Form PF Supporting Statement (2018) - revised for comments - submission

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 204(b)-1 and Form PF
A.

JUSTIFICATION
1.

Necessity for the Information Collection

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”)
established the Financial Stability Oversight Council (“FSOC”) to monitor emerging risks to
U.S. financial stability. 1 Sections 404 and 406 of the Dodd-Frank Act direct the Securities and
Exchange Commission (“SEC”) to supply FSOC with information for use in monitoring
systemic risk by establishing reporting requirements for private fund advisers. 2 On October 26,
2011, in a joint release with the Commodity Futures Trading Commission (“CFTC”), the SEC
adopted rule 204(b)-1 under the Investment Advisers Act of 1940 (“Advisers Act”). This rule
implements sections 404 and 406 of the Dodd-Frank Act by requiring private fund advisers that
have at least $150 million in private fund assets under management to report certain information
regarding the private funds they advise on Form PF.
Form PF contains a “collection of information” within the meaning of the Paperwork
Reduction Act of 1995 (“PRA”). 3 The paperwork burden associated with rule 204(b)-1 is
included in the collection of information burden associated with Form PF and, therefore, does
not entail a separate collection of information.

1

Pub. L. No. 111-203, 124 Stat. 1376 (2010).

2

For the purposes of this supporting statement, a “private fund adviser” is any investment adviser that (i) is
registered or required to register with the SEC and (ii) advises one or more private funds. See Reporting by
Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading
Advisors on Form PF, Investment Advisers Act Release No. IA-3308 (Oct. 31, 2011) (“Adopting
Release”).

3

44 U.S.C. 3501-3521.

1

Form PF divides respondents into two broad groups, Large Private Fund Advisers and
smaller private fund advisers. “Large Private Fund Advisers” are advisers with at least
$1.5 billion in assets under management attributable to hedge funds (“large hedge fund
advisers”), advisers that manage “liquidity funds” and have at least $1 billion in combined assets
under management attributable to liquidity funds and registered money market funds (“large
liquidity fund advisers”), and advisers with at least $2 billion in assets under management
attributable to private equity funds (“large private equity advisers”). 4 All other respondents are
considered smaller private fund advisers.
Smaller private fund advisers must report annually and provide only basic information
regarding their operations and the private funds they advise. Large private equity advisers also
must report on an annual basis but are required to provide additional information with respect to
the private equity funds they manage. Finally, large hedge fund advisers and large liquidity fund
advisers must report on a quarterly basis and provide more information than other private fund
advisers.
In addition to periodic filings, a private fund adviser is required to file very limited
information on Form PF in three situations. First, any adviser that transitions from quarterly to
annual filing because it has ceased to be a large hedge fund adviser or large liquidity fund
adviser must file a Form PF indicating that it is no longer obligated to report on a quarterly basis.
Second, filers that are no longer subject to Form PF’s periodic reporting requirements must file a
final report indicating that fact. Finally, an adviser experiencing technical difficulties in

4

See the Adopting Release for definitions of “hedge fund,” “liquidity fund,” and “private equity fund.”

2

submitting Form PF may request a temporary hardship exemption by filing portions of Form PF
in paper format. 5
On July 23, 2014, the SEC adopted amendments to Form PF under the Advisers Act. 6
Those amendments to Form PF affected only large liquidity fund advisers and required them to
disclose on Form PF certain additional information with respect to each portfolio security, for
each month of the reporting period.
The Office of Management and Budget (“OMB”) approved, and subsequently extended,
this collection under control number 3235-0679 .
2.

Purpose and Use of the Information Collection

Form PF is designed to facilitate FSOC’s monitoring of systemic risk in the private fund
industry and to assist FSOC in determining whether and how to deploy its regulatory tools with
respect to nonbank financial companies. 7 The SEC and the CFTC may also use information
collected on Form PF in their regulatory programs, including examinations, investigations and
investor protection efforts relating to private fund advisers. The respondents to Form PF are
private fund advisers, as defined above, that have $150 million or more in assets under
management attributable to private funds. Compliance with Form PF is mandatory for any such
private fund adviser. Responses to the information collection will be kept confidential to the
extent permitted by law. 8

5

See rule 204(b)-1(f). The rule requires that the adviser provide limited information describing the nature of
the hardship.

6

See Money Market Fund Reform; Amendments to Form PF, Investment Company Act Release No. 339616 (July 23, 2014).

7

See section I.A of the Adopting Release.

8

See below section A.7 of this supporting statement.

3

3.

Consideration Given to Information Technology

Under rule 204(b)-1(b), Form PF must be filed through an electronic system designated
by the SEC for this purpose. The Financial Industry Regulatory Authority (“FINRA”) maintains
the filing system for Form PF through the Private Fund Reporting Depository (“PFRD”), a
subsystem of the Investment Adviser Registration Depository (“IARD”), through which
registered advisers are already separately obligated to file annual reports on Form ADV. Form
PF may be filed either through a fillable form on the PFRD website or through a batch filing
process utilizing the eXtensible Markup Language (“XML”) tagged data format. Certain
advisers may prefer to report in XML format because it allows them to automate aspects of their
reporting and thus minimize burdens and generate efficiencies for the adviser. Collecting
information electronically will reduce the regulatory burden upon investment advisers by
providing a convenient portal for quickly transmitting reports and, for advisers that submit their
reports in XML format in particular, allowing them to automate aspects of their reporting.
4.

Duplication

The collection of information requirements of Form PF are not duplicated elsewhere.
5.

