January 28, 2022

Private Equity: SEC Proposes Changes to Form PF

On Wednesday, the SEC announced proposed amendments to Form PF, the confidential reporting form used by certain SEC-registered investment advisers to private funds to make reports upon the occurrence of key events. Here’s the 236-page proposing release and here’s the 2-page fact sheet. Davis Polk came out with this memo yesterday summarizing the proposed changes.  This excerpt addresses the potential new obligations of advisers to large PE funds:

The proposed amendments would reduce the reporting threshold for large private equity advisers from $2 billion to $1.5 billion in private equity fund assets under management. In addition, the proposals seek to expand the information gathered from large private equity advisers by amending section 4 of Form PF to require disclosure of information regarding fund strategies, use of leverage and portfolio company financings, controlled portfolio companies (CPCs) and CPC borrowings, fund investments in different levels of a single portfolio company’s capital structure, and portfolio company restructurings or recapitalizations.

Comments are due 30 days after publication of the proposal in the Federal Register. But Cadwalader’s Steven Lofchie already won the comment period with his commentary the end of the firm’s memo on the proposal. After characterizing Form PF as “worthless,” he went on to say exactly why he thinks that’s the case:

In the decade since Form PF was required, there has not been a single public report analyzing the data and demonstrating its value. That is not because the data must be kept a secret. Any lawyer knowledgeable about the issues as to which Form PF is intended to elicit information can tell, without seeing the responses, that the questions asked by the report are completely ambiguous and badly stated. There is no way that the responses to the Form PF questions could yield significant results across the industry.

Responses to badly drafted and ambiguous questions do not provide useful information. Rather than insisting upon the collection of more useless information, the SEC should take some time and really revisit the Form, and either get it right or throw it away.

John Jenkins