value hierarchy established under U.S. generally accepted accounting
principles.\81\ Current Question 14 is designed to provide insight into
the illiquidity and complexity of a fund's portfolio and the extent to
which the fund's value is determined using metrics other than market
mechanisms.\82\ We are proposing to revise how advisers report fair
value hierarchy in current Question 14, which we would redesignate as
proposed Question 20, in the following ways to improve data quality and
better understand the reporting fund's complexity and valuation
challenges:
---------------------------------------------------------------------------

    \81\ See 2011 Form PF Adopting Release, supra footnote 3, at
text accompanying n.204.
    \82\ See 2011 Form PF Adopting Release, supra footnote 3, at
n.204.
---------------------------------------------------------------------------

     We propose to require advisers to indicate the date the
categorization was performed. This proposed amendment is designed to
show how old the data is. Some advisers report current fair value
hierarchy, while others report a prior year's fair value hierarchy if
the current data is not yet available.\83\ This can cause confusion
when analyzing the data, because the fair value hierarchy data concerns
a different time period than the other data advisers report on Form PF.
Therefore, we believe that adding a categorization date would help
ensure the data is not incorrectly categorized as applying to the wrong
time period, and in turn, would allow the Commissions and FSOC to
correlate data to other Form PF data and market events more accurately.
---------------------------------------------------------------------------

    \83\ Advisers are not required to update information that they
believe in good faith properly responded to Form PF on the date of
filing even if that information is subsequently revised for purposes
of their recordkeeping, risk management, or investor reporting (such
as estimates that are refined after completion of a subsequent
audit). See Instruction 16.
---------------------------------------------------------------------------

     We propose to direct advisers to report the absolute value
of all liabilities. Currently, advisers report liabilities
inconsistently, with some reporting absolute values and others
reporting negative values. This inconsistency causes errors when the
Commissions and FSOC aggregate this data and we believe the proposed
instruction would help reduce aggregation errors.
     We propose to direct advisers to provide an explanation in
Question 4 if they report assets as a negative value. We have found
that some advisers have reported negative values for assets in
error.\84\ Therefore, this instruction is designed to reduce
inadvertent errors.
---------------------------------------------------------------------------

    \84\ We recognize that there may be cases when advisers
correctly report negative values, such as when subtracting fund of
fund investments.
---------------------------------------------------------------------------

     We propose to require advisers to separately report cash
and cash equivalents. Currently, Form PF does not explain where
advisers must report cash and cash equivalents in current Question 14.
While SEC staff have suggested that advisers generally should report
cash in the cost based column and cash equivalents in the applicable
column in the fair value hierarchy or the cost based column, depending
on the nature of the cash equivalents, we are proposing to add a
separate column for cash and cash equivalents.\85\ The proposed
categorization is designed to differentiate reported holdings of cash
and cash equivalents from harder to value assets that may be valued at
cost, and in turn, improve data quality and comparability.
---------------------------------------------------------------------------

    \85\ See Form PF Frequently Asked Question 14.3, Form PF
Frequently Asked Questions, supra footnote 79.
---------------------------------------------------------------------------

     We propose to amend the definition of ``cash and cash
equivalents.'' The current definition of ``cash and cash equivalents''
includes ``government securities.'' \86\ When reporting cash and cash
equivalents, some advisers may include government securities with
longer maturities, while others do not, which results in inconsistent
reporting and may obscure our and FSOC's understanding of fund
exposures. Therefore, to improve data quality, we propose to remove
government securities from the definition of ``cash and cash
equivalents,'' and present it as its own line item in the proposed Form
PF Glossary of Terms.\87\ We also propose to amend the term ``cash and
cash equivalents'' so it would direct advisers to not include any
digital assets when reporting cash and cash equivalents. As discussed
in section II.B.3 of this Release, we propose to define ``digital
assets'' and require advisers to report them separately than other
types of assets.\88\ Therefore, this proposed amendment is designed to
ensure that the categories of ``cash and cash equivalents'' and
``digital assets'' are clearly distinct to help ensure accurate
reporting.
---------------------------------------------------------------------------