Effect on Small Entities

Under SEC rules, for the purposes of the Advisers Act and the Regulatory Flexibility Act,
an investment adviser generally is a small entity if it: (i) has assets under management having a
total value of less than $25 million; (ii) did not have total assets of $5 million or more on the last
day of its most recent fiscal year; and (iii) does not control, is not controlled by, and is not under
common control with another investment adviser that has assets under management of

4

$25 million or more, or any person (other than a natural person) that had total assets of
$5 million or more on the last day of its most recent fiscal year. 9
Under section 203A of the Advisers Act, most advisers qualifying as small entities are
prohibited from registering with the SEC and are instead registered with state regulators.
Therefore, few small advisers will meet the registration criterion. Fewer still are likely to meet
the minimum reporting threshold of $150 million in regulatory assets under management
attributable to private funds. By definition, no small entities will, on their own, meet this
threshold. Advisers are, however, required to determine whether they exceed this threshold by
aggregating their private fund assets under management with those of their related persons (other
than separately operated related persons), with the result that some small entities may be subject
to Form PF reporting requirements.
6.

Consequences of Not Conducting Collection

The collection of information required by Form PF is intended to implement the
requirements of sections 404 and 406 of the Dodd-Frank Act and is designed to provide FSOC
with timely information for purposes of monitoring systemic risk in the private fund industry.
The frequency of collection will vary depending on the size of the adviser and the types of private
funds it manages, which balances the need for (and value of) current information against the relative
reporting burden for different types of advisers. In addition, if the information either is not
collected or is collected less frequently, FSOC’s ability to monitor systemic risk, and the SEC’s
ability to protect investors, may be reduced.

9

17 CFR 275.0-7(a).

5

7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

Under applicable federal regulations, OMB generally will not approve a collection of
information that includes a pledge of confidentiality unless the pledge is “supported by
disclosure and data security policies that are consistent with the pledge....” 10 In addition, if an
agency proposes to collect confidential information, it must be able to “demonstrate that it has
instituted procedures to protect the information’s confidentiality to the extent permitted by
law.” 11
Form PF elicits non-public information about private funds and their trading strategies,
the public disclosure of which could adversely affect the funds and their investors. The SEC
does not intend to make public Form PF information identifiable to any particular adviser or
private fund, although the SEC may use Form PF information in an enforcement action. 12 The
Dodd-Frank Act amended the Advisers Act to preclude the SEC from being compelled to reveal
this information except in very limited circumstances. Similarly, the Dodd-Frank Act exempts
the CFTC from being compelled under FOIA to disclose to the public any information collected
through Form PF and requires that the CFTC maintain the confidentiality of that information
consistent with the level of confidentiality established for the SEC in section 204(b) of the
Advisers Act. The SEC makes information collected through Form PF available to FSOC, as the
Dodd-Frank Act requires, subject to the confidentiality provisions of the Dodd-Frank Act. 13
The Dodd-Frank Act contemplates that Form PF data may also be shared with other
Federal departments or agencies or with self-regulatory organizations, in addition to the CFTC

10

5 CFR 1320.5(d)(2)(vii).

11

5 CFR 1320.5(d)(2)(viii).

12

See sections II.D and II.E of the Adopting Release.

13

See section 204(b) of the Advisers Act.

6

and FSOC, for purposes within the scope of their jurisdiction. 14 In each case, any such
department, agency, or self-regulatory organization is exempt from being compelled under FOIA
to disclose to the public any information collected through Form PF and must maintain the
confidentiality of that information consistent with the level of confidentiality established for the
SEC in section 204(b) of the Advisers Act. 15 Prior to sharing any Form PF data, the SEC also
requires that any such department, agency, or self-regulatory organization represent to the SEC
that it has in place controls designed to ensure the use and handling of Form PF data in a manner
consistent with the protections established in the Dodd-Frank Act. 16
Certain aspects of the Form PF reporting requirements also help to mitigate the potential
risk of inadvertent or improper disclosure. For instance, the SEC has designed controls and
systems for the use and handling of Form PF data in a manner that reflects the sensitivity of this
data and is consistent with the confidentiality protections established in the Dodd-Frank Act.
8.

Consultation Outside the Agency

The SEC and the staff of the Division of Investment Management participate in an
ongoing dialogue with representatives of the investment company industry through public
conferences, meetings, and informal exchanges. These various forums provide the SEC and the
staff with a means of ascertaining and acting upon paperwork burdens confronting the industry.
The SEC requested public comment on the collection requirements in Form PF before it
submitted this request for revision and approval to OMB.

The SEC received two comment

14

See section 204(b)(8)(B)(i) of the Advisers Act.

15

See sections 204(b)(9) and (10) of the Advisers Act.

16

This would be consistent with the SEC’s current practice of requiring that it receive, prior to sharing
nonpublic information with other regulators, “such assurances of confidentiality as the [SEC] deems
appropriate.” See section 24(c) of the Exchange Act and rule 24c-1 thereunder.

7

letters in response to this comment solicitation. 17 SEC staff has considered these comments and,
in response to these comments, revised some of the estimates that were included in the 60-day
notice. Both letters provided alternative estimates of the Paperwork Reduction Act burdens of
Form PF and survey data to support the commenters’ alternative estimates. Based on the new
information commenters provided in response to the 60-day notice, SEC staff has revised its
hourly burden estimates, as discussed more fully below.
The Associations commented on the SEC staff estimates of the amortized average annual
burdens for large hedge fund advisers. The SEC staff estimated that large hedge fund advisers
making their first Form PF filing would bear an estimated amortized average annual burden of
610 hours and that all other large hedge fund advisers (i.e., those already making Form PF
filings) would bear an estimated amortized average annual burden of 560 hours. These estimates
reflected the fact that large hedge fund advisers must make four filings every year and that there
is a start-up burden associated with an adviser’s initial filing that was then amortized across the
adviser’s first three years of filings. The Associations’ survey data arguably supported the
estimated average annual burdens for large hedge fund advisers; however, the Associations
emphasized that the averages they reported were “conservative” given caps on the responses that
were imposed by their survey and that almost 40% of respondents to their survey indicated they
spent more burden hours than the survey caps. The Associations’ survey data confirmed the
basis of the SEC staff’s estimate that subsequent filings are less burdensome than initial filings.
The Council commented on the SEC staff estimates of the amortized average annual
burdens for large private equity advisers. The SEC staff estimated that large private equity

17

Letters from the American Investment Council (the “Council”), March 12, 2018; and the Managed Funds
Association and the Alternative Investment Management Association (the “Associations”), March 12,
2018.

