A compendium of regulatory matters for Q2 2025
ADMINISTRATIVE MATTERS
SEC Division of Investment Management: Marketing Compliance Rule Frequently Asked Questions
On March 19, 2025, the staff of the U.S. Securities and Exchange Commission’s (the “SEC” or the “Commission”) Division of Investment Management (“DIM”) issued responses to frequently asked questions (“FAQ”) related to the adoption of amendments in December 2020 to Rule 206(4)-1 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) (https://www.sec.gov/rules/final/2020/ia-5653.pdf). The staff noted that it expects to update the FAQ from time to time to include responses to additional questions. These responses represent the views of the staff of the DIM and they are not a rule, regulation, or statement of the SEC. The SEC has neither approved nor disapproved these FAQs or the answers to these FAQs. The FAQs, like all staff guidance, have no legal force or effect: they do not alter or amend applicable law, and they create no new or additional obligations for any person.
SEC.gov | Marketing Compliance Frequently Asked Questions
SEC Hosts Industry Roundtable on Artificial Intelligence
On March 27, 2025, the SEC hosted a roundtable of regulators, industry leaders and academics, focusing discussion on topics related to artificial intelligence (“AI”) within the financial industry. Panelists discussed AI-related challenges, including cyber-attacks and fraud schemes that are continuously evolving to exploit vulnerabilities with an objective to gain unauthorized access to funds or sensitive information. Acting SEC Charman Uyeda, along with panelists throughout the day, emphasized that the existing regulatory framework should be leveraged to address AI-related misconduct in the financial industry. Panelists also emphasized the importance of proactively addressing both the risks and opportunities with the use of AI, which include collaboration and information sharing to support the establishment of AI governance committees, enhancement of cybersecurity measures, and development of comprehensive training programs.
SEC Reportedly Reorganizes Regional Offices and its Enforcement and Exams Divisions
Effective April 9, 2025, the SEC reorganized its ten regional offices into three primary regions: Northeast, Southeast, and West. SEC enforcement staff began reporting to three new deputy directors based on these geographic regions. Previously, the enforcement division had a single deputy director. Additionally, exam staff in the SEC’s ten regional offices began reporting to new associate directors. In connection with these changes, the SEC enacted its previously reported plan to eliminate its Regional Director position. Nine of the current Regional Directors were reassigned into new roles. A spokesperson for the SEC confirmed the changes, saying they “are intended to improve efficiency, management, and oversight of the Divisions.”
Paul Atkins Sworn In as SEC Chairman
On April 21, 2025, Paul S. Atkins was sworn into office as the 34th Chairman of the SEC. Chairman Atkins was nominated by President Donald J. Trump on January 20, 2025, and confirmed by the U.S. Senate on April 9, 2025. Prior to returning to the SEC, Chairman Atkins was most recently chief executive of Patomak Global Partners, a company he founded in 2009. Chairman Atkins helped lead efforts to develop best practices for the digital asset sector. He served as an independent director and non-executive chairman of the board of BATS Global Markets, Inc. from 2012 to 2015. Chairman Atkins was appointed by President George W. Bush to serve as a Commissioner of the SEC from 2002 to 2008. During his tenure, he advocated for transparency, consistency, and the use of cost-benefit analysis at the agency. Chairman Atkins also represented the SEC at meetings of the President’s Working Group on Financial Markets and the U.S.-EU Transatlantic Economic Council. From 2009 to 2010, he was appointed a member of the Congressional Oversight Panel for the Troubled Asset Relief Program. Before serving as an SEC Commissioner, Chairman Atkins was a consultant on securities and investment management industry matters, especially regarding issues of strategy, regulatory compliance, risk management, new product development, and organizational control. From 1990 to 1994, Chairman Atkins served on the staff of two chairmen of the SEC, Richard C. Breeden and Arthur Levitt, ultimately as chief of staff and counselor, respectively.