    \86\ Current Form PF defines ``government securities'' in the
current term ``cash and cash equivalents'' as (1) U.S. treasury
securities, (2) agency securities, and (3) any certificate of
deposit for any of the foregoing.
    \87\ We propose to make corresponding amendments to the
definition of ``unencumbered cash'' to reflect that ``government
securities'' would be a distinct term from ``cash and cash
equivalents.'' This proposed amendment is not intended to change the
meaning of the term ``unencumbered cash.'' See Form PF Glossary of
Terms.
    \88\ See e.g., proposed Question 25, which would include digital
assets as a strategy category for advisers to hedge funds.
---------------------------------------------------------------------------

     We propose to add instructions directing advisers about
how to report data if their financial statement's audit is not yet
completed when Form PF is due. The instructions would state that
advisers should use the estimated values for the fiscal year and
explain that the information is an estimate in Question 4. The proposed
instructions also would provide that the adviser may, but is not
required to, amend Form PF when the audited financial statements are
complete.\89\ The instructions are consistent with responses to Form PF
Frequently Asked Questions and are designed to provide the Commissions
and FSOC with more recent information regarding the reporting fund than
may be possible if the reporting fund relied solely on audited
financial statement information (i.e., the reporting fund's previous
fiscal year's audited financial statements).\90\ Given that advisers
file Form PF sometimes months after their quarter and year ends,
depending on their size and the type of funds they advise, we believe
the proposed instruction would balance reporting burdens with more
timely information for assessing potential systemic risk and investor
protection concerns.
---------------------------------------------------------------------------

    \89\ Form PF Instruction 16 would continue to provide that an
adviser is not required to update information that it believes in
good faith properly responds to Form PF on the date of filing, even
if that information is subsequently revised, as Form PF currently
provides.
    \90\ See Form PF Frequently Asked Question A.11, Form PF
Frequently Asked Questions, supra footnote 79.
---------------------------------------------------------------------------

    We request comment on the proposed amendments.
    48. Should we require advisers to indicate the date the
categorization was performed, as proposed? Would this proposed
amendment help ensure the data is correctly categorized as applying to
the appropriate time period, and in turn, allow the Commissions and
FSOC to correlate data to other Form PF data and market events more
accurately? Is there a better way to meet this objective?
    49. Should Form PF direct advisers to report the absolute value of
all liabilities, as proposed? Would this proposed amendment reduce
aggregation errors? Is there a better way to meet this objective?
    50. Should Form PF direct advisers to provide an explanation in
Question 4 if they report assets as a negative value, as proposed?
Would this proposed instruction reduce inadvertent errors?
    51. Should advisers report cash or cash equivalents separately from
other

assets, as proposed? Are there other alternatives we should implement?
For example, should Form PF require advisers to report cash in the cost
based column and cash equivalents in the applicable column in the fair
value hierarchy or the cost based column, depending on the nature of
the cash equivalents? \91\
---------------------------------------------------------------------------

    \91\ See supra footnote 85.
---------------------------------------------------------------------------

    52. Would the proposed amendments to the terms ``cash and cash
equivalents'' and ``unencumbered cash,'' and the addition of
``government securities'' allow for more precise reporting for these
types of assets? Alternatively, should the definition of ``cash and
cash equivalents'' provide that government securities would be included
in cash equivalents if they are eligible to be held by money market
funds under the risk-limiting condition set forth in [17 CFR 270.2a-
7(d)(1)(i)] Investment Company Act rule 2a-7(d)(1)(i), which generally
prohibits a money market fund from acquiring any instrument with a
remaining maturity of greater than 397 calendar days? Should this
language be more comparable with other requirements of Form PF, which
require large liquidity fund advisers to report the dollar amount of a
liquidity fund's assets that have a maturity greater than 397 days?
\92\ Should Form PF provide distinct line items for the term ``cash''
and ``cash equivalents,'' and revise questions to refer to each term,
as applicable? Should the term ``unencumbered cash'' continue to refer
to government securities, as proposed, or should we modify the term
differently? For example, should ``unencumbered cash'' refer to U.S.
treasury bills, rather than government securities?
---------------------------------------------------------------------------