8

advisers making their first Form PF filing would bear an estimated amortized average annual
burden of 67 hours and that all other large private equity advisers (i.e., those already making
Form PF filings) would bear an estimated amortized average annual burden of 50 hours. These
estimates reflected the fact that large private equity advisers must make one filing every year and
that there is a start-up burden associated with an adviser’s initial filing that was then amortized
across the adviser’s first three years of filings. The Council commented that its survey data
indicated that the SEC staff’s estimate “substantially underestimates” the actual burden. The
Council’s survey data did not address any distinction in burden hours between advisers making
their first filing and advisers making subsequent filings; the SEC staff continues to believe that
there is a start-up burden associated with Form PF filings that should be reflected in the
estimated burden hours.
Both comment letters offered ways to reduce the burdens of filing Form PF that would
require amendments to Form PF. The Associations commented that the SEC should reduce the
frequency of filings and the number of month-end data points required of large hedge fund
advisers. The Council commented that the SEC should amend the definition of “hedge fund” to
limit its scope and either (a) remove Section 4 of Form PF (which is required only of large
private equity advisers) or (b) both amend the definition of “controlled portfolio company” and
exclude co-investment funds from Section 4 reporting requirements.
Both letters also suggested more structural changes to Form PF. The Associations
commented that the threshold for defining a large hedge fund adviser should be increased, that
monitoring of systemic risk could be achieved by the SEC seeking transaction data from other
parties, and that a wholesale review of Form PF would be appropriate given other regulatory
developments. The Council argued that Form PF’s burdens on sponsors are particularly

9

unnecessary as private equity funds are not “systemically risky.” The SEC staff acknowledges
the commenters’ broader concerns about Form PF and recommendations for potential
amendments. However, any such changes would need to be effected pursuant to a rulemaking
and are beyond the scope of the Paperwork Reduction Analysis.
9.

Payment or Gift

Not applicable.
10.

Confidentiality

See section A.7 of this supporting statement.
11.

Sensitive Questions

Form PF elicits non-public information about private funds and their trading strategies,
the public disclosure of which could adversely affect the funds and their investors. In addition,
Form PF collects basic Personally Identifiable Information (PII), that may include a name, job
title, telephone number, email address, user ID, IP address, date/time of access, queries ran, ID
files accessed and contents of files. A System of Records Notice that covers this collection of
information has been published in the Federal Register at 66 FR 7820, which can be found at
http://www.sec.gov/about/privacy/sorn/secsorn50.pdf. Instructions for obtaining the Privacy
Impact Assessment for IARD can be found at
http://www.sec.gov/about/privacy/secprivacyoffice.htm.
12.

Burden of Information Collection

(a)

Estimate of Hour Burden

Existing Estimates
Following our most recent Paperwork Reduction Act submission for Form PF, OMB
approved a total annual compliance burden of 249,300 annual aggregate hours to comply with

10

the collection of information requirement of rule 204(b)-1 and Form PF (including amendments
to Form PF adopted in 2014).
In estimating the compliance burden, the SEC has estimated that the amortized annual
burdens of Form PF for each type of adviser required to file Form PF is as follows:
(a) For smaller private fund advisers (i.e., private fund advisers required to file Form PF
and not meeting the thresholds as Large Private Fund Advisers), the estimated
amortized average annual burden of periodic filings is 23 hours for each of the first
three years, 18 and the estimated amortized aggregate annual burden of periodic filings
is 70,600 hours for each of the first three years; 19
(b) For large hedge fund advisers, the estimated amortized average annual burden of
periodic filings is 610 hours for each of the first three years, 20 and in the aggregate,
the estimated amortized annual burden of periodic filings is 153,000 hours for each of
the first three years; 21
(c) For large liquidity fund advisers, the estimated amortized average annual burden of
periodic filings is 588 hours for each of the first three years, 22 and in the aggregate,

18

The SEC estimated that a smaller private fund adviser will make 3 annual filings in three years, for an
amortized average annual burden of 23 hours (1 initial filing X 40 hours + 2 subsequent filings X 15 hours
= 70 hours; and 70 hours ÷ 3 years = approximately 23 hours), and after the first three years, filers
generally would not incur the start-up burdens applicable to the first filing.

19

The SEC indicated that 23 burden hours on average per year X 3,070 smaller private fund advisers =
approximately 70,600 burden hours per year.

20

The SEC estimated that a large hedge fund adviser will make 12 quarterly filings in three years, for an
amortized average annual burden of 610 hours (1 initial filing X 300 hours + 11 subsequent filings X
140 hours = 1,840 hours; and 1,840 hours ÷ 3 years = approximately 610 hours), and after the first three
years, filers generally would not incur the start-up burdens applicable to the first filing.

21

The SEC indicated that 610 burden hours on average per year X 250 large hedge fund advisers =
approximately 153,000 burden hours per year.

22

The SEC estimated that a large liquidity fund adviser will make 12 quarterly filings in three years, for an
amortized average annual burden of 588 hours, and after the first three years, filers generally would not
incur the start-up burdens applicable to the first filing.

11

the estimated amortized annual burden of periodic filings is 16,464 hours for each of
the first three years; 23
(d) For large private equity advisers, the estimated amortized average annual burden of
periodic filings is 67 hours for each of the first three years, 24 and in the aggregate, the
estimated amortized annual burden of periodic filings is 11,400 hours for each of the
first three years; 25
(e) For advisers transitioning from quarterly to annual filings because they have ceased to
be large hedge fund advisers or large liquidity fund advisers, the estimated total is 7
burden hours per year for all fund advisers; 26
New Estimates
Based on IARD data using Form ADV, as of May 15, 2017, there were 4,386 registered
investment advisers reporting at least one private fund on Form ADV, Schedule D, Section
7.B.(1). Of those, there were 1,414 registered investment advisers reporting less than
$150 million in private fund regulatory assets under management on Form ADV, Schedule D,
Section 7.B.(1).

