Enforcement Actions for Failure to File Form PF

A mentioned two weeks ago that the Securities and Exchange Commission was looking at private fund managers who failed to Form PF. That is now official and the SEC announced enforcement actions against 13 private fund managers.

The SEC’s orders are against:

• Bachrach Asset Management Inc.
• Biglari Capital LLC
• Brahma Management Ltd.
• Bristol Group Inc.
• CAI Managers & Co. L.P.
• Cherokee Investment Partners LLC
• Ecosystem Investment Partners LLC
• Elm Partners Management LLC
• HEP Management Corp.
• Prescott General Partners LLC
• RLJ Equity Partners LLC
• Rose Park Advisors LLC
• Veteri Place Corp.

Each of the enforcement orders are cookie cutter and straight-forward:

1. The private fund manager is registered with the SEC and manages private funds.
2. Rule 204(b)-1 applies to the manager, requiring it file Form PF.
3. The manager failed to file Form PF.
4. The manager willful violated Rule 204(b)-1.
5. The manager has to pay the SEC $75,000.

In each of the orders, the manager is noted as failing to file Form PF in multiple years.

As I said earlier, this is an easy violation for the SEC to catch. When filing Form ADV and listing a private fund, it gets a private fund identification number. It should be fairly easy for the SEC to search its database to see which funds in Form ADV filings were not in Form PF filings.

If you don’t want to file Form PF, you now know the result. You get subject to cease and desist, you get censured, and you pay $75,000. Since you get a cease and desist, you have to file Form PF or face even more serious consequences.

I’m not sure if the 13 orders surprises me because it’s a mistake that nobody should make (or that it’s too high and that there are many other firms out there not doing the filing). I know that there was a great deal of uncertainty about the definitions in Form PF with many funds being advised to file as hedge fund because of the poorly written definitions of the different fund types. These cases are all wholesale failures to file, not for filing the wrong form.

If you’re a private fund manager and haven’t filed a Form PF for one or more of your funds, the SEC has fired this shot across the bow. You’ve been warned. Be prepared to pay your $75,000.

Sources:

• SEC Charges 13 Private Fund Advisers for Repeated Filing Failures
• Form ADV and Form PF
• Settlement talks follow SEC sweep targeting advisers that failed to file Form PF in IA Watch(subscription required)
• Proposed Changes to Form ADV
• Real Estate Funds and Form PF