Comment Text:
I submit this comment on the proposed amendments to Form PF. I appreciate the Commissions’ interest in reducing unnecessary reporting burden. A reporting system should not collect information merely because it has collected that information before. If particular fields are duplicative, stale, poorly calibrated, or no longer useful for investor protection or systemic-risk monitoring, the Commissions should say so and remove or revise them.
The problem is that the proposal does not yet make that showing with enough precision.
The proposal would raise the general Form PF filing threshold from $150 million to $1 billion. It would also raise the large hedge fund adviser threshold from $1.5 billion to $10 billion. The notice states that the proposed general filing threshold would still cover over 90 percent of reported private fund gross asset value, and that the proposed large hedge fund adviser threshold would still cover over 80 percent of reported hedge fund gross asset value. Those are relevant facts, but they are not sufficient by themselves. Asset coverage is not the same thing as information coverage.
A reporting system can retain a large share of gross asset value while still losing the particular event signals, exposure details, comparability, and reconstruction value that made the reporting useful in the first place. The notice recognizes that large hedge fund adviser reporting currently includes quarterly Section 2 reporting and Section 5 current reporting for events such as extraordinary investment losses, margin events, counterparty defaults, prime broker restrictions, operational events, and redemption events. Removing many advisers from those reporting obligations may reduce burden, but it also reduces current visibility into exactly the kinds of events that are most likely to matter when risk emerges episodically rather than gradually.
That is the central flaw in the current record: the proposal treats “we still cover a large share of assets” as though it answers “we still receive the right supervisory signals.” Those are fundamentally different questions. The Commissions should not finalize a rule on the assumption that one answers the other.
Before adopting the proposed threshold changes and reporting deletions, the Commissions should add a field-level and event-level explanation of the information tradeoff. For each reporting item proposed for deletion or simplification, the final rule should identify:
1. What supervisory, investor-protection, or systemic-risk function the field currently serves;
2. Whether that function is redundant with another retained field or another reporting channel;
3. What information, if any, will no longer be available after deletion;
4. Whether the lost information affects early warning, comparability, later reconstruction, enforcement, or FSOC analysis;
5. Why the burden reduction justifies that specific loss.
Without that matrix, the public cannot tell whether the proposal removes obsolete friction or removes useful instrumentation.
The Commissions should also provide a more direct sensitivity analysis for the proposed thresholds. The proposal identifies a $1 billion filing threshold and a $10 billion large hedge fund adviser threshold, but the final rule should explain why those specific lines are superior to intermediate alternatives. In particular, the Commissions should compare the proposed $10 billion threshold to at least a $5 billion threshold, since the notice itself indicates that a $5 billion line would preserve more large hedge fund adviser reporting while still reducing the number of covered advisers. The same analysis should be provided for intermediate general filing thresholds between $150 million and $1 billion.
The proposal’s shift toward reasonable estimates for indirect exposures also needs a stronger comparability backstop. Allowing advisers to use reasonable estimates consistent with internal methodologies and service-provider conventions may reduce burden, but it also risks making the same reported field mean different things across filers. The final rule should specify how the Commissions expect advisers to document estimation methods, how changes in methodology should be disclosed, and how staff will evaluate whether estimates remain comparable across filers and over time.
Finally, the Commissions should identify what replaces the current-reporting and event-trigger functions that the proposal would remove for advisers falling below the new large hedge fund adviser threshold. If the answer is that no replacement is needed because those advisers are less likely to be systemically important, the final rule should say so directly and support that conclusion. If Form ADV, retained Form PF fields, examinations, market surveillance, or other data sources are expected to substitute for the deleted current reports, the final rule should identify the substitute mechanism and explain its limits.
I therefore urge the Commissions not to finalize the proposal in its current form unless the final record includes:
• a field-by-field utility and deletion analysis;
• threshold sensitivity analysis for intermediate alternatives;
• a comparability and verification framework for reasonable estimates;
• a replacement-control explanation for deleted current-reporting and event-trigger information;
• and a clearer account of why retained gross asset value coverage is an adequate proxy for retained supervisory usefulness.
Reducing unnecessary burden is a legitimate regulatory objective. But the rule should reduce burden by pruning demonstrated excess, not by assuming that aggregate asset coverage proves that the remaining reporting system still sees what it needs to see.