    \92\ See e.g., Form PF, section 3, current Question 55(i). The
SEC recently proposed amendments to Form PF section 3, which would
redesignate current Question 55(i) to reflect new numbering. See
2022 SEC Form PF Proposal, supra footnote 13.
---------------------------------------------------------------------------

    53. Should Form PF direct advisers to report estimated values if
their financial statement's audit is not yet completed when Form PF is
due, as proposed? Alternatively, should we require advisers to update
Form PF with updated values when the audited financial statements are
complete?
    Beneficial Ownership of the Reporting Fund. Current Question 16
requires advisers to specify the approximate percentage of the
reporting funds' equity that is beneficially owned by different groups
of investors. We propose to require advisers to provide more granular
information regarding the following groups of beneficial owners.\93\
---------------------------------------------------------------------------

    \93\ See proposed Question 22.
---------------------------------------------------------------------------

     Advisers would indicate whether beneficial owners that are
broker-dealers, insurance companies, non-profits, pension plans,
banking or thrift institutions are U.S. persons or non-U.S.
persons.\94\ This proposed amendment is designed to allow the
Commissions and FSOC to conduct more targeted analysis about risks
presented in the United States separate from risks presented abroad.
With regard to pension plans, in particular, it is currently unclear
how advisers must report assets in non-U.S. pension plans: as
governmental pension plans or foreign official institutions. Therefore,
this proposed amendment also is designed to improve data quality, based
on experience with the form.
---------------------------------------------------------------------------

    \94\ We understand that, in some cases, an adviser may not be
able to determine what type of non-U.S. entity the investor is.
Current Question 16 already provides a category that would address
that scenario in certain circumstances, and we would maintain that
approach. If investors that are not United States persons and about
which certain beneficial ownership information is not known and
cannot reasonably be obtained because the beneficial interest is
held through a chain involving one or more third-party
intermediaries, advisers currently report this in current Question
16(m), which we would redesignate as proposed Question 22(s).
---------------------------------------------------------------------------

     Advisers would indicate whether beneficial owners that are
private funds are either internal private funds (i.e., managed by the
adviser or its related persons) or external private funds. This
proposed amendment is designed to help the Commissions and FSOC
understand the interconnectedness of private funds to each other, which
would aid systemic risk assessment and investor protection efforts.
Furthermore, this information is designed to help the Commissions and
FSOC understand a reporting fund's risk from investor demands for
liquidity, because beneficial owners that are external private funds
may have less predictable withdrawals than internal private funds.
     We would specify that ``state'' investors are U.S. state
investors to improve data quality and reduce potential confusion.\95\
---------------------------------------------------------------------------

    \95\ The proposal also would include instructions to proposed
Question 22, as well as current Question 15, which we would
redesignate as proposed Question 21 (concerning a certain percentage
of beneficial ownership), providing that if the reporting fund is
the master fund in a master-feeder arrangement, advisers must look
through any disregarded feeder fund (i.e., a feeder fund that is not
required to be separately reported). This proposed amendment is
designed to implement the proposed master-feeder reporting. See
section II.A.1 of this Release.
---------------------------------------------------------------------------

