Administrative matters
SEC announces new “Qualified Client” dollar-based thresholds
On May 4, 2026, the US Securities and Exchange Commission (the “SEC”) announced that it was raising the dollar-based thresholds that a client or private fund investor must meet to be deemed a “qualified client” under the Investment Advisers Act of 1940, as amended, effective June 29, 2026. The SEC is required to adjust the dollar-based qualified client thresholds for inflation every five years.
Beginning June 29, 2026, in order to be a qualified client under the updated thresholds, a client or private fund investor must have:
at least $1.4 million (up from $1.1 million) in assets under management with the adviser immediately after entering into the advisory arrangement (e.g., an investment in a private fund); or
a net worth (together with assets held jointly with a spouse, but excluding the value of a person’s primary residence and related debt) greater than $2.7 million (up from $2.2 million) at the time of entering into the advisory arrangement (e.g., an investment in a private fund).
Qualified purchasers and knowledgeable employees of an adviser are automatically deemed qualified clients, and the performance-based fee prohibition does not generally apply to non-US clients and fund investors. As a result, the dollar-based qualified client standards are generally relevant only for an advisor to (i) a private fund relying on the 100-or-fewer beneficial owner exemption (i.e., Section 3(c)(1) of the Investment Company Act of 1940 ("'40 Act"), as amended), from registration as an investment company, (ii) a separate account with a client that is not a qualified purchaser or knowledgeable employee, and (iii) a '40 Act registered fund.
SEC Order Approving Adjustment for Inflation of the Dollar Amount Tests
SEC and NFA announce memorandum of understanding to further harmonize regulatory coordination
On May 21, 2026, the SEC and the National Futures Association (“NFA”) announced that they have entered into a Memorandum of Understanding (the “Memorandum”) to enhance their cooperation, coordination, and information sharing in areas of common regulatory interest.
The Memorandum will enhance SEC and NFA staff’s ability to share information on matters of mutual regulatory interest such as emerging risks, examination planning, and financial markets’ conditions. The Memorandum will also provide for periodic meetings between staff. It is intended that this improved coordination will further enhance the SEC and NFA’s ability to promote compliance with derivatives and securities laws, maintain the highest level of oversight quality, and minimize duplicative efforts. According to SEC Chair Paul S. Atkins, “This memorandum is another step in furthering the SEC’s efforts to streamline cooperation with other regulatory organizations and alleviate the potential for duplicative or conflicting oversight.”
Division of examinations issues risk alert - observations of investment advisor obligations related to economic conflicts of interest
On June 9, 2026, the SEC’s Division of Examinations published a Risk Alert to assist advisers in developing effective compliance programs and disclosures with respect to economic conflicts of interest. The Risk Alert addresses observations made during review of the economic incentives that advisors and their financial professionals may have to recommend certain products, services, or account types to their clients. These reviews include advisors’ written policies and procedures, disclosure of fees and expenses, and whether advisors are accurately calculating and charging clients advisory fees and expenses in accordance with client disclosures. The Division encourages advisors to review and refine, as appropriate, their billing policies, procedures, and practices on a routine basis with an eye towards ensuring they are accurate and consistent with disclosures and agreements. Advisors should also identify and address timely new conflicts of interest. In addition, advisors are encouraged to review their disclosures regarding their economic conflicts of interest to ensure that clients are provided with full and fair disclosure.
SEC issues 2026 regulatory agenda
On July 7, 2026, the SEC published its 2026 Unified Agenda of Regulatory and Deregulatory Actions (the “Agenda”). The Agenda outlines a broad rulemaking program under SEC Chair Paul S. Atkins aimed at protecting investors, facilitating capital formation, and revitalizing both public and private markets. The Agenda centers on crypto asset market structure, recission of climate related disclosure rules, modernization of disclosure and reporting frameworks, and reforms to exempt offerings, proxy rules, and investment advisor/custody regulations, as noted below (along with that regulatory action’s Regulation Identifier Number or “RIN”):
1. Crypto Assets & Market Structure
Crypto Assets Rulemaking (RIN 3235 AN38)
Crypto Market Structure Amendments (RIN 3235 AN49)
Custody Rule Amendments (RIN 3235 AN46)
2. Climate Related Disclosure Rules
Recission of Climate Related Disclosure Rules (RIN 3235 AN76). (A separate proposed rule (S7 2026 19) was issued on May 29, 2026 to rescind climate related disclosure requirements.)