SEC.gov | Paul S. Atkins Sworn In as SEC Chairman
SEC Considers Regulatory Framework for Tokenized Securities
On May 8, 2025, SEC Commissioner Peirce discussed the SEC’s revised approach to crypto regulation at the SEC’s 31st International Institute for Securities Market Growth and Development. Commissioner Peirce stated the SEC’s revised approach would be multi-faceted and that one focus would be the tokenization of traditional securities. She explained that tokenization refers to the use of distributed ledger technology to maintain the record of ownership of traditional assets, including securities, such as stocks and bonds. Tokenization entails formatting these assets as crypto assets on a blockchain or other distributed ledger technology (“DLT”).
Commissioner Peirce stated that the SEC’s Crypto Task Force is considering a potential exemptive order that would allow firms to use DLT to issue, trade, and settle securities. This potential conditional exemption from certain SEC registration requirements and associated rules would allow firms to use innovative trading systems for eligible tokenized securities. While this conditional exemption is a work-in-progress, it would afford the SEC time to develop and adopt durable adaptations to its existing rules to accommodate DLT. The goal of the conditional exemption for tokenized securities would be to formulate a commercially feasible approach that protects investors, which includes ensuring that investors have the benefit of innovative technologies for trading, clearing, and settling securities.
The contemplated exemption would be conditional. Exempted entities would comply with market integrity conditions for the prevention of fraud and manipulation. Additional conditions might include:
- Requirements to provide material and relevant disclosures to users about a platform’s products, services, operations, conflicts of interest, and risks;
- Compliance with recordkeeping and reporting requirements;
- Being subject to monitoring and examination by SEC staff; and
- Maintaining adequate financial resources for operations.
Supplemental requirements for participants offering crypto custodial services might include customer disclosures about custody arrangements and risks and a requirement to implement policies and procedures or substantive requirements related to blockchain and wallet security. Additionally, restrictions such as limiting the number and types of tokenized securities listed or traded or trading volume could mitigate risks to investors and markets.
On May 12, 2025, SEC Chairman Atkins further discussed the potential regulatory framework for securities tokenization at the Crypto Tak Force Roundtable on Tokenization. He discussed three areas of focus for crypto asset policy which include issuance, custody, and trading.
First, Chairman Atkins stated that he intends for the SEC to establish clear and sensible guidelines for distribution of crypto assets that are securities or subject to an investment contract. He stated that two struggles that have prevented such registrations in the past were; (1) the challenge in satisfying disclosure requirements; and (2) whether the crypto asset constitutes a security or investment contract that requires such registration.
Second, Chairman Atkins stated he supports providing registrants with more options in determining how to custody crypto assets. He stated that the SEC will work to provide clarity on the types of custodians that qualify as a “qualified custodian” under the Advisers Act and the Investment Company Act of 1940, as amended (the “1940 Act”). He further stated that the SEC will work to implement reasonable exceptions from the qualified custody requirements to accommodate certain common practices within the crypto asset markets.
Third, Chairman Atkins stated that he favors allowing registrants to trade a broader variety of products on their platforms in response to market demand. He stated that he has asked the SEC staff to explore whether further guidance or rulemaking may be helpful for enabling the listing and trading of crypto assets on national securities exchanges.
SEC.gov | A Creative and Cooperative Balancing Act
SEC.gov | Keynote Address at the Crypto Task Force Roundtable on Tokenization
Texas Adopts Amendments to its Business Organizations Code
On May 14, 2025, Texas Governor Greg Abbott signed into law bipartisan legislation (the “New Legislation”) enacting significant amendments to the Texas Business Organizations Code (TBOC) intended to make Texas a leading jurisdiction for corporate incorporation. The New Legislation is part of a broader, concerted effort by Texas to compete with Delaware as the “jurisdiction of choice” in which to domicile public and private business organizations and follows the formation of the Texas Business Court, a specialized trial court created to resolve certain complex business disputes which commenced operations in September 2024, and anticipates the expected launch of the Texas Stock Exchange in early 2026. The New Legislation seeks to address critiques of recent Delaware caselaw regarding publicly traded corporations, and the legislation can be understood as Texas’ attempt to capitalize on companies considering leaving Delaware (so-called “DExit”) over concerns about the litigation environment.
