By introducing the Form PF, a part of the Dodd-Frank Act, the SEC is hoping to create a tool to manage potential systemic risk. From the early versions the Form PF is now adapted to the user community and the terminology used within fund and portfolio management in my view. I am on the look out for solutions in this space and to start off, I created a high level short version of what it’s all about.
The Form PF addresses four groups of advisors.
Section 1 – The first section is for all types of advisors, there are three categories of basic information that need to be filled out.
Section 2 – Any fund adviser that has an asset under management that exceeds $1,5 billion is required to fill out this section. This Section has two categories.
Section 3 – A private fund adviser must complete Section 3 of Form PF if it manages one or more liquidity funds and had at least $1 billion in combined liquidity fund and registered money market fund assets under management as of the end of any month in the prior fiscal quarter.
Section 4 – A private fund adviser must complete Section 4 of Form PF if it had at least $2 billion in private equity fund assets under management as of the end of its most recently completed fiscal year.
The reporting is filed monthly, quarterly and/or annually to the CFTC and SEC depending on the different Sections and Categories that applies. For a view at the actual form, click here!
Source: www.dodd-frank.com
Tom Andorff 
More Dodd Frank related content.
I my search for Solutions (or problems) within the Dodd Frank area the regulations landscape thickens, and a few more regulations aspects seems interesting. David Canter, executive VP of practice Management and Consulting for Fidelity’s RIA wrote this notable piece on http://www.forbes.com.
“Amidst the approximately 850 pages of the Dodd-Frank legislation lie several important provisions and initiatives that are designed to help better protect investors. At the same time, these new provisions and initiatives will more than likely have a significant and lasting impact on the RIA industry.
These include the well-publicized general requirement for some firms with less than $100 million in assets under management to transition to state regulation starting in July 2011 and the commencement of two studies by the SEC which may determine a new direction of the industry — IA/BD harmonization and whether a self-regulatory organization (“SRO”) should be imposed on the industry, each recently completed last week. [You can go directly to the SEC’s Web site for additional information.]
And if that weren’t enough, add to that a separate SEC initiative which would change the manner in which RIAs prepare, file and deliver Form ADV Part 2 to clients. All of these provisions and initiatives add up to a lot of change that could substantially affect the industry as we know it.
While there has been a lot of dialogue in the industry about each of these new requirements individually, collectively they could have a profound impact on advisors’ practices – especially for mid-sized firms that may need to transition to state regulation.
Not only should RIAs ensure they fully understand the impacts of the impending regulations, but they will need to prepare for additional change that could lie ahead.
State Registration Transition
Absent certain exemptions, the threshold applicable for advisors registering with the SEC will increase from $25 million to $100 million in assets under management, a change that takes affect in July 2011. The SEC expects this change will require approximately 4,100 advisors with $25 million to $100 million in assets under management to withdraw their federal registration and register with one or more state authorities. To do so, firms will have to make at least two filings with the SEC next summer. What does this change amount to? Again, more work and change for already taxed advisors.
IA/BD Harmonization
Section 913 of Dodd-Frank imposes the requirement of a study to identify gaps in the protection of retail customers relating to IA/BD standard of care in the context of providing personalized investment advice to retail investors. Now that the study has been completed, many expect the SEC to establish an explicit standard of care for advisors and broker-dealers whereby each is held to the same requirements under certain circumstances, namely a uniform fiduciary standard of care.
SRO Study
As a part of the Dodd-Frank legislation, the SEC conducted a study as to whether one or more self-regulatory organizations (SRO) should be imposed on the advisor industry. Will there be an SRO? If so, who will it be?
Much has been written on this topic — and generally the advisors I talk to are concerned about the notion of an SRO for the industry. One thing is certain; should there be an SRO for advisors, costs (including administrative and compliance burdens) for advisory practices will increase. One study by TowerGroup (“Broker vs. Advisor: It’s the Principle of the Thing”) expects that regulatory reform could add an additional 10%-20% in compliance costs. Depending on the size of the firm, it could be greater.
New Form ADV
The advisors that I talk to are gearing up for the new Form ADV requirements, but are not yet confident in their preparedness. In fact, according to a recent Fidelity pollof more than 200 advisors conducted in September 2010, nearly 30% of respondents say they are not very confident in their preparedness to fulfill the new ADV Part 2 requirements. Additionally, 89% of respondents indicate that the new ADV Part 2 requirements will increase their workload.
It’s no surprise then that most are seeking help from compliance consultants and attorneys as they undergo the transition to a narrative brochure from the existing “check the box” type of format.
Unknown as of yet is whether the increased transparency brought about by the publication of these documents within the SEC Web site (which also includes fee schedule information) will cause any competitive issues for advisors. At the end of the day, advisors should be able to manage the new requirements, but the early part of 2011 when most advisors’ compliance staff are already busy, will be even busier.”
Here’s some more useful links on the subject;
Start with this one!
http://www.sec.gov/divisions/investment/iard/iastuff.shtml
http://www.sec.gov/answers/formadv.htm
http://www.nasaa.org/
Click to access formadv-part2.pdf
LikeLike
Another part of the Dodd Frank regulations package is the creation of SEF’s (Swap Exchange Facilities) and the rule set that requires primarily the Banks to trade and clear OTC derivatives in a much more transparent way than today.
If you happen to have an interest in the subject, there in an absolutely excellent article in the NY Times where you can find an enlightened view and historical background.
Read up on it by clicking on the link:
http://topics.nytimes.com/top/reference/timestopics/subjects/d/derivatives/index.html
LikeLike
MSCI has an interesting product called RiskMetrics analytics that can take care of the Form PF reporting requirements.
Check it out here http://www.msci.com/insights/factor_and_risk_modeling/form_pf_reporting_added_to_msci_hedge_fund_reporting_suite.html
MSCI says that the SEC and CFTC have adopted Form PF reporting requirements consistent with RiskMetrics industry leading methodology for calculating risk and exposure statistics.
LikeLike