3. Disclosure Modernization & Reporting Reform
Rationalization of Disclosure Practices (RIN 3235 AN43)
Semiannual Reporting (RIN 3235 AN58; S7 2026 15)
Electronic Delivery of Information (RIN 3235 AN57; S7 2026 25)
Executive Compensation Disclosure Reform (RIN 3235 AN60)
4. Capital Formation & Exempt Offering Pathways
Updating Exempt Offering Pathways (RIN 3235 AN42)
Enhancement of Emerging Growth Company Accommodations (RIN 3235 AN40; S7 2026 18)
Registered Offerings Reform (RIN 3235 AN41; S7 2026 17)
5. Market Structure & Trading Rules
Trade Through Rule Amendments (RIN 3235 AN50; S7 2026 20)
Definition of Dealer (RIN 3235 AN51)
Oversight of US Government Securities on ATSs (RIN 3235 AN53)
6. Investment Adviser & Investment Company Rules
Custody Rule Amendments (RIN 3235 AN46)
Form PF Reporting Enhancements (RIN 3235 AN64)
Recordkeeping Rule Amendments (RIN 3235 AN66)
7. Proxy System & Shareholder Rights
Amendments to Certain Proxy Rules (RIN 3235 AN63)
Shareholder Proposal Modernization (RIN 3235 AN47)
8. Small Entity Regulatory Relief
Updates to “Small Entity” Definitions (RIN 3235 AN39)
Statement on the 2026 Regulatory Agenda
SEC forms new retail fraud working group
On July 7, 2026, the SEC announced the creation of the Retail Fraud Working Group designed to strengthen the Division of Enforcement’s efforts to identify and combat fraud targeting everyday investors. The Retail Fraud Working Group will leverage staff and resources across the SEC to identify fraud and other misconduct targeting retail investors, including offering frauds, pump-and-dump schemes, market manipulation, and breaches of duties to customers by investment advisors and broker dealers. The working group will serve as a dedicated resource for proactive case generation, play an important role in coordinating with the SEC’s regulatory partners and foreign counterparts, and participate in educational outreach to retail investors in coordination with the SEC’s Office of Investor Education and Assistance.
SEC Announcement of New Retail Fraud Working Group
SEC announces roundtable on preparations for 24-hour trading
On July 23, 2026, the SEC announced that it will host a roundtable on September 17, 2026, to discuss moving towards 24-hour trading in the US equity markets, including preparations to support overnight trading, operations and resiliency in a 24-hour market, and opportunities and challenges for expansion. The roundtable will be open to the public and held at the SEC’s headquarters at 100 F St. NE, Washington, D.C. The discussion will be streamed live on SEC.gov, and a recording will be made available at a later date. Information regarding the roundtable’s agenda and speakers will be posted before the event. Members of the public who wish to provide their views on 24-hour trading may submit their comments electronically or on paper.
SEC Announcement of Roundtable on Preparations for 24-Hour Trading
SEC proposed rules
SEC proposes amendments to permit optional semi-annual reporting for public companies
On May 5, 2026, the SEC proposed rule and form amendments that would give public companies the option to file semi-annual reports instead of quarterly reports to meet interim reporting requirements under federal securities laws. Public companies that are subject to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 ('34 Act), as amended, are currently required to file quarterly interim reports on Form 10-Q. The proposed amendments would allow public companies to elect to file semi-annual reports on new Form 10-S. This proposed change would result in public companies being able to file one semi-annual report on Form 10-S and one annual report on Form 10-K, rather than three quarterly reports on Form 10-Q and one annual report on Form 10-K. This flexibility would allow a public company to choose the interim reporting frequency that best serves its company and investors.
Under the proposal, the filing deadline for Form 10-S would be 40 or 45 days after the first semi-annual period of the fiscal year, depending on the company’s filer status. The proposal would also amend Regulation S-X, which governs the financial statement requirements for periodic reports in order to reflect the new semi-annual option and simplify existing financial statement requirements.
SEC Proposed Public Company Amendments
SEC proposes transformative reforms to help public companies conduct registered offerings and simplify reporting requirements
On May 19, 2026, the SEC proposed amendments to its rules and forms governing registered offerings that are designed to increase efficiency, flexibility, and cost savings for public companies while maintaining robust investor protections. The SEC also proposed rule amendments to simplify its public company reporting framework and better calibrate disclosure obligations with a company's size and maturity.
