SEC amends Form PF - implications for private fund advisers and the secondaries market

On May 3, 2023, the U.S. Securities and Exchange Commission (SEC) adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds. 

As part of these final amendments, the SEC will require private equity fund advisers to report certain triggering events, including "occurrences of an adviser-led secondary transaction", within 60 days of each fiscal quarter end. 

The SEC is defining “adviser-led secondary transaction” as any transaction initiated by the adviser or any of its related persons that offers private fund investors the choice to: 

• Sell all or a portion of their interests in the private fund; or
• Convert or exchange all or a portion of their interests in the private fund for interests in another vehicle advised by the adviser or any of its related persons.

Reporting for completed adviser-led secondary transactions includes the transaction closing date and a brief description of the transaction. Besides GP-led secondaries transactions, other trigger events include the removal of the general partner and certain fund termination events. Other annual reporting will be required from "large" private equity fund advisers (i.e., private equity fund advisers with at least $2 billion in private equity assets under management) as it relates to general partner or limited partner clawback that occurred in the past year.

The SEC’s stated purpose is to provide more timely information about private equity funds that may "indicate significant stress at a fund or investor harm". The SEC cited the recent market events, alluding to the collapse of Silicon Valley Bank. 

With respect to adviser-led secondary transactions, the SEC pointed to such transactions’ potential “meaningful impact on the liquidity profile of a private equity investment and/or the private equity fund that held it originally” and the potential conflicts of interest inherent in such transactions, as well as the systemic risk assessment utility of reporting such transactions.

These rules had been proposed over a year ago. However, the final rules reflect a softer stance than originally proposed by the SEC, which had initially contemplated a fund reporting deadline at one business day of completion of a GP-led transaction. The proposed rules had also contemplated the more controversial requirement for private fund advisers to obtain a fairness opinion in connection with any GP-led secondary transaction. However, it remains to be seen what the SEC’s final rules will be on the topic of fairness opinions.

The final amendments will become effective six months after publication of the adopting release in the Federal Register for current and quarterly event reporting and one year after publication in the Federal Register for the remainder of the amendments.

With respect to adviser-led secondary transactions in particular, while obviously the responsibility of the relevant adviser, LP participants in such transactions (particularly lead investors) may consider efforts – including contractual undertakings – to ensure that the relevant adviser is fulfilling its reporting obligations under the amendments as adopted.