WASHINGTON—Federal regulators are set to propose measures that would significantly increase their visibility into private-equity funds and some hedge funds, the first in a range of plans to expand oversight of private markets.
The Securities and Exchange Commission plans to issue a proposal Wednesday that would increase the amount and timeliness of confidential information that private-equity and hedge funds report to the agency on a document known as Form PF. A main goal, Chairman
said, is to allow regulators to better understand the operations and strategies of private funds for purposes of gauging their implications for financial stability.
The commission, in a meeting Wednesday, is unveiling a separate proposal that would expand oversight of some trading platforms that match buyers and sellers of U.S. Treasury securities. The agency will seek comment on the proposals before finalizing the rules, a process which could take several months at least.
Net assets managed by private funds, which are accessible only to institutional investors or relatively wealthy individuals, rose to $11.7 trillion in the first quarter of last year from $5.3 trillion in 2013, SEC data show. With the growth have come concerns from some policy makers about the potential for unseen risks to accumulate in a corner of the market that is far less transparent than mutual funds or publicly traded companies.
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The SEC adopted Form PF as part of the regulatory overhaul following the 2008 financial crisis. Currently, it is filed by private-equity funds and large hedge funds on a quarterly basis with a 60-day lag. The form includes information such as net assets, borrowings and derivative holdings. The SEC and group of federal financial-stability regulators then aggregate that confidential data in public reports.
“We have identified significant information gaps and situations where we would benefit from additional information,” Mr. Gensler said in a statement, noting that regulators have nearly a decade of experience with Form PF data. “For example, we would benefit from more timely information during fast-moving market events.”
Among other changes, Wednesday’s proposal would require large hedge funds to file reports within one business day of incidents such as extraordinary investment losses. Private-equity funds would have to file reports within one business day of events such as removal of a fund’s general partner or termination of a fund’s investment period.
In addition, the proposal would reduce the threshold that triggers reporting as a large private-equity adviser to $1.5 billion from $2 billion in assets under management. It would also require such entities to provide more information about their use of leverage and their portfolio companies.
Mr. Gensler, who was nominated last year by President Biden, has outlined a series of possible ways to address some Democrats’ concerns that private markets have become too big and risky over the past decade or so.
Last year, he said the SEC is considering new rules to increase disclosures by private-equity firms and hedge funds to their investors about their conflicts of interest and sometimes opaque fee structures.
The agency is also working on a plan to require more private companies to routinely disclose information about their finances and operations, and potentially increase the amount of information that some nonpublic companies must file with the agency.
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