Division of Trading and Markets: Frequently Asked Questions Relating to Crypto Asset Activities and Distributed Ledger Technology
On May 15, 2025, the staff of the Division of Trading and Markets of the Commission prepared responses to frequently asked questions relating to crypto asset activities and distributed ledger technology. These responses represent the views of the staff and they are not a rule, regulation, or statement of the Commission. The Commission has neither approved nor disapproved their content. These responses, like all staff statements, have no legal force or effect: they do not alter or amend applicable law, and they create no new or additional obligations for any person.
Brian Daly Named Director of the SEC’s Division of Investment Management
On June 10, 2025, the SEC announced that Natasha Vij Greiner, Director of the DIM, would depart the agency effective July 4, 2025, after more than 23 years of public service. Brian T. Daly became the new Director of the DIM, effective July 8, 2025. Mr. Daly brings decades of experience serving in prominent roles at global law firms and investment management firms while advising fund managers and sponsors on regulatory compliance. For the past four years, he has been a partner in the investment management practice at Akin Gump Strauss Hauer & Feld LLP in New York, where he has guided investment advisers and other clients on their legal and compliance programs, policies, and procedures as well as counseling on fund and management company formation, operational and trading issues, contentious matters, and management company transactions. Prior to Akin, Mr. Daly spent nearly a decade as a partner in the investment management group of Schulte Roth & Zabel LLP, advising investment advisers and fund managers on legal, compliance, and operational issues and matters. He was also a founding equity partner of Kepos Capital, a quantitative investment management company, while he served as chief legal and compliance officer. Among other prior positions, Mr. Daly served in general counsel and chief compliance officer positions at Millennium Partners, a Carlyle Group liquid markets fund manager, and Raptor Capital Management. He also taught legal ethics at Yale Law School and served on the board of directors of the Managed Funds Association.
SEC.gov | Brian Daly Named Director of Division of Investment Management
U.S. Supreme Court to Consider Case Related to Closed-End Fund Activist Suits
On June 30, 2025, the U.S. Supreme Court granted a petition for a writ of certiorari with respect to a ruling by the U.S. Court of Appeals for the Second Circuit holding that Saba Capital had the right to sue a series of closed-end funds under the 1940 Act. The case, FS Credit Opportunities Corp. v. Saba Capital Master Fund Ltd., centers on whether fund shareholders may bring a private right of action directly under Section 47 of the 1940 Act to rescind fund governance bylaws or decisions that they allege violate the 1940 Act’s shareholder voting rights requirements. The SEC has filed an amicus brief arguing that Section 47 of the 1940 Act does not authorize a private right of action, which is consistent with other efforts by the SEC under the Trump Presidencies, to limit the activities of activist investors with respect to closed-end funds and issuers generally.
SEC PROPOSED RULES
Request for Extension of Compliance Dates for Amendments to Regulation S-P
On April 25, 2025, the Investment Company Institute, along with several other financial industry organizations, submitted a joint request to SEC Chairman Atkins for a 12-month extension of the compliance dates to Regulation S-P. The SEC adopted amendments to Regulation S-P on May 16, 2024, with a compliance date for larger entities (investment companies with net assets of $1 billion or more and registered investment advisers with AUM of $1.5 billion or more) set for December 3, 2025, and small entities set for June 3, 2026. The request cites the need to assess and potentially change agreements with service providers, material changes to policies and procedures, and the new 30-day notice period for individuals affected by a breach as additional burdens that need to be considered. In addition, the request urges further amendments to harmonize inconsistencies between the new requirements and existing state and global privacy requirements. On July 18, 2025, the same industry organizations provided additional comments to SEC Chairman Atkins highlighting the need for further clarity and guidance on aspects of the amended rule, as well as urging the SEC to extend the compliance date.