23

The SEC indicated that 588 burden hours on average per year X 28 large liquidity fund advisers = 16,464
burden hours per year.

24

The SEC estimated that a large private equity adviser will make 3 annual filings in three years, for an
amortized average annual burden of 67 hours (1 initial filing X 100 hours + 2 subsequent filings X 50 hours
= 200 hours; and 200 hours ÷ 3 years = approximately 67 hours), and after the first three years, filers
generally would not incur the start-up burdens applicable to the first filing.

25

The SEC indicated that 67 burden hours on average per year X 170 large private equity advisers =
approximately 11,400 burden hours per year.

26

The SEC estimated that approximately 9 percent of quarterly filers would need to make a transition filing
each year with a burden of 0.25 hours. The estimate was based on IARD data on the frequency of advisers
to one or more private funds ceasing to have assets under management sufficient to cause them to be large
hedge fund advisers or large liquidity fund advisers. ((80 large liquidity fund advisers + 250 large hedge
fund advisers) X 0.09 X 0.25 hours = approximately 7 hours)

12

There have been no amendments to Form PF since our most recent Paperwork Reduction
Act submission for Form PF, which took into account the 2014 amendments that affected only
Large Liquidity Fund Advisers. We are changing the estimated burdens for large hedge fund
advisers and large private equity advisers based upon industry input in the comments received
during the 60-day comment period. Otherwise, we are not modifying the existing estimate as to
the initial burden and ongoing burden per filing of each type of adviser required to file Form PF.
We are, however, modifying the existing estimates as to the number of filers that are making
their first Form PF filing among total filers, because the existing estimates took into account the
fact that all filers would be making their first Form PF filings and therefore have initial costs and
burdens. We estimate that most filers of Form PF have already made their first filing, and so we
estimate that the burden hours applicable to those filers will reflect only ongoing burdens, and
not start-up burdens. We are instead including an estimate of the number of advisers making
their first Form PF filing each year.
Based on IARD data, as of May 12, 2017, of the 1,978 smaller private fund advisers (i.e.,
private fund advisers required to file Form PF and not meeting the thresholds as Large Private
Fund Advisers) that filed Form PF from 2016 Q2 to 2017 Q1, 231 (or 11.7%) made their first
Form PF filing. For purposes of this submission, we assume that annually there will be
approximately 231 smaller private fund advisers making their first Form PF filing, each of which
will incur initial start-up costs and burdens. For these advisers, the estimated amortized average
annual burden of periodic filings is 23 hours for each of the first three years, 27 and the estimated
amortized aggregate annual burden of periodic filings is 5,313 hours for each of the first three

27

The SEC has not modified its estimate that a new smaller private fund adviser will make 3 annual filings in
three years, for an amortized average annual burden of 23 hours (1 initial filing X 40 hours + 2 subsequent
filings X 15 hours = 70 hours; and 70 hours ÷ 3 years = approximately 23 hours), and that existing filers
generally will not incur the start-up burdens applicable to the first filing.

13

years. 28 For the other estimated 1,747 smaller private fund advisers that already file Form PF,
the estimated amortized average annual burden of periodic filings is 15 hours for each of the next
three years, 29 and the estimated amortized aggregate annual burden of periodic filings is 26,205
hours for each of the next three years. 30 Accordingly, the total estimated amortized aggregate
annual burden for smaller private fund advisers is 31,518 hours. 31
Based on IARD data, as of May 12, 2017, of the 604 large hedge fund advisers that filed
Form PF in either 2016 Q4 to 2017 Q1, 19 (or 3.15%) made their first Form PF filing. For
purposes of this submission, we assume that annually there will be approximately 19 large hedge
fund advisers making their first Form PF filing, each of which will incur initial start-up costs and
burdens. For these advisers, the estimated amortized average annual burden of periodic filings is
658 hours for each of the first three years, 32 and the estimated amortized aggregate annual
burden of periodic filings is 12,502 hours for each of the first three years. 33 For the other
estimated 585 large hedge fund advisers that already file Form PF, the estimated amortized
average annual

28

23 burden hours on average per year X 231 smaller private fund advisers = 5,313 burden hours per year.

29

The SEC has not modified its estimate that, other than in any year in which a smaller private fund adviser is
filing its initial Form PF, a smaller private fund adviser will make 3 annual filings in three years, for an
amortized average annual burden of 15 hours (3 filings X 15 hours = 45 hours; and 45 hours ÷ 3 years =
approximately 15 hours).

30

15 burden hours on average per year X 1,747 smaller private fund advisers = 26,205 burden hours per year.

31

5,313 burden hours + 26,205 burden hours = 31,518 burden hours.

32

The SEC has not modified its estimate that a new large hedge fund adviser will make 12 quarterly filings in
three years, and that existing filers generally will not incur the start-up burdens applicable to the first filing.
The SEC has increased the estimated hour burden for each initial and subsequent filing based on the
comments received in response to the 60-day notice. Accordingly, the SEC estimates that a large hedge
fund adviser making its first filing will have an amortized average annual burden of 658 hours (1 initial
filing X 325 hours + 11 subsequent filings X 150 hours = 1,975 hours; and 1,975 hours ÷ 3 years =
approximately 658 hours).

33

658 burden hours on average per year X 19 large hedge fund advisers = 12,502 burden hours per year.

