Hedge Funds and PE Firms Ordered to Disclose Buybacks Faster
Posted on 05/05/2023
The Securities and Exchange Commission (SEC) on May 4, 2023, decided that hedge funds and private equity firms need to provide faster disclosures on stock buybacks and other financial events. This is listed in SEC Form PF, requiring private fund advisers to frequently disclose buybacks.
The SEC is growing in its oversight of private managers and is concerned about systemic risk. Hedge fund advisers with US $1.5 billion or more in assets will have to file reports within 72 hours of a buyback, unusual losses, or counterparty defaults. New reports will be required quarterly that discuss investor elections that remove a partner, fund termination, and any relevant transactions. If there are US$ 2 billion in assets, additional information will need to be included in annual statements, to include leverage, strategies, compensation, and other financial material.
The rules passed on a 3-2 vote, and passing by the same margin was a rule requiring individual companies to disclose daily stock buyback information quarterly or bi-quarterly. It will be required to list the number of shares sold and the price paid for them. SEC Chairman Gary Gensler said this regulatory update was necessary given the changing dynamics of investment firms, pointing out: “In 2021, buybacks amounted to nearly US$ 950 billion and reportedly reached more than US$1.25 trillion in 2022. Today’s amendments will increase the transparency and integrity of this significant means by which issuers transact in their own securities.”