SEC, CFTC Propose Raising Compliance Threshold for Private Fund Advisers

The Securities and Exchange Commission and the Commodity Futures Trading Commission proposed a reduction in reporting requirements for hedge fund and private fund investment advisers, undoing amendments made during the administration of former President Joe Biden.

The regulators announced the jointly proposed amendments on April 20, seeking to raise the reporting thresholds for Form PF, a disclosure form created in 2011 to provide the agencies and the Financial Stability Oversight Council with confidential information about private funds, such as their exposure to specific industries and countries, all to help the regulators manage systemic market risks.

The proposed amendments continue one of the agencies’ current objectives, as SEC Chair Paul Atkins has repeatedly expressed a desire to reduce disclosures, often extending compliance deadlines or proposing rules that ease reporting requirements. Last year, the SEC extended the compliance deadline until October 2026 for the enhanced confidential disclosures about portfolio investments and risks required by the 2024 Biden-era rule.

The changes follow a few turbulent months in private credit markets that have drawn constant attention, as a plethora of retail-oriented private credit funds have faced a rise in redemption requests. The uptick led several private credit asset management firms to cap redemptions, setting off fear among retail investors and some industry hawks.

The Changes

In the agencies’ new proposal, the SEC and CFTC would raise the fund-size threshold for compliance to $1 billion in private fund assets under management from $150 million for all filers, and to $10 billion in private fund AUM from $1.5 billion for “large” hedge funds.

The change for advisers of funds with between $150 million and $1 billion in assets would exempt more than half of the advisers currently required to file Form PF, according to the proposal.

“Form PF would continue to obtain information on over 90 percent of private fund gross assets and require detailed exposure information for funds managed by large hedge fund managers,” regulators wrote. “In addition, the proposed amendments to Form PF would enable a method to identify funds that are active in the private credit market.”

The agencies also stated that the changes would reduce burdens on the private funds and investment advisers, while still requiring the collection of “necessary and appropriate” information.

“A key pillar of my agenda is restoring balance to disclosure obligations and reducing the cost of compliance wherever possible,” Atkins said in a statement.

Last September, when the SEC delayed the Biden-era version of the rule, its lone Democratic commissioner, Caroline Crenshaw, insisted that the Republican commissioners were delaying the rule’s enforcement date to effectively replace it. In January, Crenshaw left the Commission, leaving both Democrat seats unfilled.

At the CFTC—which, like the SEC, typically has five members, with no more than three belonging to the same political party—its chair, Republican Michael Selig, is the lone commissioner. Combined, the agencies are supposed to have 10 commissioners; they are operating with only four.

According to the agencies, the changes would still capture 90% of assets under management.

Regulators will accept comments on the proposal for 60 days after it is published in the Federal Register.