The SEC adopted amendments to two rules Wednesday, changes designed to increase transparency in reporting required of large hedge fund advisers, private-equity fund advisers, and public company issuers.
Large hedge fund advisers and private-equity fund advisers will be affected by the first amendments to Form PF reporting since its initial adoption in 2011. Among other things, advisers now must report, before regular reporting periods, certain events of "significant stress" that could pose systemic risk.
On the public side, amendments adopted Wednesday related to the modernization of disclosure requirements for the repurchase of an issuer's equity securities — more commonly known as "buybacks" — will require issuers to disclose daily quantitative information.
The Form PF amendments spell out differing lists of triggering events that would compel large hedge fund advisers and private-equity fund advisers to rapidly report to the SEC. Large hedge fund advisers will be required to report within 72 hours of the event, while private-equity fund advisers must report on a quarterly basis within 60 days of the fiscal quarter end.
"Private funds today are ever more interconnected with our broader capital markets. They also nearly have tripled in size in the last decade," SEC Chair Gary Gensler said in a news release. "This makes visibility into these funds ever more important. Today's amendments to Form PF will enhance visibility into private funds and help protect investors and promote financial stability."
Reporting events for large hedge fund advisers include certain extraordinary investment losses, significant margin and default events, terminations or material restrictions of prime broker relationships, operations events, and events associated with withdrawals and redemptions. Reporting events for private-equity fund advisers include the removal of a general partner, certain fund termination events, and the occurrence of an adviser-led secondary transaction.
The amendments will also require large private-equity fund advisers to report additional information on their strategies and borrowings as a part of their annual filing, as well as information on general partner and limited partner clawbacks on an annual basis.
Buybacks are the focus of the other amendments adopted Wednesday by the SEC. Changes to Share Repurchase Disclosure Modernization will require disclosure — at least semi-annually — by public company issuers of the number of shares repurchased and the average price paid on each given day, as well as information about the objectives of the buybacks and whether certain company officers or directors traded the securities around the same time.
"In 2021, buybacks amounted to nearly $950 billion and reportedly reached more than $1.25 trillion in 2022," Gensler said in a news release. "Today's amendments will increase the transparency and integrity of this significant means by which issuers transact in their own securities. Through these disclosures, investors will be able to better assess issuer buyback programs. The disclosures will also help lessen some of the information asymmetries inherent between issuers and investors in buybacks. That's good for investors, issuers, and the markets."
Earlier this week, the SEC also reopened the comment period on its proposed amendments to modernize the rules governing beneficial ownership reporting.
— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.