Insight Center: Publications

SEC and CFTC Working on Regulatory Harmonization

Investment Management Alert

Authors: Gregory J. Nowak and Matthew R. Silver


The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) required that the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly issue rules establishing the form and content of reports to be filed by private funds. The SEC and CFTC recently issued joint final rules1 for Reporting by Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF2 that implement provisions of Title IV of the Dodd-Frank Act.

The new SEC rule requires investment advisers registered with the SEC that advise one or more private funds and have at least $150 million in private fund assets under management to file Form PF periodically with the SEC. The new CFTC rule requires commodity pool operators (CPOs) and commodity trading advisors (CTAs) registered with the CFTC to satisfy certain CFTC filing requirements with respect to private funds, should the CFTC adopt such requirements (such requirements are currently in the proposal stage), by filing Form PF with the SEC if those CPOs and CTAs are also registered with the SEC as investment advisers and are required to file Form PF under the Advisers Act.3

An investment adviser must file Form PF if it: (1) is registered or required to register with the SEC; (2) advises one or more private funds; and (3) had at least $150 million in regulatory assets under management attributable to private funds as of the end of its most recently completed fiscal year. Advisers required to file form PF annually will be required to pay a $150 filing fee; those filing quarterly will pay a $150 filing fee for each quarterly filing.

A CPO that is registered with the CFTC and that is also dually registered as a private fund adviser with the SEC will be deemed to have satisfied certain CFTC reporting requirements (requirements that are still in the development/finalization stage and have not yet been formally adopted) by filing Form PF with the SEC. The new CFTC rule provides that for registered CPOs and CTAs that are also SEC-registered as investment advisers, filing Form PF will serve as substitute compliance with certain of the CFTC’s proposed systemic risk reporting requirements should the CFTC (as expected) adopt such requirements (i.e., for Schedules B and C of Form CPO-PQR and Schedule B of Form CTA-PR as proposed). For these private fund advisers, filing Form PF through the Form PF filing system satisfies filing obligations for both the SEC and CFTC. SEC has announced that FINRA will administer the Form PF filing system and that there will be a filing fee assessed by FINRA for each Form PF filed. CPOs and CTAs that are dually registered as private fund advisers would be required to provide annually basic information (on Form PF) about the operations of their private funds - $150 for quarterly filings and $150 for annual filings. Only large CPOs and CTAs that are also registered as private fund advisers with the SEC would have to submit, on a quarterly basis, the full complement of systemic risk-related information required by Form PF. CPOs and CTAs will be given the option of submitting on Form PF data regarding commodity pools that are not private funds as substitute compliance with certain of the CFTC’s proposed systemic risk reporting requirements (assuming the CFTC adopts certain rules, as currently contemplated).

Because commodity pools that are reported or required to be reported on Form PF are categorized as hedge funds for purposes of Form PF,4 CPOs and CTAs filing Form PF need to complete only the sections applicable to hedge fund advisers (i.e., Section 1 and, if AUM is large enough, Section 2), provided that they do not manage reportable private equity funds or liquidity funds.

Irrespective of their filing a Form PF with the SEC, the CFTC has proposed that all private fund advisers that are also registered as CPOs and CTAs with the CFTC would be required to file Schedule A of Form CPO-PQR (for CPOs) or Schedule A of Form CTA-PR (for CTAs).


1 The CFTC is adopting Rule 4.27 under the Commodity Exchange Act (CEA) and Form PF. The SEC is adopting Rule 204(b)-1 and Form PF under the Investment Advisers Act of 1940 (the Advisers Act).

2 Available at http://www.sec.gov/rules/final/2011/ia-3308.pdf. Form PF itself is available at http://www.sec.gov/rules/final/2011/ia-3308-formpf.pdf.

3 Advisers solely to venture capital funds or advisers solely to private funds that in the aggregate have less than $150 million in assets under management in the United States that rely on the exemption from registration under, respectively, Section 203(l) or 203(m) of the Advisers Act (so-called “exempt reporting advisers”) are not required to file Form PF.

4 The definition of “hedge fund” as used in Form PF does not apply with respect to any other form or regulation of either the SEC or the CFTC unless otherwise specified by such regulator. The SEC has recently adopted this same definition in amendments to Form ADV. The CFTC has not adopted any definition of “hedge fund” beyond that adopted solely for purposes of Form PF.

Form PF defines a “hedge fund” as any private fund (other than a securitized asset fund):

(a) with respect to which one or more investment advisers (or related persons of investment advisers) may be paid a performance fee or allocation calculated by taking into account unrealized gains (other than a fee or allocation the calculation of which may take into account unrealized gains solely for the purpose of reducing such fee or allocation to reflect net unrealized losses)(b) that may borrow an amount in excess of one-half of its net asset value (including any committed capital) or may have gross notional exposure in excess of twice its net asset value (including any committed capital), or (c) that may sell securities or other assets short or enter into similar transactions (other than for the purpose of hedging currency exposure or managing duration).

Solely for purposes of Form PF, any commodity pool about which an adviser is reporting, or is required to report, on Form PF is categorized as a hedge fund. For purposes of the definition, parties completing the form are instructed not to net long and short positions and to include any borrowings or notional exposure of another person that are guaranteed by the private fund or that the private fund may otherwise be obligated to satisfy.

Gregory J. Nowak and Matthew R. Silver

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