FOR IMMEDIATE RELEASE
Jan. 27, 2022
SEC Proposal Would Expose and Help Combat Abuses In Private Funds
Today’s proposals from the Securities and Exchange Commission would shed greater light on the investments and activities of what’s now become a massive $11.5 trillion private market. Hedge funds and private equity firms currently face very little oversight, opening the door to all sorts of shady behavior.
“Our regulators simply must have the data they need to properly monitor what’s now become an $11.5 trillion market run largely in the dark,” said Andrew Park, senior policy analyst at Americans for Financial Reform Education Fund. “It will greatly help regulators stop abusive and manipulative practices that previously went undetected,”
With this proposal, the SEC is heeding longstanding calls to improve Form PF, the main disclosure vehicle for private funds, because of the size of these markets and their ability to inflict widespread losses across the financial system. The sudden implosion in March 2021 of family office Archegos Capital, which led to over $10 billion in losses among the largest banks, only highlighted how important it is for regulators to have this information.
The SEC is proposing that Form PF reporting be expanded to include, for all private equity funds over $1.5 billion, additional data on their investments including:
– All portfolio companies and how those investments are being financed
– Potential conflicts that may arise from Investments in different parts of their portfolio company’s capital structure
Hedge funds would have to file, within one business day:
– Extraordinary investment losses
– Significant counterparty defaults
– Material changes to their relationship with their prime broker
– Sudden withdrawals/redemptions