SEC proposes tougher disclosure rules

Private equity managers with more than $1bn in assets may be subject to additional reporting requirements under a new rule proposed by the SEC.

Large hedge and private equity fund advisors may need to provide information on the types of assets in each of their funds' portfolios, should a recently proposed Securities and Exchange Commission rule be passed.

They would also have to provide certain information relevant to the risk profile of the fund, and the extent to which the fund has a policy of complying with all or aspects of the Investment Company Act's principal rule concerning registered money market funds.

Under the SEC's proposal, large private fund advisors would include any advisor with $1 billion or more in hedge fund, liquidity fund, or private equity fund assets under management. All other private fund advisors would be regarded as smaller private fund advisers and would not be subject to the additional reporting requirements.

The additional information would be presented on Form PF, which would be filed periodically by registered investment advisors who manage one or more private funds. Information reported on Form PF would remain confidential.

Large private fund advisors would file Form PF on a quarterly basis and would provide more detailed information than smaller advisors. The focus of the reporting would depend on the type of private fund that the advisor manages.

The rule, which was proposed 25 January, would require advisors to private funds to report the additional information for use by the Financial Stability Oversight Council (FSOC).

The Dodd-Frank Act, which was enacted over the summer, established the FSOC to monitor risks to the stability of the US financial system.

“While the group of large private fund advisers is relatively small in number, it represents a large majority of private funds' assets under management,” SEC Chairwoman Mary Schapiro said in a statement. “The data collection we propose will play an important role in supporting the framework created by the Dodd-Frank Act and is designed to ensure that regulators have a view into any financial market activity of potential systemic importance.”

The SEC estimates about 250 US-based private equity fund advisors managing more than $1 billion in private equity fund assets manage 85 percent of the US private equity fund industry, Schapiro added.

The SEC is seeking public comment on the proposed reporting requirements. Comments should be received by the SEC within 60 days after publication of the proposing release in the Federal Register.