Surviving Form PF: What to expect and how to prepare with confidence

Author:

Kyrstin Ritsema, IACCP®
Executive Director - Compliance Services at Confluence

Confluence recently hosted a webinar, Prioritizing Form PF - Before It’s Too Late, where experts from Confluence and international law firm Mayer Brown explained the changes required for all filers, and especially large hedge funds advisors who will need to conduct a holistic review of their Form PF preparation processes efficiently and accurately.

The webinar was a crucial session for compliance and finance teams, particularly for private fund advisors facing significant updates to comply with the new Form PF regulatory requirements by March 12, 2025. Here are six key takeaways from the discussion.

1. Complex Changes to Reporting Fund Structures

The most impactful Form PF change relates to how firms will have to report each component of complex fund structures, such as master-feeder and parallel funds, separately. This replaces the previous practice of reporting these structures in a consolidated manner. For many, this could exponentially increase the number of funds they need to report, meaning more time and resources required for accurate filing.

In a poll of Confluence clients taken over the summer, 90% of respondents anticipated a significant impact from this change, with many expecting to report dozens of additional entities. The majority highlighted that the adjustments would require more than just minor tweaks, emphasizing the need for firms to be well-prepared.

2. Granular Data on Investment and Counterparty Exposure

The Form PF amendments also introduce more granular reporting requirements for both investment and counterparty exposure. This includes additional calculations, such as adjusted exposure, netting across reference assets, and reporting return volatility for certain positions. Hedge fund advisors, in particular, will face more detailed exposure and counterparty risk reporting, with enhanced data requirements.

When the audience was asked which aspect of the changes they found most challenging, 33% identified the new counterparty exposure reporting as the biggest hurdle, making it the top concern. The next largest group cited the compressed reporting timeline as a significant challenge, indicating that firms are struggling to adjust their processes within a limited timeframe.

3. Fast-Approaching Compliance Timeline

The Form PF changes officially take effect on March 12, 2025. Quarterly filers will be required to use the new form starting with their Q1 2025 filing, while annual filers will need to adhere to the new form if they file on or after March 12, 2025. Firms have the option to use the old form if they file before this deadline.

During the webinar, 88% of participants confirmed they were aware of the March 2025 deadline, reflecting strong awareness across the industry. However, the remaining 12% were still unfamiliar with the timeline, underscoring the need for continued education and outreach. On a separate poll question, 55% of participants lacked confidence in meeting the March 2025 deadline.

4. Actionable Steps for Preparation

With the complexity and volume of these changes, the panel emphasized the need for early preparation. Firms were encouraged to take the following actions to ensure compliance:


  • Impact Analysis: Immediately conduct an impact analysis to identify which changes will affect their reporting and data collection processes. Understanding the full scope of the new requirements will help avoid last-minute scrambles.

  • Data Sources: Identifying reliable data sources is critical, especially considering the need to report more granular information and perform look-throughs for certain fund structures. Poll results showed a mix of approaches: some firms are managing Form PF compliance manually in-house, while 21% are using vendor technology solutions, and others are outsourcing to service providers.

  • Outsourcing and Vendor Solutions: Realistically consider the burden on your current resources. One of the webinar polls indicated that the majority (about 44%) are managing their Form PF strategy manually in-house, while about 14% are still figuring it out. Given the heightened complexity and fast-approaching deadline, opt to leverage vendor technology and outsource some regulatory reporting functions to handle the increased workload efficiently.

5. The Role of Vendor Solutions and Testing Environment

To ensure a smooth transition, firms should evaluate vendor solutions or consult with managed service providers specializing in regulatory reporting. Since the SEC has already released a draft FINRA schema, testing these changes in a simulated environment will help you identify potential challenges before the compliance deadline.

During the webinar, the panelists advised firms to treat this as a Q4 2024 issue, not a Q1 2025 problem. Waiting until the first quarter of next year could lead to firms trying to implement changes while simultaneously managing other critical year-end reporting tasks, which could overwhelm compliance teams. The time to start implementing a Form PF strategy is now.

6. The Value of Consensus Building and Knowledge Sharing

Jordan Dague, a product manager with Confluence, emphasized the importance of firms not standing out from the crowd with their Form PF responses. By building consensus and sharing best practices, firms can ensure their approaches are aligned with industry norms, reducing the risk of regulatory scrutiny.

Confluence will host additional informal roundtable discussions to help firms collaborate, share methodologies, and build consensus on best practices for Form PF reporting. This will be an essential resource as the industry adjusts to the new requirements.

Planning and Partnership: A Blueprint for Form PF Readiness

The upcoming changes to Form PF are significant and will demand a coordinated effort from compliance, operations, and finance teams. The key to success is early preparation—by starting now, firms can conduct thorough impact analyses, identify reliable data sources, and explore outsourcing options if needed. This proactive approach will allow them to meet the new requirements in a timely and compliant manner.

Firms are encouraged to utilize available resources such as vendor solutions, roundtable discussions, and peer collaboration to navigate these changes effectively. By acting early and planning strategically, you can mitigate the complexity and avoid last-minute challenges as the March 2025 deadline approaches.

Dive deeper into this informative discussion by watching “Prioritizing Form PF - Before It’s Too Late” on demand. For consulting and a Form PF reporting solution, contact us today.

Disclaimer

The information contained in this communication is for informational purposes only.
Confluence, a Confluence company, is not providing legal, financial accounting, compliance or other similar services or advice through this communication. Recipients of this communication are responsible for understanding the regulatory and legal requirements applicable to their business.
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