The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have put forward certain alterations to Form PF (SEC regulatory filing requirement). The amendment advances that the enlisting of “cash and cash equivalents” and “digital assets” should be different in order to ensure correct filing. This implies that if this proposal is accepted then the Form PF would have another sub-asset column for digital properties.
Form PF is the clandestine reporting form for a certain kind of trading analysers to privatise funds that are authorised by the SEC and the CFTC.
According to the information given on the site of the Federal Register a suggestion to create a different category called “cash and cash equivalents” is proposed so that it would facilitate analysers in sparing crypto assets at the time of enlisting cash and cash equivalents.
The commissions (mutually) have observed that within the past few years the virtual assets also called “crypto assets” have gone through advancements as well as inconsistency. In the present condition, several hedge funds are initiated to trade in these crypto assets. Simultaneously, various other working hedge funds are also witnessed securing a part of their portfolios for such assets. Therefore, for the sake of having clarity in the entire industrial exposures of hedge funds, it is important to have knowledge about their exposure to these virtual assets.
The proposal terms a “digital asset” as the asset that is issued and/or transacted via distributed ledger or blockchain system. This involves but is not dependent entirely on, thus-called “virtual currencies,” “coins,” or “tokens.”
According to the commission, the proposals are targeted to improvise its capability in examining the extent of hedge fund portfolio concentration and to figure out the directional exposure. It further demanded that high portfolio concentration includes the risk of greater losses that can occur when trading a fund depicts a huge part of a specific investment, asset, or industrial segment. Leveraged portfolios increase such risks even more.