NYSE Proposes to Exempt Closed-End Funds from Annual Shareholder Meeting Requirement
On June 12, 2025, the New York Stock Exchange LLC (the “Exchange”) proposed to amend Section 302.00 of the NYSE Listed Company Manual to exempt closed-end funds registered under the 1940 Act from the requirement to hold annual shareholder meetings.
Notice of Filing of Proposed Rule Change Amending Section 302.00 of the NYSE Listed Company Manual
SEC FINAL RULES
SEC Approves Multi-Class Exemptive Relief for Privately Offered Business Development Companies and Closed-End Funds
On April 8, 2025, the SEC approved multiple applications for multi-share class exemptive relief for privately offered business development companies (“BDCs”) and certain registered closed-end funds (interval and tender offer funds) (together the “Funds”). This relief allows these Funds to issue multiple classes of shares with varying sales loads, asset-based service fees, and/or distribution fees, a practice previously limited to publicly offered, non-listed BDCs and the specified types of registered closed-end funds. The 1940 Act generally does not permit a Fund to offer multiple share classes without exemptive relief and previously, the SEC had only allowed non-listed publicly offered BDCs to obtain this type of exemptive relief.
Potential Benefits
The relief is expected to increase access to distribution channels, potentially leading to greater market reach and AUM growth. This change also aligns private BDCs more closely with other retail investment vehicles and can offer operational efficiency compared to publicly offered, non-listed BDCs.
Key Considerations
Funds using this relief must accept continuous subscriptions at prices at or above the net asset value of each share class. They are also subject to additional regulations and compliance procedures not typically applied to privately offered funds. Shareholder approval may be required for distribution plans with varying fees. Each manager must obtain its own multi-class exemptive relief, even if they have received similar relief before.
https://www.sec.gov/Archives/edgar/data/1449853/000110465925019211/tm257881d1_40appa.htm
https://www.sec.gov/Archives/edgar/data/2031750/999999999725000872/filename1.pdf
SEC Extends Effective and Compliance Dates for Amendments to Form N-PORT Reporting Requirements
On April 16, 2025, the SEC delayed the effective date of the amendments to the Form N-PORT reporting requirements to November 17, 2027, two years after the original effective date of the amendments. Additionally, the compliance date for registered funds to comply with these amendments has been delayed two years from the initial date. For larger fund groups with net assets of $1 billion or more as of the end of their most recent fiscal year end, the new compliance date is November 17, 2027. For smaller fund groups with less than $1 billion in net assets as of the end of their most recent fiscal year end, the new compliance date is May 18, 2028.
SEC Approves More Flexible Co-Investment Relief for Business Development Companies and Closed-End Funds
On April 29, 2025, the SEC approved a more simplified and flexible framework for co-investments involving certain BDCs and closed-end funds (together, “Regulated Funds”). The relief aims to streamline the process for co-investments between these Regulated Funds and their affiliated entities (including private funds). Some of the key changes of the relief are as follows:
- Reduced Board Approval Requirements: Previously, Regulated Fund boards were often required to pre-approve each co-investment transaction and subsequent actions. The new relief significantly reduces this burden, requiring board pre-approval only in specific situations with quarterly board reporting required for most transactions.
- Expanded Access to Follow-On Investments: Restrictions that previously prevented Regulated Funds from participating in follow-on investments if they weren’t part of the original co-investment. The new relief allows Regulated Funds to participate in such follow-on investments subject to board pre-approval.
- Streamlined Allocation Processes: Advisers can now utilize their existing allocation policies, provided they adopt and implement co-investment policies designed to ensure fairness and equity in allocating opportunities.
- Broader Scope of Eligible Affiliates: The definition of “affiliated entities” eligible to participate in co-investments has been expanded, including a wider range of private funds and joint venture subsidiaries of Regulated Funds.
