U.S. regulators were responsive to industry concerns over new disclosures for private-fund firms, changing the final rule to prevent unnecessary duplication, said Barbara Novick, co-founder and vice chairman of BlackRock Inc. (BLK), the world’s biggest fund manager.
Private-equity and hedge funds will start reporting operational information to regulators next year as part of a government effort to prevent future financial crises. The reports they are required to file with the Commodity Futures Trading Commission and Securities and Exchange Commission will be substantially similar, according the text of the final rule released yesterday.
“This is the model we want to see,” Novick, whose firm manages $3.6 trillion in hundreds of funds, said in a telephone interview. “The SEC and the CFTC coordinated their work together. They harmonized their rules. Everybody is in a better spot.”
The previously secret data -- including gross and net assets and the value of a fund’s derivatives -- will be passed confidentially to the Financial Stability Oversight Council as it considers the private-funds firms’ risk to the financial system. The Dodd-Frank Act created the council, composed of top regulators, and charged it with monitoring the financial system for systemic risks.
“One of the issues that regulators have been grappling with for years is getting enough information that they can figure out where the risks are,” said John H. Walsh, a former SEC associate director who left last month to work for Sutherland, Asbill & Brennan LLP, a Washington law firm. The new disclosure form “is certainly going to give them a lot more information.”
Since the law’s enactment, the industry has argued against the burdens they anticipated under the new system, including what it saw as divergent approaches by the two regulators toward disclosures by hedge and private-equity firms.
“Our first impression is that the final rules on the private-fund reporting are extremely responsive to the comments they received from industry,” Novick said. “This worked out, I think, for them and for the industry much better than it could have.”
BlackRock is among about 250 large hedge-fund firms that will have to comply with requirements to provide the most internal information on the most frequent timetable. Under the final rule, hedge funds with more than $1.5 billion must submit quarterly reports and will begin filing after June 15.
The SEC estimated 3,570 advisers managing more than $150 million in assets must file the new Form PF. The form asks for information about performance, borrowings and the share of each fund’s equity in the hands of the five largest holders.
“With this final rule, regulators will gain transparency into an important sector of the financial marketplace to better assess risk to the overall system,” CFTC Chairman Gary Gensler said in a statement. His agency approved the joint reporting system yesterday, following the SEC’s adoption last week.
The rule eased several elements of the regulators’ original January proposal, including narrowing thresholds for which large funds will have to report the most information to regulators and allowing firms to use existing methods for compiling data about their operations.
It also removed an earlier SEC provision requiring a fund officer to certify the report under penalty of perjury and extended the time the big hedge funds have to report from 15 days after each quarter to 60 days.
The rule also made concessions to large private-equity funds -- those managing more than $2 billion -- allowing them to report annually instead of quarterly.
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