14

burden of periodic filings is 600 hours for each of the next three years, 34 and the estimated
amortized aggregate annual burden of periodic filings is 351,000 hours for each of the next three
years. 35 Accordingly, the total estimated amortized aggregate annual burden for large hedge
fund advisers is 363,502 hours. 36
Based on IARD data, as of May 12, 2017, of the 25 large liquidity fund advisers that filed
Form PF in either 2016 Q4 to 2017 Q1, two (or 8.0%) made their first Form PF filing. For
purposes of this submission, we assume that annually there will be approximately two large
liquidity fund advisers making their first Form PF filing, each of which will incur initial start-up
costs and burdens. For these advisers, the estimated amortized average annual burden of
periodic filings is 588 hours for each of the first three years, 37 and the estimated amortized
aggregate annual burden of periodic filings is 1,176 hours for each of the first three years. 38 For
the other estimated 23 large liquidity fund advisers that already file Form PF, the estimated
amortized average annual burden of periodic filings is 280 hours for each of the next three
years, 39 and the estimated amortized aggregate annual burden of periodic filings is 6,440 hours

34

The SEC has not modified its estimate that, other than in any year in which a large hedge fund adviser is
filing its initial Form PF, a large hedge fund adviser will make 12 quarterly filings in three years. The SEC
has increased the estimated hour burden for each subsequent filing based on the comments received in
response to the 60-day notice. Accordingly, the SEC estimates that a large hedge fund adviser that is not
making its initial filing will have an amortized average annual burden of 600 hours (12 filings X 150 hours
= 1,800 hours; and 1,800 hours ÷ 3 years = approximately 600 hours).

35

600 burden hours on average per year X 585 large hedge fund advisers = 351,000 burden hours per year.

36

12,502 burden hours + 351,000 burden hours = 363,502 burden hours.

37

The SEC has not modified its estimate that a new large liquidity fund adviser will make 12 quarterly filings
in three years, for an amortized average annual burden of 588 hours, and that existing filers generally will
not incur the start-up burdens applicable to the first filing.

38

588 burden hours on average per year X 2 large liquidity fund advisers = 1,176 burden hours per year.

39

The SEC estimates that, other than in any year in which a large liquidity fund adviser is filing its initial
Form PF, a large liquidity fund adviser will make 12 quarterly filings in three years, for an amortized
average annual burden of 280 hours (12 filings X 70 hours = 840 hours; and 840 hours ÷ 3 years =
approximately 280 hours).

15

for each of the next three years. 40 Accordingly, the total estimated amortized aggregate annual
burden for large liquidity fund advisers is 7,616 hours. 41
Based on IARD data, as of May 12, 2017, of the 245 large private equity advisers that
filed Form PF from 2016 Q2 to 2017 Q1, 7 (or 2.86%) made their first Form PF filing. For
purposes of this submission, we assume that annually there will be approximately 7 large private
equity advisers making their first Form PF filing, each of which will incur initial start-up costs
and burdens. For these advisers, the estimated amortized average annual burden of periodic
filings is 133 hours for each of the first three years, 42 and the estimated amortized aggregate
annual burden of periodic filings is 931 hours for each of the first three years. 43 For the other
estimated 238 large private equity advisers that already file Form PF, the estimated amortized
average annual burden of periodic filings is 100 hours for each of the next three years, 44 and the
estimated amortized aggregate annual burden of periodic filings is 23,800 hours for each of the

40

280 burden hours on average per year X 23 large liquidity fund advisers = 6,440 burden hours per year.

41

1,176 burden hours + 6,440 burden hours = 7,616 burden hours.

42

The SEC has not modified its estimate that a new large private equity adviser will make 3 annual filings in
three years, and that existing filers generally will not incur the start-up burdens applicable to the first filing.
The SEC has increased the estimated hour burden for each initial and subsequent filing based on the
comments received in response to the 60-day notice. Accordingly, the SEC estimates that a large private
equity adviser making its initial filing will have an amortized average annual burden of 133 hours (1 initial
filing X 200 hours + 2 subsequent filings X 100 hours = 400 hours; and 400 hours ÷ 3 years =
approximately 133 hours).

43

133 burden hours on average per year X 7 large private equity advisers = 931 burden hours per year.

44

The SEC has not modified its estimate that, other than in any year in which a large private equity adviser is
filing its initial Form PF, a large private equity adviser will make 3 annual filings in three years. The SEC
has increased the estimated hour burden for each subsequent filing based on the comments received in
response to the 60-day notice. Accordingly, the SEC estimates that a large private equity adviser that is not
making its initial filing will have an amortized average annual burden of 100 hours (3 filings X 100 hours =
300 hours; and 300 hours ÷ 3 years = approximately 100 hours).

16

next three years. 45 Accordingly, the total estimated amortized aggregate annual burden for large
private equity advisers is 24,731 hours. 46
(b)

Burden Estimates for Transition Filings, Final Filings, and Temporary

Hardship Exemption Requests
In addition to periodic filings, a private fund adviser must file very limited information
on Form PF in three situations.
First, any adviser that transitions from quarterly to annual filing because it has ceased to
be a large hedge fund or large liquidity fund adviser must file a Form PF indicating that it is no
longer obligated to report on a quarterly basis. Based on IARD data, as of May 12, 2017, 40
quarterly filers made a transition filing within the prior calendar year. The SEC estimates that
each such transition filing imposed a burden of 0.25 hours, or a total of 10 burden hours per year
for all private fund advisers. 47
Second, filers who are no longer subject to Form PF’s periodic reporting requirements
must file a final report indicating that fact. Based on IARD data, as of May 12, 2017, 48
advisers filed such a report within the prior calendar year. The SEC estimates that each such
filing imposed a burden of 0.25 hours, or a total of 12 burden hours per hour for all private fund
advisers. 48

45

100 burden hours on average per year X 238 large private equity advisers = 23,800 burden hours per year.

46

931 burden hours + 23,800 burden hours = 24,731 burden hours.