- Reduced Board Reporting Burden: The new relief reduces the detailed, deal-by-deal reporting previously required for board review, opting instead for summarized quarterly and annual reports.
While the new relief retains certain burdens of the prior relief, it is a positive step toward modernizing and expanding permitted joint transactions.
https://www.sec.gov/files/rules/ic/2025/ic-35520.pdf
SEC Removes 15% Limit on Private Fund Investments by Retail Closed-End Funds
On May 19, 2025, the SEC announced a significant policy shift regarding registered closed-end funds offered to retail investors –the SEC staff will no longer require retail closed-end funds to limit their investments in private funds – i.e., funds relying upon Sections 3(c)(1) or 3(c)(7) of the 1940 Act (“private funds”) – to 15% of their net assets.
The policy shift stems from remarks made by SEC Chairman Atkins on May 19, 2025 at the first day of the “SEC Speaks in 2025” conference. Prior to these remarks, the SEC staff required closed-end funds that proposed to invest more than 15% of their net assets in private funds to limit the sale of their shares to investors (i) who are “accredited investors,” as defined in Regulation D’s Rule 501(a) under the Securities Act of 1933, as amended, and (ii) whose initial investment was $25,000. These SEC staff requirements were not required by any statute or rule, nor were they published or memorialized in any formal SEC guidance but, instead, have been communicated to closed-end fund registrants during the registration statement disclosure review process. Although recently the SEC staff had narrowed the scope of their position by not applying the 15% limit to real estate or infrastructure funds, it had still been applying it to private equity funds and hedge funds.
In support of this significant rule change, SEC leadership cited the explosive growth of the private markets – tripling in assets over the past decade – and increased regulatory oversight as drivers for the change. This policy change will provide greater access for non-accredited retail investors to invest in private equity and private credit markets but also introduces heightened litigation and enforcement risk.
SEC.gov | Prepared Remarks Before SEC Speaks
SEC Withdrawal of Proposed Regulatory Actions
On June 12, 2025, the Commission formally withdrew fourteen notices of proposed rulemaking issued between March 2022 and November 2023. The Commission does not intend to issue final rules with respect to these proposals. If the Commission decides to pursue future regulatory action in any of these areas, it will issue a new proposed rule. Below are certain of the rule withdrawals relating to investment advisers and registered investment companies.
- Conflicts of Interest Associated With the Use of Predictive Data Analytics by Broker-Dealers and Investment Advisers
On August 9, 2023, the Commission published proposed new rules under the Securities Exchange Act of 1934, as amended (“Exchange Act”), and the Advisers Act to, among other things, address certain interactions between broker-dealers or investment advisers and investors through these firms’ use of predictive data analytics.
- Safeguarding Advisory Client Assets
On March 9, 2023, the Commission published a proposed new rule under the Advisers Act to address how investment advisers safeguard client assets. The Commission also proposed, among other things, to amend certain provisions of the current custody rule.
Safeguarding Advisory Client Assets
- Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies
On March 9, 2022, the Commission published proposed new rules and forms and amendments to existing forms under the Advisers Act and the 1940 Act to require registered investment advisers and investment companies to adopt and implement written cybersecurity policies and procedures reasonably designed to address cybersecurity risks, disclose information about cybersecurity risks and incidents, report information confidentially to the Commission about certain cybersecurity incidents, and maintain related records.
- Enhanced Disclosures by Certain Investment Advisers and Investment Companies About Environmental, Social and Governance Investment Practices
On June 17, 2022, the Commission published proposed amendments to rules and forms under both the Advisers Act and the 1940 Act to require, among other things, registered investment advisers, certain advisers that are exempt from registration, registered investment companies, and business development companies, to provide additional information regarding their environmental, social, and governance investment practices.
- Outsourcing by Investment Advisers
On November 16, 2022, the Commission published a proposed new rule under the Advisers Act to prohibit advisers from outsourcing certain services or functions without first meeting certain requirements. The Commission also proposed related form amendments to collect information about the service providers defined in the proposed rule.
