Statement from Commissioner Kristin N. Johnson on Joint Rule Proposal to Amend Form PF

Transparency is an integral part of the regulatory framework that ensures the safety, soundness and enduring pre-eminence of our financial markets.

Working collaboratively with our colleagues at the Securities and Exchange Commission (SEC) to strengthen oversight and improve visibility through well-designed and well-calibrated collection approaches is consistent with our mission and statutory mandate: “to ensure the integrity of all transactions subject to this law and the prevention of systemic risk.[1]

Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)[2] incorporated innovative regulatory frameworks to promote the stability of the US financial system, including creating the Financial Stability Oversight Council (FSOC) to monitor emerging systemic risks that could have a significant impact on our financial markets and US consumers.[3]

Today’s proposal aims to reinforce our commitment to realizing these values. Accordingly, I support the release for comment of the proposed Form PF changes, and look forward to the thoughtful and substantive contributions that the proposed changes will generate.

Congress, when drafting the Dodd-Frank Act, recognized that systemic import risks are best monitored through collaboration among U.S. financial regulators, each with distinct regulatory mandates, and by leveraging their resources and their expertise to support the overall FSOC responsibilities. The PF form reflects these statutory qualities. Pursuant to the Dodd-Frank Act, the Commission and the SEC jointly issued in 2011 rules for providing the FSOC with material information about the operations and strategies of private funds via Form PF.[4]

The private funds industry has only grown in size and importance since 2011. In the third quarter of 2021, private funds reported a staggering $12 trillion in assets on Form PF.[5] The aggregate size of private funds means that events in this industry can have ripple effects on the integrity of our financial markets and, in turn, dramatically impact the well-being of American consumers. Over the past decade, Form PF has provided financial regulators with the transparency needed in this potentially important sector of the financial system.[6]

I support the Commission’s efforts to build on data collection points that need clarity and to propose revisions in response to developments in financial markets as well as the experience of market participants and regulators with the PF form as an information gathering tool. Over the past decade, private funds have adopted new practices, new investment strategies and an appetite for investing in non-traditional assets.[7] The proposed revisions to the PF form aim to adapt to these developments, based on the experience gained in the administration of the PF form.

Notwithstanding these significant gains, I note that it will be important to hear and consider the concerns raised by all stakeholders, including, for example, concerns about reporting costs and challenges, particularly for small entities. I anticipate that the proposed Form PF amendment will yield important substantive contributions that will refine our understanding of the benefits of data collection, improve transparency, and improve our ability to preserve the integrity of our markets.

[1] Section 3(b) of the Commodity Exchange Act, 7 USC 5(b).

[2] Public Law 111–203, 124 Stat. 1376 (2010).

[3] See sections 111 and 120 of the Dodd-Frank Act.

[4] Reports of Investment Advisors to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors on Form PF, 76 FR 71128, 71129 (November 16, 2011).

[5] Amendments to Form PF to Amend Reporting Requirements for All Filers and Large Hedge Fund Advisors (Voting Copy – as approved by the Commodity Futures Trading Commission on 8/10/2022) (Proposed Rules) at 8 n .7, https://www .cftc.gov/media/7536/votingdraft081022Parts275and279/download.

[6] See Proposed Rules at 150.

[7] Proposed rules at 7–8.

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