FORM PF: Essential guide - August 2012 Some of the largest hedge fund managers will shortly make their initial filing for the Form PF, on August 29, 2012. This guide will recap on the previously announced and finalized Form PF obligations and provide an update on the most recent developments. What is Form PF? It refers to a regulatory reporting obligation upon SEC registered investment advisers i.e. hedge fund managers who advise one or more private funds relying upon the 3(c)(1) or 3(c)(7) exemptions and have at least $150 million under management in hedge funds. Hedge fund managers meeting the criteria will be required to complete and periodically file the Form PF. As it is a joint initiative with the CFTC, any Commodity Pool Operators (CPOs)/ Commodity Trading Advisors (CTAs) registered with the SEC and CFTC also must complete the Form PF. The filing obligations and the portion of the Form PF that an SEC registered hedge fund manager is obligated to complete depends upon their assets under management. By definition, Exempt Reporting Advisers (those hedge fund managers with less than $150 million under management in hedge funds) are not required to file the Form PF. The legislative basis for the Form PF regulations is Rule 204(b)-1 of the Investment Advisers Act, 1940. What is the purpose of the Form PF? The Form PF was one of the initiatives introduced under the U.S. Dodd-Frank legislation ("Dodd-Frank"). The purpose is to allow the Financial Stability Oversight Council (FSOC) in monitoring risks to the U.S. Financial System. According to Mary Schapiro, the SEC Chairman “The data collection form that we have adopted will address the dramatic lack of private fund information available to regulators today while easing the burden on private fund managers producing the data." In short, the purpose of the Form PF is to allow the collection of risk exposure information. What is the meaning of “regulatory assets under management" ("RAUM") and "hedge fund"? The RAUM for each hedge fund is gross assets under management, without subtracting any borrowings, short sales or other forms of leverage. The RAUM calculation is the basis hedge fund managers must use for calculating the assets of hedge funds managed. For the purposes of Form PF, “hedge fund" has also been defined. According to the regulations “A hedge fund is defined generally to be any private fund that has the ability to pay a performance fee to its adviser, borrow in excess of a certain amount, or sell assets short." What are "Large Private Advisers" and "Smaller Private Advisers"? For the purposes of completing the Form PF, the SEC has classified registered investment advisers as "Smaller Private Advisers" and "Larger Private Advisers". "Large Private Advisers" are: • Large hedge fund advisers with at least $1.5 billion in assets under management attributable to hedge funds. • Liquidity fund advisers with at least $1 billion in combined assets under management attributable to liquidity funds and registered money market funds. • Advisers with at least $2 billion in assets under management attributable to private equity funds. Any registered investment advisers who do not meet the criteria of Large Private Advisers are deemed "Smaller Private Advisers". What are the obligations of "Large Private Advisers" and "Smaller Private Advisers"? Most hedge fund managers are deemed to be "Smaller Private Advisers", by virtue of their assets under management being less than $1.5billion. Smaller Private Advisers are only required to complete Part 1 of the Form PF. Large hedge fund advisers (at least $1.5 billion in assets under management attributable to hedge funds) must complete Parts 1 and 2 of Form PF. Large Private Advisers completing Part 2 of Form PF are required to include detailed descriptions of the geographic location, market, credit and liquidity risks of the hedge funds. When is Form PF filed? Smaller Private Advisers are required to file the Form PF annually within 120 days after the end of their fiscal year. Large Private Advisers must file depending on which classification of the following they meet: - Large hedge fund advisers are required to file the Form PF within 60 days of the end of each fiscal quarte r. - Large liquidity fund advisers must file Form PF to update information regarding the liquidity funds they manage within 15 days of the end of each fiscal quarter. - Large private equity fund advisers must file Form PF annually within 120 days of the end of the fiscal year. This is only a partial extract of a more complete article. To view the full version of this article please visit Murray LLP. For further information about Form PF please contact Murray LLP: Anthony Murray Murray LLP (212) 729 3045 Anthony@murrayllp.com This guide is general in nature and is not complete or exhaustive legal advice. If you are intending to act upon this advice please contact us for specific advice. No attorney-client relationship is created by the publication of this advice. Murray LLP accepts no liability for any reliance on this guide. Attorney advertising.