47

This estimate is based on IARD data on the number of private fund advisers that checked the box next to
“Transition to annual reporting” in Section 1a of Form PF. (40 X 0.25 hours = 10 hours.)

48

This estimate is based on IARD data on the number of private fund advisers that checked either box (box A
or box B) next to “Submit a final filing” in Section 1a of Form PF. (48 X 0.25 hours = 12 hours).

17

Finally, an adviser experiencing technical difficulties in submitting Form PF may request
a temporary hardship exemption by filing portions of Form PF in paper format. 49 The
information that must be filed is comparable to the information that Form ADV filers provide on
Form ADV-H when requesting a temporary hardship exemption relating to that form. In the case
of Form ADV-H, the SEC has estimated that the average burden of filing is 1 hour and that
approximately 1 in every 1,000 advisers will file annually. Assuming that Form PF filers request
hardship exemptions at the same rate and that the applications impose the same burden per filing,
the SEC expects approximately 5 filers to request a temporary hardship exemption each year 50
for a total of 5 burden hours. 51
(c)

Monetized Total Hour Burden

The SEC continues to expect that the costs Form PF imposes will be most significant for
the first report that a private fund adviser is required to file because the adviser will need to
familiarize itself with the new reporting form and may need to configure its systems in order to
efficiently gather the required information. The SEC also anticipates that the initial report will
require more attention from senior personnel, including compliance managers and senior risk
management specialists, than will subsequent reports. In addition, the SEC expects that some
Large Private Fund Advisers will find it efficient to automate some portion of the reporting
process, which will increase the burden of the initial filing but reduce the burden of subsequent
filings.

49

See Advisers Act rule 204(b)-1(f). The rule requires that the adviser complete and file Item A of Section
1a and Section 5 of Form PF, checking either box (box A or box B) next to “Request a temporary hardship
exemption” in Section 1a of Form PF.

50

4,386 private fund advisers X 1 request per 1,000 advisers = approximately 5 advisers.

51

5 advisers X 1 hour per response = 5 hours.

18

The SEC anticipates that, after filing their initial reports, advisers will incur significantly
lower costs because much of the work involved in the initial report is non-recurring and because
of efficiencies realized from system configuration and reporting automation efforts accounted for
in the initial reporting period. In addition, the SEC estimates that senior personnel will bear less
of the reporting burden in subsequent reporting periods, reducing costs though not necessarily
reducing the burden hours.
Based on the foregoing, the SEC estimates that the periodic filing requirements under
Form PF (including configuring systems and compiling, automating, reviewing and
electronically filing the report) will impose:
(1) 40 burden hours at a cost of $12,600 52 per smaller private fund adviser for the initial
annual report;
(2) 15 burden hours at a cost of $3,907.50 53 per smaller private fund adviser for each
subsequent annual report;

52

We expect that for the initial report these activities will most likely be performed equally by a compliance
manager at a cost of $292 per hour and a senior risk management specialist at a cost of $338 per hour and
that, because of the limited scope of information required from smaller private fund advisers, these advisers
generally would not realize significant benefits from or incur significant costs for system configuration or
automation. ($292/hour X 0.5 + $338/hour X 0.5) X 40 hours = approximately $12,600.

53

We expect that for subsequent reports senior personnel will bear less of the reporting burden. As a result,
we estimate that these activities will most likely be performed equally by a compliance manager at a cost of
$292 per hour, a senior compliance examiner at a cost of $224 per hour, a senior risk management
specialist at a cost of $338 per hour, and a risk management specialist at a cost of $188 per hour.
($292/hour X 0.25 + $224/hour X 0.25 + $338/hour X 0.25 + $188/hour X 0.25) X 15 hours =
approximately $3,907.50.

19

(3) 200 burden hours at a cost of $59,400 54 per large private equity adviser for the initial
annual report;
(4) 100 burden hours at a cost of $26,050 55 per large private equity adviser for each
subsequent annual report;
(5) 325 burden hours at a cost of $94,950 56 per large hedge fund adviser for the initial
quarterly report;
(6) 150 burden hours at a cost of $39,075 57 per large hedge fund adviser for each
subsequent quarterly report;

54

The SEC expects that for the initial report, of a total estimated burden of 200 hours, approximately 120
hours will most likely be performed by compliance professionals and 80 hours will most likely be
performed by programmers working on system configuration and reporting automation. Of the work
performed by compliance professionals, the SEC anticipates that it will be performed equally by a
compliance manager at a cost of $292 per hour and a senior risk management specialist at a cost of $338
per hour. Of the work performed by programmers, the SEC anticipates that it will be performed equally by
a senior programmer at a cost of $313 per hour and a programmer analyst at a cost of $227 per hour.
($292/hour X 0.5 + $338/hour X 0.5) X 120 hours + ($313/hour X 0.5 + $227/hour X 0.5) X 80 hours =
approximately $59,400.

55

The SEC expects that for subsequent reports senior personnel will bear less of the reporting burden and that
significant system configuration and reporting automation costs will not be incurred. As a result, the SEC
estimates that these activities will most likely be performed equally by a compliance manager at a cost of
$292 per hour, a senior compliance examiner at a cost of $224 per hour, a senior risk management
specialist at a cost of $338 per hour, and a risk management specialist at a cost of $188 per hour.
($292/hour X 0.25 + $224/hour X 0.25 + $338/hour X 0.25 + $188/hour X 0.25) X 100 hours =
approximately $26,050.

56

We expect that for the initial report, of a total estimated burden of 325 hours, approximately 195 hours will
most likely be performed by compliance professionals and 130 hours will most likely be performed by
programmers working on system configuration and reporting automation. Of the work performed by
compliance professionals, we anticipate that it will be performed equally by a compliance manager at a cost
of $292 per hour and a senior risk management specialist at a cost of $338 per hour. Of the work
performed by programmers, we anticipate that it will be performed equally by a senior programmer at a
cost of $313 per hour and a programmer analyst at a cost of $227 per hour. ($292/hour X 0.5 + $338/hour
X 0.5) X 195 hours + ($313/hour X 0.5 + $227/hour X 0.5) X 130 hours = approximately $94,950.