    The proposal would provide that if advisers report information in
the ``other'' category, they must describe in Question 4 the type of
investor, why it would not qualify for any of the other categories, and
any other information to explain the selection of ``other.'' This
proposed amendment is designed to improve data quality by providing
context to the adviser's selection of the ``other'' category, and help
ensure that advisers do not inadvertently report information in the
wrong category.
    We request comment on the proposed amendments.
    54. Should we revise the reporting categories as proposed? Should
we eliminate, add, or change any categories? For example, should we add
categories for security-based swap dealers that are U.S. persons and
those that are not? The instructions for current Question 16 require
advisers to include each investor in only one group. Therefore, if we
require advisers to report whether an investor is a security-based swap
dealer, how should they report the investor if the investor also
qualifies for another category, such as broker-dealers or ``banking or
thrift institutions?'' For example, should the list be non-exclusive?
Is there a better way to address cases when advisers may not be able to
determine what type of entity the investor is? \96\
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    \96\ See supra footnote 94.
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    55. Should Form PF require advisers to explain their response when
they select ``other'' as a category, as proposed? Should Form PF
require the adviser to include more, less, or different information in
the explanation? Would this proposed change provide context to the
adviser's selection of the ``other'' category and help prevent
misreporting?
    56. Should we add instructions to current Question 15 (which we
propose to redesignate as proposed Question 21) to allow good faith
estimates in determining beneficial interests outstanding before March
31, 2012 (the effective date of Form PF), that have not been
transferred on or after that date, as current Question 16 does and Form
PF would continue to provide in proposed Question 22?
    57. Current Question 16 includes a category concerning broker-
dealers. Under the proposal, advisers would distinguish between broker-
dealers that are U.S. persons and those that are not U.S. persons.
Should Form PF define ``broker-dealer'' or use different terms so the
categories would be more consistent with the Federal Reserve Board's
reports and analysis? Is there a way to achieve this objective while
ensuring the terms are consistent with the SEC's definition of the
terms? For example, should Form PF use and define the term ``broker''
or ``dealer'' as they are defined in the Securities Exchange Act of
1934 (``Exchange Act'')? \97\ Should Form PF

