SEC Adopts Amendments on Private Fund Reporting and Share Repurchase Disclosure

May 3, 2023

The Securities and Exchange Commission (SEC) recently adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, as well as amendments intended to modernize the disclosure requirements relating to repurchases of an issuer’s equity securities.

Amendments To Enhance Private Fund Reporting

In a press release, the SEC said the Form PF amendments are designed to enhance the ability of the Financial Stability Oversight Council (FSOC) to assess systemic risk and to bolster the SEC’s oversight of private fund advisers and its investor protection efforts. The amendments will require large hedge fund advisers and all private equity fund advisers to file current reports upon the occurrence of certain reporting events that could indicate significant stress at a fund or investor harm.

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. Large hedge fund advisers must file the reports as soon as practicable, but not later than 72 hours from the occurrence of the relevant event.

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. Private equity fund advisers must file these reports on a quarterly basis within 60 days of the fiscal quarter end.

The amendments will also require large private equity fund advisers to report information on general partner and limited partner clawbacks on an annual basis, as well as additional information on their strategies and borrowings as a part of their annual filing.

The amendments for current reporting will become effective six months after publication of the adopting release in the Federal Register, and the remaining amendments will become effective one year after publication in the Federal Register.

Amendments To Modernize Share Repurchase Disclosure

In addition, the SEC adopted amendments intended to modernize the disclosure requirements relating to repurchases of an issuer’s equity securities. The SEC said the amendments will improve disclosure and provide investors with enhanced information to assess the purposes and effects of share repurchases.

The amendments will require issuers to disclose daily quantitative share repurchase information either quarterly or semi-annually. The required disclosures include, for each day on which a repurchase was conducted, the number of shares repurchased that day and the average price paid, among other things. Issuers will also be required to include a checkbox indicating whether certain officers and directors traded in the relevant securities in the four business days before or after the announcement of the repurchase plan or program.

Further, the amendments will revise and expand narrative repurchase disclosure requirements to require that an issuer disclose: (1) the objectives or rationales for its share repurchases and the process or criteria used to determine the amount of repurchases; and (2) any policies and procedures relating to purchases and sales of the issuer’s securities during a repurchase program by its officers and directors, including any restriction on such transactions.

Finally, the amendments will add a new item to Regulation S-K to better allow investors, the SEC and other market participants to observe how issuers use Rule 10b5-1 plans. New Item 408(d) will require quarterly disclosure in periodic reports on Forms 10-Q and 10-K about an issuer’s adoption and termination of Rule 10b5-1 trading arrangements.

Foreign private issuers that file on foreign private issuer forms will disclose the quantitative data in new Form F-SR beginning with the Form F-SR that covers the first full fiscal quarter that begins on or after April 1, 2024, and provide the narrative disclosure starting in the first Form 20-F filed after their first Form F-SR has been filed. Registered closed-end management investment companies that are exchange traded will disclose the quantitative data and provide the narrative disclosure on Form N-CSR beginning with the Form N-CSR that covers the first six-month period that begins on or after Jan. 1, 2024. All other issuers will be required to include the quantitative data as an exhibit to their Forms 10-Q and 10-K and provide the narrative disclosure in their Forms 10-Q and 10-K beginning with the first filing that covers the first full fiscal quarter that begins on or after Oct. 1, 2023.