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FRM Part II · FRM Exam Part II · Risk, Regulation and Organizational Structure

A risk officer at a hedge fund of $2 billion in assets reviews the post-crisis U.S. regulatory framework. Under the Dodd-Frank Act, which of the following is a direct requirement affecting large hedge fund advisers?

Large hedge fund advisers must register with the SEC and file Form PF, which gives regulators confidential data for monitoring systemic risk. Dodd-Frank did not impose bank-style capital ratios, a fixed leverage cap or daily public position disclosure on hedge funds.

  1. ARegistration with the SEC as investment advisers and reporting of confidential risk information on Form PFCorrect
  2. BMandatory minimum capital ratios equal to those imposed on banks under Basel III
  3. CA ban on the use of leverage above 3 times net assets
  4. DMandatory daily public disclosure of all positions

Explanation

Dodd-Frank removed the private adviser exemption, so hedge fund advisers above a size threshold must register with the SEC and file Form PF, which gives regulators data to monitor systemic risk. Hedge funds are not subject to bank capital ratios, leverage caps or public daily position disclosure.

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