use and define the term ``foreign broker or dealer'' as it is defined
in [17 CFR 240.15a-6(b)(3)] (``Exchange Act rule 15a-6(b)(3)'')? Should
Form PF use the term ``securities brokers and dealers,'' and define it
the following way: Firms that buy and sell securities for a fee, hold
an inventory of securities for resale, or do both? Are the firms that
make up this sector those that submit information to the SEC on one of
two reporting forms, either [17 CFR 249.617] Form X-17A-5, Financial
and Operational Combined Uniform Single Report of Brokers and Dealers
(``FOCUS Report'') or [17 CFR 449.5] Form G-405, on Finances and
Operations of Government Securities Brokers and Dealers (``FOGS
Report'')?
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    \97\ 15 U.S.C. 78c(a)(4) and 15 U.S.C. 78c(a)(5).
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    Fund Performance. We are proposing several amendments regarding
fund performance reporting in current Question 17, which we would
redesignate as proposed Question 23.\98\ Currently, Form PF requires
all advisers to report gross and net fund performance for specified
fiscal periods using a table in current Question 17. The table in
current Question 17 requires advisers to provide monthly and quarterly
performance results in the table only if such results are calculated
for the reporting fund. This requirement would remain, but we propose
to add instructions specifying which lines to complete depending on
whether the adviser is submitting an initial filing, annual update, or
quarterly update.\99\ We also propose to amend the instructions to the
table to specify that if gross and net performance is reported to
current and prospective investors, counterparties, or otherwise in a
currency other than U.S. dollars, advisers must report the data using
that currency. We believe this instruction is implied in the current
form and we propose to amend this instruction to make it explicit. We
also propose to require advisers to identify the currency in Question
4.\100\ This proposed amendment is designed to inform the Commissions
and FSOC of the currency the adviser used to report the reporting
fund's gross and net performance, for more accurate and informed
analysis.
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    \98\ In a separate release, the SEC is proposing a new rule
under the Advisers Act to require advisers to provide certain fund
performance information to its private funds' investors in quarterly
statements. See Private Fund Advisers; Documentation of Registered
Investment Adviser Compliance Reviews, Advisers Act Release No. IA-
5955 (Feb. 9, 2022) [87 FR 16886, (Mar. 24, 2022)].
    \99\ We also propose to reorganize the table so monthly,
quarterly, and yearly data is presented in separate categories, but
this change would not affect reporting; advisers would report
information according to the same intervals, as they currently do.
We also propose to amend the table to refer to the end date of each
applicable month, quarter, and year, rather than last day of the
fiscal period, to reflect the proposed amendments to the reporting
period, as discussed above. See supra section II.A.3 of this
Release, and proposed Question 23(a).
    \100\ See proposed Question 23(a).
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    We also propose to create an exception to the tabular reporting. If
the reporting fund's performance is reported to current and prospective
investors, counterparties, or otherwise as an internal rate of return
since inception, the adviser would report its performance as an
internal rate of return.\101\ If such information is reported to
current and prospective investors, counterparties, or otherwise, in a
currency other than U.S. dollars, advisers would report the data using
that currency, and identify the currency in Question 4. This approach
is designed to acknowledge that advisers calculate performance data
differently for different types of private funds. For example, advisers
of private equity funds may use internal rate of return to calculate
performance data, while advisers to liquidity funds and hedge funds may
use a periodic rate of return. These calculations may differ in the way
they reflect realized and unrealized gains, among other things.
Therefore, the proposed change is designed to allow the Commissions and
FSOC to improve the usefulness and quality of performance data to
conduct more accurate analysis, including comparisons, and
aggregations.
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    \101\ See proposed Question 23 instructions, and proposed
Question 23(b). Proposed Question 23(b) also would require that if
the fund reports different performance results to different groups,
advisers must provide the most representative results and explain
their selection in Question 4. The instructions to proposed Question
23(b) would specify that internal rates of return for periods longer
than one year must be annualized, while internal rates of return for
periods one year or less must not be annualized. This instruction is
designed to help ensure consistent reporting for accurate
comparisons.
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    The proposal would require advisers to report additional
performance-related information if the adviser calculates a market
value on a daily basis for any position in the reporting fund's
portfolio. In such a case, the adviser would report the following:
     The ``reporting fund aggregate calculated value'' at the
end of the reporting period.\102\ Advisers that file a quarterly update
also would report the reporting fund aggregate calculated value as of
the end of the first and second month of the reporting period.\103\
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    \102\ We would define the term ``reporting fund aggregate
calculated value'' in the Form PF Glossary of Terms. See proposed
Form PF Glossary of Terms and proposed Question 23(c).
    \103\ See proposed Question 23(c)(i).
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     The reporting fund's volatility of the natural log of the
daily ``rate of return'' for each month of the reporting period,
following a prescribed methodology.\104\ Advisers would report whether
the reporting fund uses a different methodology than is prescribed in
Form PF to report to current and prospective investors, counterparties,
or otherwise, and if so, they would describe it in Question 4.\105\
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    \104\ We would define ``rate of return'' for a reporting fund as
the percentage change in the reporting fund aggregate calculated
value in the reporting fund's base currency from one date to
another, and adjusted for subscriptions and redemptions. For a
portfolio position, the ``rate of return'' would be the percentage
change in the ``position calculated value,'' adjusted for income
earned. We would define ``position calculated value'' in the Form PF
Glossary of Terms. The prescribed methodology would be the standard
deviation of the natural log of one plus each of the daily rates of
return in the month, annualized by the square root of 252 trading
days. When calculating the natural log of a daily rate of return,
the rate of return, which is expressed as a percent, must first be
converted to a decimal value and then one must be added to the
decimal value. See proposed Form PF Glossary of Terms and Question
23(c)(ii).
    \105\ See proposed Question 23(c)(iii).
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     Whether the reporting fund had one or more days with a
negative daily rate of return during the reporting period. If so,
advisers would report (1) the most recent peak to trough drawdown, and
indicate whether the drawdown was continuing on the data reporting
date, (2) the largest peak to trough drawdown, (3) the largest single
day drawdown, and (4) the number of days with a negative daily rate of
return in the reporting period.\106\ These measures are designed to
help us and FSOC understand risk, particularly in reporting funds with
unique return patterns that are poorly measured using volatility alone.
We understand that advisers use drawdown metrics, therefore, this
question also is designed to be more reflective of industry practice,
and in turn improve data quality.
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    \106\ See proposed Question 23(iv).
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    Together, the proposed changes are designed to allow the
Commissions and FSOC to more accurately compare volatility across
different fund types to identify market trends (e.g., volatility of a
specific fund type), for systemic risk assessment and investor
protection efforts. For example, if several reporting funds that engage
in similar trading activity experience a surge in volatility, the
volatility itself or the reporting funds' response to the volatility
may impact others who also are engaging in similar trading activity,
which could pose systemic risk, and negatively affect investors.
    We request comments on the proposed amendments.