57

We expect that for subsequent reports senior personnel will bear less of the reporting burden and that
significant system configuration and reporting automation costs will not be incurred. As a result, the SEC
estimates that these activities will most likely be performed equally by a compliance manager at a cost of
$292 per hour, a senior compliance examiner at a cost of $224 per hour, a senior risk management
specialist at a cost of $338 per hour, and a risk management specialist at a cost of $188 per hour.
($292/hour X 0.25 + $224/hour X 0.25 + $338/hour X 0.25 + $188/hour X 0.25) X 150 hours =
approximately $39,075.

20

(7) 200 burden hours at a cost of $59,400 58 per large liquidity fund adviser for the initial
quarterly report;
(8) 105 burden hours at a cost of $27,352.50 59 per large liquidity fund adviser for each
subsequent quarterly report.
As described above, based on IARD data, as of May 12, 2017, there were 231 smaller
private fund advisers making their first Form PF filing in the period from 2016 Q2 to 2017 Q1.
There were 7 large private equity advisers making their first Form PF filing in the period from
2016 Q2 to 2017 Q1. There were 19 large hedge fund advisers making their first Form PF filing
in either 2016 Q4 or 2017 Q1. There were 2 large liquidity fund advisers making their first form
PF filing in either 2016 Q4 or 2017 Q1. With respect to these advisers making their initial Form

58

The SEC expects that for the initial report, of a total estimated burden of 200 hours, approximately 120
hours will most likely be performed by compliance professionals and 80 hours will most likely be
performed by programmers working on system configuration and reporting automation. (120 hours is
approximately 60% of 200 hours, and 80 hours is approximately 40% of 200 hours. In our prior
submission, the SEC expected that approximately 60% (85 hours of 140 hours) of burden hours would be
performed by compliance professionals and approximately 40% (55% of 140 hours) of burden hours would
be performed by programmers. Of the work performed by compliance professionals, the SEC anticipates
that it will be performed equally by a compliance manager at a cost of $292 per hour and a senior risk
management specialist at a cost of $338 per hour. Of the work performed by programmers, the SEC
anticipates that it will be performed equally by a senior programmer at a cost of $313 per hour and a
programmer analyst at a cost of $227 per hour. ($292/hour X 0.5 + $338/hour X 0.5) X 120 hours +
($313/hour X 0.5 + $227/hour X 0.5) X 80 hours = approximately $59,400.

59

The SEC expects that for subsequent reports senior personnel will bear less of the reporting burden and that
significant system configuration and reporting automation costs will not be incurred. As a result, the SEC
estimates that these activities will most likely be performed equally by a compliance manager at a cost of
$292 per hour, a senior compliance examiner at a cost of $224 per hour, a senior risk management
specialist at a cost of $338 per hour, and a risk management specialist at a cost of $188 per hour.
($292/hour X 0.25 + $224/hour X 0.25 + $338/hour X 0.25 + $188/hour X 0.25) X 105 hours =
approximately $ 27,352.50.

21

PF filings, the SEC estimates an annual cost of $7,640,640 60 for the first year of reporting and an
annual cost of $4,273,498.50 61 in subsequent years.

Also as described above, based on IARD data, as of May 12, 2017, there were 1,747
smaller private fund advisers making Form PF filings without making their first filings in the
period from 2016 Q2 to 2017 Q1. There were 238 large private equity advisers making Form PF
filings without making their first filings in the period from 2016 Q2 to 2017 Q1. There were 585
large hedge fund advisers making Form PF filings without making their first filings in either
2016 Q4 or 2017 Q1. There were 23 large liquidity fund advisers making Form PF filings
without making their first filings in either 2016 Q4 or 2017 Q1. With respect to these advisers,
the SEC estimates an annual cost of $106,978,232.50 62 for each year of reporting.
The cost estimates above assume that risk and compliance personnel (and, in the case of
Large Private Fund Advisers filing an initial report, programmers) will carry out the work of
reporting on Form PF.
In addition, as discussed above, a private fund adviser must file very limited information
on Form PF if it needs to transition from quarterly to annual filing, if it is no longer subject to the

60

(231 smaller private fund advisers X $12,600 per initial annual report) + (7 large private equity advisers X
$59,400 per initial annual report) + (19 large hedge fund advisers X $94,950 per initial quarterly report) +
(19 large hedge fund advisers X 3 quarterly reports X $39,075 per subsequent quarterly report) + (2 large
liquidity fund advisers X $59,400 per initial quarterly report) + (2 large liquidity fund advisers X 3
quarterly reports X $27,352.50 per subsequent quarterly report) = approximately $7,640,640.

61

(231 smaller private fund advisers X $3,907.50 per subsequent annual report) + (7 large private equity
advisers X $26,050 per subsequent annual report) + (19 large hedge fund advisers X 4 quarterly reports X
$39,075 per subsequent quarterly report) + (2 large liquidity fund advisers X 4 quarterly reports X
$27,352.50 per subsequent quarterly report) = approximately $3,984,347.50.

62

(1,747 smaller private fund advisers X $3,907.50 per subsequent annual report) + (238 large private equity
advisers X $26,050 per subsequent annual report) + (585 large hedge fund advisers X 4 quarterly reports X
$39,075 per subsequent quarterly reports) + (23 large liquidity fund advisers X 4 quarterly reports X
$27,352.50 per subsequent quarterly report) = approximately $106,978,232.50.

