Stephen T. Mears, Christopher M. Wells, Laurier W. Beaupre, Gregory T. Merz, and Michael R. Suppappola of Proskauer Rose LLP
Late in 2011, the Securities and Exchange Commission (the "SEC") adopted Rule 204(b)-1 under the Investment Advisers Act of 1940 (the "Advisers Act"). The new rule will require SEC-registered advisers with at least $150 million in assets under management attributable to private funds to report certain information to the SEC on newly created Form PF.
The information provided under this new reporting obligation will be treated as confidential. It will be used primarily by the Financial Stability Oversight Council to assess systemic risks to the U.S. financial system.
Scope and Applicability of Form PF Reporting Requirements
The frequency of the reporting obligation and the amount of information that must be reported on Form PF will vary depending on the size of the adviser and on the type of private funds managed by the adviser.
In general, any registered investment adviser that advises one or more private funds and has at least $150 million in assets under management attributable to those private funds (a "Reporting Adviser") will be required to file a Form PF with the SEC on an annual basis.  However, the reporting requirements for hedge funds will be more extensive than the reporting requirements for other types of private funds.
In addition, the reporting requirements for certain large Reporting Advisers will be more frequent and/or more extensive. In particular:
Advisers (including advisers to venture capital funds) that qualify as "exempt reporting advisers" under the Advisers Act will not be required to file a Form PF. 
For purposes of these reporting requirements:
For purposes of determining whether an adviser's private fund assets under management exceed a particular reporting threshold, Form PF provides that an adviser must calculate its assets under management attributable to private funds in accordance with the requirements of Part 1A of Form ADV. In general, this requires advisers to include as assets under management the gross value of all assets in a private fund (regardless of the nature of those assets) plus any uncalled capital commitments to the fund. 
For purposes of Form PF:
A Reporting Adviser may (but is not required to) file a single Form PF with respect to all of its related persons and the private funds they advise, so long as the Reporting Adviser identifies all related persons included in the filing.
Several interesting consequences arise from the manner in which the SEC has chosen to define the terms "private equity fund" and "hedge fund" under Form PF. For example, a private equity fund is defined as any private fund that does not fall into one of the SEC's other private fund categories. This raises the possibility that some private fund advisers that do not consider themselves to be private equity firms will nevertheless find themselves included in the private equity category simply because their investment products do not fit neatly into one of the SEC's other categories under Form PF. Perhaps more importantly, any fund that meets the definition of a hedge fund must report as a hedge fund for purposes of Form PF and may not be classified as a private equity fund. Significantly, the SEC noted in the Adopting Release that a fund's governing documents do not need to expressly prohibit the types of borrowing or short sale activities that are included in the definition of a hedge fund in order for a fund to avoid being treated as a hedge fund, so long as the fund does not actually engage in such activities and no reasonable investor would expect the fund to engage in such activities based on the fund's offering documents. Nevertheless, private equity and other non-hedge fund advisers should carefully review their activities and fee structures against Form PF's definitions to understand properly how their funds will be characterized for purposes of Form PF and to ensure that their funds will not be inadvertently caught up in the reporting requirements for hedge funds.