    58. Would the proposed changes improve data quality and provide the
Commissions and FSOC with a more robust picture of fund performance?
    59. Should we amend the table in current Question 17, as proposed?
For example, should we specify that if a reporting fund's gross and net
performance is reported to current and prospective investors,
counterparties, or others in a currency other than U.S. dollars,
advisers must report the data using that currency, as proposed? Should
we require advisers to identify the currency in Question 4, as
proposed?
    60. Do different types of private funds calculate performance data
differently based on industry conventions, or otherwise? Do the
proposed requirements and defined terms accurately capture the right
types of performance reporting for investor protection and systemic
risk assessment? Is there a better way to meet these objectives?
    61. As an alternative, should Form PF require advisers to report
the reporting fund aggregate calculated value information only for
reporting funds that meet a certain asset threshold?
    62. Should Form PF require advisers to follow the prescribed
methodology to compute the reporting fund's volatility of the daily
rate of return, as proposed, or should Form PF require advisers to
follow a different methodology? If so, what methodology should Form PF
prescribe and why? Should advisers have the flexibility to use their
own methodology to compute the reporting fund's volatility of the daily
rate of return? If advisers use their own methodology, how could the
Commissions and FSOC ensure data could be aggregated and compared?
    63. Could the instructions on how to calculate the volatility of
the daily rate of return be clearer? For example, should the form
include a calculation worksheet for advisers to fill out to help
advisers calculate the volatility of rates of return?
    64. Should we define ``position calculated value,'' ``reporting
fund aggregate calculated value,'' and ``rate of return,'' as proposed?
    65. We are not defining the term ``drawdown.'' Should Form PF
define ``drawdown?'' For example, should Form PF define ``drawdown'' as
the maximum loss in the value over a specified time internal? Should
Form PF define or redefine any other terms?
    66. Should Form PF specify what ``peak to trough'' means? For
example, should ``peak to trough'' mean the percentage decline from
portfolio's highest value (peak) to lowest value (trough) following the
establishment of the highest value (peak)? Are there industry standards
for determining peak to trough? For example, should Form PF provide
guidance on when the ``peak'' or ``trough'' should be reset? As an
alternative to requiring information about ``peak to trough,'' should
Form PF require advisers to report the maximum drawdown? If so, should
Form PF define ``maximum drawdown'' as the largest decline over any
time interval within the reporting period?
    67. Should Form PF require advisers to report information about the
negative daily rates of return, as proposed? Alternatively, should Form
PF require the largest peak to trough drawdown over a rolling 10-day
period, or in each month?
    68. Alternatively, should Form PF require advisers to report the
daily mark to market calculations, or both the daily rate of return and
the daily mark to market calculations?
    69. Are the instructions clear for reporting funds that have base
currencies other than U.S. dollars? Should we revise the form further
to accommodate data concerning such funds?
3. Proposed Amendments to Section 1c of Form PF--Concerning All Hedge
Funds
    Section 1c requires advisers to report information about the hedge
funds they advise. We propose to require advisers to report additional
information about hedge funds to provide greater insight into hedge
funds' operations and strategies, assist in identifying trends, and
improve data quality and data comparability for purposes of systemic
risk assessments and to further investor protection efforts. We also
propose to remove certain questions where other questions would provide
the same or more useful data to streamline reporting and reduce
reporting burdens without compromising investor protection efforts and
systemic risk analysis.
    Investment Strategies. We propose to amend how advisers report