Recent Developments Affecting Investment Advisers: SEC and CFTC Jointly Propose Form PF to Implement Dodd-Frank Reporting Requirements for Advisers to Certain Private Funds; SEC Releases Study on Enhancing Investment Adviser Examinations

Sullivan & Cromwell LLP - February 3, 2011

This memo focuses on recent developments that affect investment advisers. Specifically, the SEC has recently proposed, jointly with the CFTC, certain rules and reporting requirements for registered investment advisers. The SEC has also released a study regarding registered adviser examinations.


The SEC and CFTC have jointly proposed rules requiring registered investment advisers to private funds, as well as commodity pool operators and commodity trading advisors who are also registered advisers to private funds, to periodically report systemic risk information on new Form PF for use by the Financial Stability Oversight Council. Under the proposal, the character and detail of information a private fund adviser would be required to report on the proposed form would vary, based on both the size and the type of funds it advises. Specifically:

  • All private fund advisers, including commodity pool operators and commodity trading advisors that are also registered advisers to private funds, would be required to provide certain identifying information and basic aggregate and individual information for the private funds each advises.
  • Smaller private fund advisers (i.e., those with less than $1 billion in assets under management), would file this information on an annual basis in order to allow FSOC to monitor systemic trends in the fund industry. In addition, smaller private fund advisers to hedge funds would be required to disclose certain information on each advised hedge fund, including its strategy, counterparty exposure and trading and clearing practices in respect of the fund’s securities and derivatives.
  • Large Private Fund Advisers (i.e., those with at least $1 billion in assets under management) to hedge funds, liquidity funds, and private equity funds would have to file proposed Form PF quarterly, and would have to report more detailed financial information, tailored to each fund type, than smaller private fund advisers.


The SEC Staff recently released a study that focuses on the SEC’s historical role in examination of registered investment advisers, the prospective impact of Dodd-Frank on such examinations, and certain recommendations concerning these issues. The Study:

  • highlights that the frequency of examinations has declined over the past five years due to a combination of fewer SEC examiners and more registered advisers;
  • projects that, although the number of investment advisers is expected to decrease in the near term due to provisions of Dodd-Frank, over the next five to ten years, the number of registered investment advisers is expected to increase sharply;
  • proposes, as alternative means to alleviate the strain on SEC examination resources:
    • charging advisers user fees to cover the examination costs,
    • authorizing a new SRO to assist the SEC in adviser examinations, or
    • authorizing FINRA to conduct examinations for advisers involved in the securities industry who are already subject to its oversight.