22

reporting requirements of Form PF or if it requires a temporary hardship exemption under rule
204(b)-1(f). The SEC estimates that transition and final filings will, collectively, cost private
fund advisers as a whole approximately $1,452 per year. 63 The SEC further estimates that
hardship exemption requests will cost private fund advisers as a whole approximately $1,023 per
year. 64
(d)

Aggregate Hour Burden Estimates

Based on the foregoing, the SEC estimates that Form PF will result in an aggregate of
427,394 burden hours per year for all private fund advisers for each of the first three years, or
440 burden hours per year on average for each private fund adviser over the same period. 65
13.

Cost to Respondents

In addition to the hour burdens identified above, advisers subject to the Form PF
reporting requirements will incur other external costs. The currently approved annual cost
burden to comply with the collection of information requirement of rule 204(b)-1 and Form PF is
$23,310,350.
This approved cost burden included estimates for filing fees for the Form PF filing
system; those fees, which were established by the SEC in a separate order, currently equal $150

63

The SEC estimates, for purposes of the PRA, that transition filings will impose 10 burden hours per year on
private fund advisers in the aggregate and that final filings will impose 12 burden hours per year on private
fund advisers in the aggregate. The SEC anticipates that this work will most likely be performed by a
compliance clerk at a cost of $66 per hour. (10 burden hours + 12 burden hours) X $66/hour =
approximately $1,452.

64

The SEC estimates, for purposes of the PRA, that requests for temporary hardship exemptions will impose
5 burden hours per year on private fund advisers in the aggregate. The SEC anticipates that five-eighths of
this work will most likely be performed by a compliance manager at a cost of $292 per hour and that threeeighths of this work will most likely be performed by a general clerk at a cost of $59 per hour. (($292 per
hour X 5/8 of an hour) + ($59 per hour X 3/8 of an hour)) X 5 hours = approximately $1,023.

65

31,518 hours for periodic filings by smaller advisers + 363,502 hours for periodic filings by large hedge
fund advisers + 7,616 hours for periodic filings by large liquidity fund advisers + 24,731 hours for periodic
filings by large private equity advisers + 10 hours per year for transition filings + 12 hours per year for final
filings + 5 hours per year for temporary hardship requests = approximately 427,394 burden hours. 427,394
hour per year ÷ 972 total advisers required to file = approximately 440 hours per year on average.

23

per annual filing and $150 per quarterly filing. 66 Accordingly, the SEC estimates that advisers
will bear aggregate filing fees of approximately $710,850 per year. 67
Advisers subject to the Form PF reporting requirements will incur external costs besides
filing fees. As the Staff explained in prior Paperwork Reduction Act submissions for rule
204(b)-1, in connection with the first year of Form PF reporting, many advisers must modify
existing systems or deploy new systems to support Form PF reporting and advisers may incur
costs associated with the acquisition or use of hardware needed to perform computations or
otherwise process data required on Form PF. In the Staff’s prior Paperwork Reduction Act
submissions for rule 204(b)-1, the Staff estimated that the external cost burden would range from
$0 to $50,000 per adviser. This range of costs reflected the fact that the cost to any adviser
might depend on how many funds or the types of funds it manages, the state of its existing
systems and the complexity of its business, the frequency of Form PF filings, and the deadlines
for their completion and amount of information required. The Staff estimated that smaller
private fund advisers would be unlikely to bear those costs because the information they are
required to provide is limited and will, in many cases, already be maintained in the ordinary
course of business.
We estimate that the same range of costs will continue to apply among advisers filing
Form PF, and so we are not modifying the existing estimate as to the range of external cost to be

66

See section II.E of the Adopting Release.

67

We have not modified our estimate as to the cost of the filing fees, which has remained unchanged since
our prior Paperwork Reduction Act submission. The current estimate has been modified from prior
estimates to account for the current estimate of the number of advisers and the number of filings to be made
by such advisers ((1,978 smaller private fund advisers + 245 large private equity advisers) X $150 per
annual filing) + ((604 large hedge fund advisers + 25 large liquidity fund advisers) X $150 per quarterly
filing X 4 quarterly filings per year) = $710,850 per year.

24

borne by each adviser. We are, however, modifying the existing estimate as to the number of
initial filers and current filers because the existing estimates reflected the expected incremental
cost in the first year of reporting for Large Private Fund Advisers. Most filers of Form PF have
already made their first filing and completed their first year of reporting, and so we estimate that
the external costs applicable to those filers will no longer reflect the incremental start-up costs
and there will be no annual or ongoing external costs. Accordingly, the SEC estimates that
Large Private Fund Advisers required to make their initial Form PF filing will bear external costs
(other than filing fees) of approximately $1,400,000. 68 The SEC estimates that, together with the
estimated aggregate filing fees described above, the aggregate external cost burden over the next
three-year period will be approximately $3,532,550. 69
14.

Cost to the Federal Government

There are no costs to the government directly attributable to Form PF.
15.

Change in Burden

The total annual hour burden of 427,394 hours represents an increase of 178,094 hours
over the previous approved burden hour estimate of 249,300 hours. In addition, the annual
external cost burden of $3,532,550 represents a decrease of $19,777,800 over the previous
annual external cost burden estimate of $23,310,350. The changes in burden hours and external
cost burdens are due to the estimated change in the number of advisers filing Form PF, whether

68

This estimate is based on the following calculation: (19 large hedge fund advisers making their first Form
PF filing + 2 large liquidity fund advisers making their first Form PF filing + 7 large private equity advisers
making their first Form PF filing = 28) X $50,000 = $1,400,000.

69

This estimate is based on the following calculation: ($710,850 X 3 years) = $2,132,550 + $1,400,000 =
$3,532,550.

25

as an initial filing or subsequent filing, and the estimated change in the wages paid, as well as
industry input in the comments received during the 60-day comment period.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB Expiration Date

We request authorization to omit the expiration date on the electronic version of Form
PF, although the OMB control number will be displayed. Including the expiration date on the
electronic version of this form will result in increased costs, because the need to make changes to
the form may not follow the application’s scheduled version release dates.
18.

Exceptions to Certification Statement for Paperwork Reduction Act
Submission

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.

26