Much hype has surrounded the outreach efforts of the Securities and Exchange Commission (SEC) to engage the private fund industry. The campaign supposedly is an altruistic one, providing the industry with the tools necessary to help it comply with its regulatory obligations a hedge fund continuing education course, if you will. The SEC is co-sponsoring just such a Getting to Know You event officially billed as a Compliance Outreach Program along with the Municipal Securities Rulemaking Board (MSRB) and Financial Industry Regulatory Authority (FINRA) in Chicago in early November complete with a discussion forum with regulators. But at the same time as the engagement campaign proceeds, another SEC effort is underway that takes advantage of mandatory reporting requirements to increase the number of enforcement actions against private funds.
Form PF was designed to obtain detailed investment and operational information from private funds. The form, part of the Dodd-Frank Act, requires private fund advisers to report on Regulatory Assets Under Management (RAUM). Investment advisers who are registered with the SEC having at least $150 million in private funds under management must file the form, and the SEC, the Commodities Futures Trading Commission (CFTC) and the Financial Stability Oversight Council (FSOC) oversee enforcement of the reporting regime.
What Gets Reported?
Form PF is comprehensive in terms of the information it requires, and filers must provide information about types of funds advised, size of funds, use of leverage, types of investors the fund caters to, fund liquidity, performance, fund strategy, counterparty credit risk and the use of trading and clearing mechanisms in sum, the advisers entire investment strategy.
Confidential but Not Privileged
Although the Dodd-Frank Act provides that the information submitted via Form PF be treated confidentially and, in fact, the SEC has designed controls to safeguard the proper handling of Form PF data nothing in the act prohibits its use by the SEC as a tool for gathering evidence helpful in the furtherance of an enforcement action against the very party supplying the data. Furthermore, confidentiality in this context does not mean that the data cannot be shared with co-regulators such as the Commodity Futures Trading Commission, which also scrutinizes the submissions as part of its own examination and enforcement responsibilities. The SEC recently acknowledged that although the primary aim of Form PF is to assist the FSOC in assessing systemic risk to the economy, the SEC also is using the information to support its own regulatory programs, including examinations, investigations and investor protection efforts relating to private fund advisers (Source: SEC Annual Staff Report Relating to the Use of Data Collected from Private Fund Systemic Risk Reports, August 15, 2014).
David draws on 20+ years’ experience in both legal practice and in business services delivery since his own call to the Bar in 1989. With several years in the startup environment, including as a co-founder in the legal tech space specifically, he brings a unique and timely perspective on the role of data, automation and artificial intelligence in the modern and efficient delivery of services for legal consumers. Having been both a corporate buyer of legal services and a services provider, he identifies the greater efficiency and value that can be achieved in legal operations for corporate buyers especially.
An attorney, David worked for law firms Pinsent Masons and Linklaters in London before moving to New York to join Credit Suisse. As CAO, he helped negotiate & execute the relocation of Credit Suisse into its new NYC global HQ. Subsequently, David directed major global outsourcing, shared sourcing, HR operations & process efficiency initiatives including the digitization of records, the global roll-out of PeopleSoft HRMS & Y2K. David has worked extensively in the UK, US, Philippines, India and China markets in the areas of data management, human resources and business process outsourcing.
Most recently, David has been successfully investing in and serving as an advisory board member of several legal services start-ups including a cloud-based solution for legal process automation and e-filing; and a technology solution for large-scale capture of court and other public data used for litigation analysis, among others.
David graduated from the University of Manchester with Honors in Law and Bar School (College of Legal Education) in London, and has been a member of Middle Temple since 1989. He is the founder and former Chairman of The Global Sourcing Council.
Member: Bar of England & Wales, ABA, NYCBA, ACC, DRI