Outsourcing by Investment Advisers
- Regulation Best Execution
On January 27, 2023, the Commission published proposed new rules under the Exchange Act relating to a broker-dealer’s duty of best execution. Proposed Regulation Best Execution would have changed the existing regulatory framework concerning the duty of best execution by requiring detailed policies and procedures for all broker-dealers and additional policies and procedures for broker-dealers engaging in certain transactions with retail customers, as well as related review and documentation requirements.
- Order Competition Rule
On January 3, 2023, the Commission published a rule proposal to, among other things, amend the regulation governing the national market system under the Exchange Act to add a new rule prohibiting a “restricted competition trading center” from internally executing certain orders of individual investors at a price unless the orders are first exposed to competition at that price in a qualified auction operated by an open “competition trading center,” subject to limited exceptions.
- Cybersecurity Risk Management Rule for Broker-Dealers, Clearing Agencies, Major Security-Based Swap Participants, the Municipal Securities Rulemaking Board, National Securities Associations, National Securities Exchanges, Security-Based Swap Data Repositories, Security-Based Swap Dealers, and Transfer Agents
On April 5, 2023, the Commission published a proposed new rule and form and amendments to existing rules to, among other things, require broker-dealers, clearing agencies, major security-based swap participants, the Municipal Securities Rulemaking Board, national securities associations, national securities exchanges, security-based swap data repositories, security-based swap dealers, and transfer agents to address cybersecurity risks through policies and procedures, immediate notification to the Commission of the occurrence of a significant cybersecurity incident and, as applicable, reporting detailed information to the Commission about a significant cybersecurity incident, and public disclosures.
Notice of Withdrawal of Proposed Regulatory Actions
FinCEN Postpones New AML Rule for Investment Advisers
On July 21, 2025, In order to ensure efficient regulation that appropriately balances costs and benefits, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) announced its intention to postpone the effective date of the final rule establishing Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers (the “IA AML Rule”) and to revisit the scope of the IA AML Rule at a future date. FinCEN anticipates delaying the effective date of the IA AML Rule from January 1, 2026, until January 1, 2028.
The IA AML Rule seeks to address ongoing illicit finance risks, threats, and vulnerabilities posed by criminals and foreign adversaries that exploit the U.S. financial system and assets through investment advisers. FinCEN recognizes, however, that the rule must be effectively tailored to the diverse business models and risk profiles of the investment adviser sector. FinCEN also recognizes that extending the effective date of the rule may help ease potential compliance costs for industry and reduce regulatory uncertainty while FinCEN undertakes a broader review of the IA AML Rule.
While FinCEN will work through the rulemaking process to extend the effective date, FinCEN intends to provide the investment adviser sector with regulatory certainty by issuing appropriate exemptive relief delaying the effective date. During the delayed effective date, FinCEN intends to revisit the substance of the IA AML Rule through a future rulemaking process and, together with the Commission, also intends to revisit the joint proposed rule establishing customer identification program rule requirements for investment advisers, Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers.
ENFORCEMENT AND LITIGATION MATTERS
SEC Drops Liquidity Rule Suit Against Mutual Fund Adviser and its Officers and Mutual Fund Trustees
On July 11, 2025, the SEC announced that it had filed a joint stipulation with a mutual fund adviser, two of its officers, and two mutual fund independent trustees, to dismiss with prejudice the SEC’s first-ever case seeking to enforce provisions of Rule 22e-4 under the 1940 Act (the Liquidity Rule).
Pinnacle Advisors, LLC; Robert F. Cuculich; Benjamin R. Quilty; Mark E. Wadach; and Lawton A. Williamson (dismissal)
Pinnacle Advisors, LLC, Robert F. Cuculich, Benjamin Quilty, Mark E. Wadach and Lawton A. Williamson (original complaint)
COD00000807 8/5/2025
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