The SEC is proposing to amend Form PF for certain SEC-registered advisors to private funds.
The amendments will affect the disclosure of the fees and other compensation that are paid to a registered representative of an adviser of a private fund. In this Notice, we refer to the “proposed amendments” unless otherwise specified. The Commission is also proposing to adopt new rules under the Advisers Act that address the requirements of the proposed amendments.
The proposed amendments would also require large hedge fund advisers and private equity fund advisers to file the Form ADV with the Commission, and the Form ADV with the SEC, by February 15 of the following year, or as soon as practicable thereafter.
These advisers would file reports within one business day of events that indicate significant stress at a fund that could harm investors or signal risk in the broader financial system. The proposed amendments would provide the Commission and FSOC with more timely information to analyze and assess risks to investors and the markets more broadly.
The proposal also would decrease the reporting threshold for large private equity advisers from $2 billion to $1.5 billion in private equity fund assets under management. Lowering the threshold would result in reporting on Form PF that continues to provide robust data on a sizable portion of the private equity industry. Finally, the proposal would require more information regarding large private equity funds and large liquidity funds to enhance the information used for risk assessment and the Commission’s regulatory programs.
“Since the adoption of Form PF in 2011, a lot has changed,” said SEC Chair Gary Gensler. “The private fund industry has grown in size to $11 trillion and evolved in terms of business practices, complexity of fund structures, and investment strategies and exposures. The Commission and Financial Stability Oversight Council now have almost a decade of experience analyzing the information collected on Form PF. We have identified significant information gaps and situations where we would benefit from additional information. Among other things, today’s proposal would require certain advisers to hedge funds and private equity funds to provide current reporting of events that could be relevant to financial stability and investor protection, such as extraordinary investment losses or significant margin and counterparty default events. I am pleased to support it.”
The proposal will be published on SEC.gov and in the Federal Register. The public comment period will remain open for 30 days after publication in the Federal Register.
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The attorneys at Sallah Astarita & Cox, LLC are former SEC Senior staff attorneys and counsel to brokerage firms, private funds, and investment advisors. For more information, or a telephone consultation, call 212-509-6544.
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GWG Holdings, Inc. (Nasdaq: GWGH) claims to be an innovative financial services firm based in Dallas that is a leader in providing liquidity solutions that are non-correlated to the traded markets, and unique services for the owners of illiquid investments.
GWG Holdings finances its portfolio of life insurance assets through the sale of alternative investment products, according to its website. Although these products are touted as offering potentially higher yields than other investment assets that are correlated with the traditional stock and bond markets, they may come at a much greater risk to investors.
GWG Financial Problems
GWG Holding’s stock price rose to $10.55 in 2021. As disclosed in the Company’s periodic reports filed with the SEC, the Company relies to on L Bond sales to provide liquidity. However, in 2021 the Company voluntarily suspended its L Bond sales during eight months in 2021 due to the late filing of its Annual Report on Form 10-K for the year ended December 31, 2020. Apparently the Company and its auditors were having difficulty resolving accounting issues with the Annual Report. The Company resumed L Bond sales following the filing of 10-K on November 5, 2021, months after it was due, but experienced significantly lower sales than expected.
GWG also announced that it was going to be late with its 2021 because of the refusal of its auditors to remain. Late filings of financial statements and 10Ks is a significant event for a public company and would likely result in a voluntary suspension of the sale of L Bonds.
GWG Announces Missed Interest Payments
Then on January 18, 2022, the Company announced that due to the decreased sales of its L Bonds, GWG did not make the January 15, 2022 interest payment of approximately $10.35 million and principal payments of approximately $3.25 million with respect to its L Bonds. The Company stated that if it fails make the payments in the next 30 days it will result in default, according to the filing.
GWG Stock Declines Over 50%
The price of the Company’s shares have fallen from $9.90 a share to $4.02 a share in January of this year, closing at $4.02 a share on January 26, 2022.
Investigations and Arbitrations
These events have caused many investors to question whether the brokerage firms who recommended the share for investment performed adequate due diligence on the company before making the recommendations and the accuracy of the financial statements published by the GWG.
Further analysis of the trading in the stock shows a suspicious decline in the price of the stock in the days leading up to the January 18 announcement, and huge volume on the 28th.
More Information Regarding GWG Lawsuits
For more information regarding the investigations and arbitrations which are being filed, call Sallah Astarita & Cox, at 212-509-6544
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