Reporting Obligations under Form PF
(a) All Reporting Advisers
Reporting Advisers (those whose assets under management attributable to private funds are at least $150 million as of the last day of the adviser's fiscal year) will be required to file Form PF with the SEC within 120 days of the end of the adviser's fiscal year. The basic reporting requirements for all Reporting Advisers under Form PF are as follows:
(b) Large Hedge Fund Advisers
Large Hedge Fund Advisers (those whose assets under management attributable to hedge funds are at least $1.5 billion as of the end of any month in the fiscal quarter immediately preceding the adviser's most recently completed fiscal quarter) will be required to file Form PF on a quarterly basis within 60 days of the end of each fiscal quarter. In addition to the basic information required under section 1 of Form PF for all Reporting Advisers, section 2 of Form PF requires Large Hedge Fund Advisers to provide more detailed information concerning their hedge funds' investment activities, including:
(c) Large Liquidity Fund Advisers
Large Liquidity Fund Advisers (those whose assets under management attributable to private money market funds and registered money market funds are at least $1.0 billion as of the end of any month in the fiscal quarter immediately preceding the adviser's most recently completed fiscal quarter) must file Form PF within 15 days of the end of each fiscal quarter. In addition to the basic information required under section 1 of Form PF for all Reporting Advisers, section 3 of Form PF requires Large Liquidity Fund Advisers to provide more detailed information concerning each of their private liquidity funds, including:
(d) Large Private Equity Fund Advisers
Large Private Equity Fund Advisers (those whose assets under management attributable to private equity funds are at least $2.0 billion as of the last day of the adviser's most recently completed fiscal year) must file a Form PF within 120 days of the end of the adviser's fiscal year. In addition to the basic information required under section 1 of Form PF for all Reporting Advisers, section 4 of Form PF requires Large Private Equity Fund Advisers to provide more detailed information concerning each of their private equity funds, including:
There is a two-stage phase-in period for compliance with the Form PF filing requirements. Reporting Advisers with:
Must file Form PF beginning with the first fiscal quarter or fiscal year, as applicable, to end on or after June 15, 2012.
All other Reporting Advisers must begin filing Form PF following the end of their first fiscal quarter or fiscal year, as applicable, to end on or after December 15, 2012.
The filing fee for Form PF will be $150 for each quarterly or annual filing.
The paper version of Form PF is available on the SEC's Web site at: http://www.sec.gov/rules/final/2011/ia-3308-formpf.pdf. If you have any questions concerning Form PF, please contact your Proskauer relationship attorney.
 Reporting Advisers that (i) also are registered with the CFTC as a commodity pool operator or commodity trading adviser and (ii) are otherwise subject to a reporting obligation under Rule 204(b)-1, will be permitted to use a Form PF filing with the SEC as substitute compliance for certain additional systemic risk reporting rules that the CFTC has proposed (but not yet adopted) under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
 See Proskauer Client Alert, "SEC Adopts Final Rules for Advisers to Private Investment Funds and Amendments to Form ADV" (July 11, 2011) for a discussion of the requirements to qualify as an exempt reporting venture capital fund adviser under the Advisers Act. http://www.proskauer.com/publications/client-alert/sec-adopts-final-rules-for-advisers-to-private-investment-funds/
 A "securitized asset fund" is defined as any private fund whose primary purpose is to issue asset-backed securities and whose investors are primarily debt holders.
 A "real estate fund" is defined as any private fund that is not a "hedge fund," that does not provide investors with redemption rights in the ordinary course, and that invests primarily in real estate and real estate-related assets.
 See footnote 3 above.
 A "venture capital fund" is defined as any private fund meeting the definition of a venture capital fund under Rule 203(1)-1 under the Advisers Act. See footnote 2 above.
 In calculating regulatory assets under management on a gross basis, an adviser may not deduct any liabilities that a private fund may have (such as accrued fees or expenses or the amount of any borrowings).
 A "dependent managed parallel account" is defined as any managed account or other pool of assets managed by the applicable Reporting Adviser that pursues substantially the same investment objective and strategy and invests side-by-side in substantially the same positions as the identified private fund (other than a managed parallel account or group of accounts whose gross value is greater than the identified private fund or group of parallel private funds). According to the SEC, this exception for managed parallel accounts whose value exceeds the value of the referenced private funds is intended to prevent an adviser with a relatively small amount of private fund assets from becoming subject to the reporting requirements under Form PF simply because it manages a large number of separate accounts that pursue the same investment strategy as the adviser's private fund(s).
 As defined in Advisers Act Rule 203(m)-1.
 Specifically, Form PF requires Reporting Advisers to provide a breakdown of each private fund's assets based on the fair value hierarchy categories established under U.S. Generally Accepted Accounting Principles.
