SEC & CFTC Call for Public Comment on Crypto Reporting for Hedge Funds

The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) on Thursday launched public consultations calling on the public to contribute to the proposed rule seeking to define the crypto hedge funds and their public disclosures.

The comment document for the public was made available on the Federal Registry site and seeks to collect the opinions of large hedge fund advisors and all filers about their strategies for investments as the commission moves to consider proposed amendments for Form PF, a confidential reporting form revealing business day events for SEC-registered investment advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors.

”We also are soliciting comment on the proposed rules and a number of alternatives, including whether certain possible changes to the proposal should apply to Form ADV” SEC and CFTC announced in a statement.

SEC amendments seek to increase hedge funds’ monitoring

Under the proposed amendments for Form PF or rule, SEC intends to bolster private equity and crypto hedge funds revelations and increase monitoring of the industry to mitigate potential risks.
“The amendments are designed to enhance the Financial Stability Oversight Council’s (“FSOC’s”) ability to monitor systemic risk as well as bolster the SEC’s regulatory oversight of private fund advisers and investor protection efforts” the statement read.

The regulators will also change the guidelines of the Investment advisers act of 1940 requiring “temporary hardship exemption.”
“The proposal would add a new sub-asset class for digital assets and define the term ‘digital asset” the statement read in part.
The SEC Chair, Gary Gensler, last month told reporters that the proposed amendments requiring the largest financial firms to report on their complex structure will ensure transparency.
“We can play a role by upping at least some of the transparency.” Gary Gensler, the agency’s chair, told journalists.

Proposed scrutiny will be the biggest in 10 years

If the amendments for confidential filings are considered as proposed, they will become one of the largest regulations that monitor the pooled investment fund trading in liquid assets in over 10 years, according to analysts. The regulatory scrutiny started when the hedge fund deleveraging threw turmoil in the U.S. Treasuries market in March 2020 and the “meme-stock” saga which was full of unclear assets prompting the Biden administration to move regulators to put a wall on unclear private funds that have has an adverse effect on the markets.

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