Statement Summary
The SEC’s recent vote to extend the compliance date for Form PF raises significant concerns regarding financial oversight. Form PF is essential for understanding systemic risks in the private funds market, which is increasingly intertwined with American retirement savings. While the extension seems straightforward, it reflects a troubling trend of catering to well-resourced financial entities, undermining previous regulatory efforts and potentially delaying crucial data collection on market risks. The timing of this decision aligns with broader policy discussions about opening private markets to retail investors, suggesting a reluctance to address underlying systemic vulnerabilities. By postponing compliance under questionable pretenses, the SEC risks jeopardizing investor safety and the integrity of financial regulatory processes. Proper scrutiny and adherence to past regulations are needed to ensure thorough analyses of the private markets.
Original Statement
Today’s open meeting looks like a straightforward Commission vote to extend a compliance date for a recently adopted rulemaking. But there is more here than meets the eye. The reality of our action today is more complex – and more concerning. And the clock is ticking because the compliance date at issue is, in fact, tomorrow.
Form PF is the confidential form on which certain SEC-registered investment advisers to private funds report information to the SEC that helps us to understand potential systemic risk. The SEC, and other regulators including FSOC, depend on these detailed data to better comprehend when the private markets may be experiencing turbulence that could affect our entire financial system. Because these entities generally operate outside of our regulatory view, these data are our best – and perhaps only – way to spot large scale financial disasters originating in the private funds market, or amplified by private fund exposure, before they happen. And, these data can help us understand more fully the impact of a market event if it has already occurred.
The recent amendments, and the “new” version of the form they create, would improve the quality of these data so that they are more precise and helpful for identifying and responding to systemic risk. Remember, many of our pension fund dollars are invested in private funds – so understanding risks in this market is important for American retirement savings.
Today, the Commission is attempting to extend the new form’s compliance date under the wire, with just hours to spare, to accommodate a last-minute request from some of the most highly sophisticated, highly resourced entities in our financial system, who have already been given an extension several months ago. Now they’re back for more time with what doesn’t seem like a credible reason.
The truth is that we are here to extend this compliance date not because firms actually need additional time to comply, but to allow for reconsideration of these amendments more broadly. If you look closely, you’ll find the proof in footnote 12 of today’s release. That footnote admits that the Commission is delaying the Form’s compliance date so it can revisit – or perhaps endeavor to abandon – this information altogether.
So, although this extension is for just a few more months, I suspect that we will continue to accommodate requests to extend this compliance date until we have significantly revised or undone this rule. And so, with this vote, we plough ahead and do exactly that. We are simply disregarding the authority of two previous Commissions – at both the SEC and the CFTC – who adopted this new form just one year ago. And while I would posit that entities in such a situation should abide by regulations lawfully adopted and thus file the new form, this procedural quagmire is certainly a far cry from what the APA intends.
Much has been said about the Commission’s desire to “return” to a reasoned agency process, but this desire is nowhere to be found when there’s a looming compliance date that some would like to dodge.
Finally, it is important to remember that this timing also just so happens to be aligned with a powerful policy push to increasingly open private markets to retail investors. By preventing these amendments from coming online, we are willfully blindfolding the Commission and similarly hobbling our and other financial regulators’ ability to conduct more precise and effective analysis of private markets. This further undermines our ability to do data-driven rulemaking in the future, including our ability to effectively do an economic analysis if this or any future Commission tries to open private markets to retail investors. And the timing couldn’t be worse, as evidenced by increasingly widespread concern about the stability of private markets.
Refusing to receive these improved data on systemic risk doesn’t make those risks go away. And we can’t have it both ways. We can’t suggest that it’s perfectly safe and appropriate for investors of all stripes to gain exposure to these markets while we are going out of our way to put our head in the sand about what’s actually going on in those same markets.
Of course, if this Commission wants to revisit Form PF and reconsider any part of the Form, it can attempt to do so as part of the rulemaking process and in proper coordination with the CFTC. Not by forcing through an eleventh-hour compliance date extension under false pretenses.
Thank you to the staff in the Division of Investment Management, the Division of Economic and Risk Analysis, and the Office of the General Counsel for their work on this release. I’m particularly grateful to many of these team members who also worked on the final form amendments last year. I hope that, one day, the Commission will actually experience the benefits of your work and the important data from these Form PF amendments.