 The instructions to Form PF provide that for any private fund that invests substantially all of its assets in other unaffiliated private funds (a "fund-of-funds"), the Reporting Adviser is only required to complete section 1b of Form PF for that fund and that for all other purposes the fund-of-funds should be disregarded.
 A "controlled portfolio company" is defined as a company that is controlled by the private equity fund, either alone or together with the private equity fund's affiliates or other persons that are part of a club or consortium that includes the private equity fund. "Control" is defined by reference to Form ADV, which defines control as the power, directly or indirectly, to direct the management or policies of a portfolio company, whether through ownership of securities, by contract or otherwise. Control is generally presumed to exist with an ownership interest of 25% or greater.
Stephen T Mears, Partner, firstname.lastname@example.org
Stephen T. Mears is a Partner in the Private Investment Funds Group. He concentrates on private investment funds, including venture capital, mezzanine and buyout funds. He represents fund sponsors in all aspects of fund formation, operation and management, including fund structuring, portfolio investments, sales and distributions, internal governance and management, regulatory compliance and ongoing maintenance and administration. Stephen also represents institutional investors in connection with their participation in private investment funds.
Christopher M Wells, Partner, email@example.com
Christopher M. Wells is a Partner and head of the Hedge Funds Group. Chris advises hedge funds, funds of funds and other pooled investment vehicles and their managers on all aspects of fund formation, operations and ongoing compliance with securities, commodities and tax laws.
Chris has organized onshore and offshore funds using a wide range of investment and trading strategies throughout the world, ranging from private equity investments to sophisticated futures and derivatives trading strategies. He has been especially active in the formation of funds offered simultaneously to investors in multiple jurisdictions, and in the development of tax-efficient management structures for U.S. and non-U.S. investment management organizations.
Laurier W Beaupre, Partner, firstname.lastname@example.org
Laurier W. Beaupre is a Partner in the Corporate Department and a member of the Private Investment Funds Group. His practice focuses on representing private equity fund managers in fund formations and with respect to succession planning and other firm governance issues.
Larry represents numerous fund-of-funds, public pension plans and other institutions as investors in private equity funds worldwide; provides advice on compliance with the Investment Advisers Act of 1940 and the Investment Company Act of 1940; and represents private equity funds and other institutions as investors in privately held operating companies.
Gregory T. Merz, Special Regulatory Counsel, email@example.com
Greg Merz is Special Regulatory Counsel in the Corporate Department, resident in the Washington, D.C. office. Greg focuses on regulatory and compliance issues for private investment firms, investment advisers, mutual funds and financial services companies. He has extensive experience with the application of federal and state securities laws to all aspects of the asset management industry, including the Investment Advisers Act of 1940, the Investment Company Act of 1940, Securities Act of 1933, the Securities Exchange Act of 1934, Dodd-Frank Wall Street Reform and Consumer Protection Act, Graham-Leach-Bliley, the PATRIOT Act, the Bank Secrecy Act and state blue sky laws.
Michael R Suppappola, Associate, firstname.lastname@example.org
Michael Suppappola is a senior Associate in the Corporate Department and a member of the Private Investment Funds Group. He has a general corporate practice with an emphasis on the representation of private investment funds, funds of funds and investment advisers.
Mike counsels U.S. and non-U.S. sponsors on all aspects of the fund formation and capital raising process, including the drafting of offering documents, general partner and management company structuring and day-to-day operational issues, and advises institutional investors with respect to investments in U.S. and non-U.S. private investment funds. He also represents secondary investment fund managers in the acquisition of portfolio investments and guides fund sponsors through all stages of the secondary transaction process.
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Material in this work is for general educational purposes only, and should not be construed as legal advice or legal opinion on any specific facts or circumstances, and reflects personal views of the authors and not necessarily those of their firm or any of its clients. For legal advice, please consult your personal lawyer or other appropriate professional. Reproduced with permission from Proskauer Rose LLP. This work reflects the law at the time of writing November 2011.