WASHINGTON, Oct 26 (Reuters) - Advisers to hedge funds and
private equity funds will face less onerous reporting
requirements than many had feared after the Securities and Exchange Commission eased a plan requiring them to turn over
confidential data to the government.
The SEC's final rule will apply to far fewer private fund
advisers than previously thought, give advisers more time to
file their forms, and, in some cases, require certain advisers
to file with the SEC less frequently.
The most extensive reporting requirements will apply to
advisers of very large funds, such as hedge fund Bridgewater
Associates and private equity fund The Carlyle Group.
But even those requirements were scaled back a bit after
the industry, lawmakers and some former SEC commissioners
complained that the regulation as proposed in January was too
The new reporting requirements, required by last year's
Dodd-Frank financial oversight law, will give the SEC its first
direct window into the investment concentrations and trading
strategies of massive funds.
The information is designed to help the new Financial
Stability Oversight Council determine whether a fund's trading
may pose any risks to the broader marketplace.
"To monitor systemic risk is a herculean task. To do it
blindly is to invite failure," said SEC Commissioner Luis
Aguilar, a Democrat. "At least today, one step has been made to
collect and provide FSOC with reliable, necessary information
to further its own mission and foster stability within the
The rule, which was adopted by a 4-0 vote, takes a tiered
Advisers to hedge funds, private equity funds and liquidity
funds with over $150 million in assets under management will
have to turn over basic information once a year.
That includes data on size, leverage, investor types,
concentration and fund performance.
Advisers to larger-sized funds will need to turn over
detailed information on things such as exposures by asset class
and the use of bridge financing.
However, in the final rule, the SEC raised the threshold so
that fewer advisers will be snagged by the more extensive
reporting, and lessened the frequency of reporting for some
Originally, the SEC had set the threshold at $1 billion in
assets under management for advisers to hedge funds, private
equity funds, and liquidity funds, and required them all to
TYPE OF FUND MATTERS
The final rule treats the types of funds differently.
Advisers to liquidity funds, such as unregistered money
market funds, will still have to report quarterly if they are
more than $1 billion in assets.
Large hedge fund advisers will also have to report
quarterly, but only if they have more than $1.5 billion in
assets under management.
The biggest relief in the final rule will be for advisers
to private equity funds, which are generally considered less
risky because they have different trading strategies and tend
to buy and hold their investments for longer periods.
Private equity fund advisers will only be subject to the
more extensive reporting requirements if they hit $2 billion in
assets. And they will only have to report annually.
SEC Chairman Mary Schapiro said on Wednesday that she
expects about 230 US-based large hedge fund advisers and 155
large private equity fund advisers will be affected by the
"While the group of large private fund advisers is
relatively small in number, it represents a large majority of
private funds' assets under management," Schapiro said.
The SEC sought to quell any anxiety the industry may feel
about handing over confidential data.
SEC Investment Management Director Eileen Rominger
clarified that there is no requirement to report on
position-level data, and that the SEC is actively engaged in
working toward establishing a secure system with controls to
safeguard the information.
The final rule also got a seal of approval from the SEC's
Republican Commissioner Troy Paredes, who said it was greatly
improved and fulfills the Dodd-Frank requirements while doing
so in a way that will reduce "the compliance burden on
The Commodity Futures Trading Commission, which regulates
private funds that invest in commodities, still must jointly
approve the rule. The CFTC is expected to vote in the next
(Reporting by Sarah N. Lynch)
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