According to the SEC, the proposed amendments—together with the recently proposed optionality for semiannual interim reporting and other forthcoming rule proposals—represent important steps toward incentivizing companies to go and stay public.
The registered offering reform proposal, if adopted, would be the most significant modernization of the registered offering framework in more than 20 years and would:
Extend current disclosure scaling and other accommodations to most public companies
Grant the smallest public companies extended deadlines to file their periodic reports
Simplify the public reporting company filer status framework
Update the SEC’s Regulatory Flexibility Act issuer “small entity” definitions
The public comment period will remain open until 60 days after publication of the proposing release in the Federal Register.
Texas Stock Exchange proposes rule amendments that would require member brokers to vote unrestricted shares
On May 28, 2026, Texas Stock Exchange LLC (“TXSE”) filed with the SEC a proposed rule change that would require TXSE member broker-dealers to vote uninstructed shares in proportion to instructions received from participating shareholders. In the event the member receives no voting instructions from any beneficial owners, the member would vote to abstain or withhold, depending on the matter. The proposed rule seeks to eliminate broker discretionary voting, with TXSE pointing out that voting outcomes should be determined by parties with an economic interest in the issuer rather than non-interested brokers. Further, the proposed rule attempts to increase retail voting participation rates, and help reach quorum, by eliminating broker non-votes. In public statements, TXSE has also indicated one of the aims of the proposal is to reduce the voting influence of proxy advisory firms such as Institutional Shareholder Services (ISS) and Glass Lewis & Co., whose recommendations may be adopted by institutional shareholders. The proposed rule would not affect any beneficial owner’s right to vote, abstain, or withhold their vote. The rule also provides for certain exceptions to the proportional vote requirement, for example where the member is acting as executor or guardian.
On July 21, 2026, the SEC found it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein. Accordingly, the SEC designated September 9, 2026, as the date by which the SEC shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change.
Proposed Rule Change Related to Proxy Voting
SEC seeks public comment on novel exchange-traded funds
On June 30, 2026, the SEC issued a request for public comment on exchange-traded funds (“ETFs”) that invest in new or innovative asset classes or use novel investment strategies. The SEC's goal is to determine how it can encourage innovation in the ETF market, protect investors, maintain fair, orderly, and efficient markets and support capital formation. SEC Chair Paul S. Atkins emphasized the need for a consistent, transparent, and efficient regulatory framework that allows the ETF industry to continue evolving while serving investors effectively. The SEC noted the rapid growth of the ETF market, which expanded from approximately $4 trillion in assets in 2019 to more than $12 trillion by the end of 2025. Brian Daly, Director of the SEC’s Division of Investment Management, highlighted that as ETF products become more complex and innovative, public input is critical to shaping future regulation.
The SEC is specifically seeking feedback on whether certain novel ETFs should be considered investment companies, how these innovative ETFs should be regulated, and how the ETF registration and approval process can remain effective as new products emerge. The public comment period will remain open for 60 days after the request is published in the Federal Register. The SEC is reviewing whether its current ETF regulatory framework is sufficient for emerging ETF products and is asking investors, issuers, and other market participants for input on how to balance innovation with investor protection.
SEC submits proposed rule regarding electronic delivery
On July 21, 2026, the SEC proposed Regulation E-Delivery. The proposed rule sets forth conditions for covered entities to deliver covered information to covered recipients electronically without first obtaining their affirmative consent. The proposed rule further establishes conditions under which the SEC would consider delivery requirements under the Federal securities laws to be satisfied by electronic delivery. The SEC also is proposing to rescind the rule providing alternative means for registered investment companies to satisfy shareholder report transmission requirements, and to amend rules addressing the dissemination of proxy materials and tender offer materials. SEC Chair Paul S. Atkins previously stated in March 2026 that, in an age of algorithmic trading and artificial intelligence, a default paper delivery requirement should be a relic and not the standard.
Proposed Rule - Electronic Delivery
SEC final rules
SEC expands co-investment relief to open-end funds
On April 27, 2026, the SEC’s Division of Investment Management issued a no-action letter to an adviser permitting registered open-end funds, including mutual funds and ETFs, to participate in co-investment transactions under the SEC’s “simplified” co-investment exemptive orders (“Simplified Orders”), which were first introduced in April 2025. This relief will allow open-end funds to invest alongside affiliated funds in negotiated investments, including investments in private credit and private equity, subject to existing regulation concerning portfolio liquidity. In addition, the no-action letter permits a fund’s board to delegate co-investment transaction approvals to a committee of the board, which will streamline the approval process for participating funds. The no-action letter is only available with respect to Simplified Orders for which the SEC published a public notice before May 4, 2026. It is believed that this provision contemplates the SEC starting to issue orders going forward that include open-end funds, which would obviate reliance on the no-action letter for future applicants. Accordingly, firms with pending applications or who are filing applications in the future should evaluate whether to include these revisions in their applications.
Advisor Request for No-Action Relief
SEC rescinds policy regarding denials of settlements in enforcement actions
On May 18, 2026, the SEC rescinded a policy, codified in Rule 202.5(e) of its informal rules of procedures, stating that when it chooses to settle an enforcement action in which a sanction is imposed, it will not settle unless the defendant or respondent also agrees not to publicly deny the allegations in the complaint or administrative order. Rescinding Rule 202.5(e) aligns the SEC with the overwhelming majority of federal agencies that do not have a similar rule and gives the SEC more flexibility in settling enforcement actions, which conserves resources, provides certainty, and potentially expedites the return of money to injured investors. The recission recognizes that the effect on the public interest from such denials may be minimal and that the policy itself may have created an incorrect impression that the SEC is trying to shield itself from criticism.
There is no known instance of the SEC seeking to reopen an administrative or civil proceeding as a consequence of a defendant or respondent violating a no-deny provision to which they have consented. In light of the recission of Rule 202.5(e), the SEC will not enforce existing no-deny provisions that have already been entered. In the event of a breach of an existing no-deny provision, the SEC will take no action to ask a district court to vacate a settlement (or to reopen an adjudicatory proceeding) in connection with the terms of the settlement agreement. The SEC generally does not require settling defendants to admit to allegations. The recission does not affect the SEC’s practice related to admissions in settlements and does not affect the SEC's discretion to settle with defendants who decline to admit facts or liability or its discretion to negotiate for admissions as part of a settlement.
SEC staff issues no-action relief for ETFs during passive concentration exceedances
On July 27, 2026, the staff (“Staff”) of the SEC's Division of Investment Management issued a no-action letter in response to a request by the Investment Company Institute regarding creation baskets for ETFs that are experiencing a passive exceedance of their concentration policy. The letter confirms that the Staff will not recommend enforcement action against an ETF that accepts certain creation baskets during a period in which the ETF is experiencing a passive exceedance of its disclosed industry concentration policy.
ICI Request for No-Action Relief
State compliance matters
CIPA website litigation: a growing compliance concern for advisors
California's Invasion of Privacy Act (CIPA), originally enacted to address wiretapping and telephone communications, has become one of the most active sources of privacy-related litigation for businesses with public-facing websites. Plaintiffs are increasingly applying the statute to modern website technologies, including analytics tools, cookies, chat features, and online forms, driving a steady rise in lawsuits and pre-litigation demand letters. The core theory is that a website operator effectively permits third parties to intercept visitor communications when data such as search terms, IP addresses, or other identifying information is transmitted to analytics, marketing, or technology vendors before the visitor provides consent. Courts remain divided on how far CIPA reaches into website technologies, but the theory now underpins a growing volume of claims, including targeted demand campaigns aimed at website search fields and contact forms. Because CIPA provides for statutory damages on a per-violation basis, even routine website functionality may now carry litigation risk.
Advisors should review their own websites, along with any sites created for a mutual fund or ETF complex they manage, and the third-party technologies used to collect, analyze, or monitor visitor interactions, including chat features and analytics software. Working with their website providers and legal counsel, firms should consider assessing whether current disclosures, consent mechanisms, and data collection practices remain appropriate as CIPA litigation evolves and should continue to monitor developments in the area. A pre-litigation demand letter or similar notice alleging a CIPA violation should not be ignored; firms should promptly engage qualified legal counsel to evaluate the allegations, preserve relevant information, and determine the appropriate response and next steps.
California Invasion of Privacy Act (CIPA)
COD00001094