Ultimus Compliance Matters
Administrative Matters
SEC Publishes Draft Strategic Plan for 2026-2030
On June 2, 2026, the US Securities and Exchange Commission (the “SEC” or the “Commission”) published a Draft Strategic Plan that, according to Chairman Paul S. Atkins, focuses on returning the agency to the core mission set by Congress more than 90 years ago: (i) protecting investors; (ii) maintaining fair, orderly, and efficient markets; and (iii) facilitating capital formation.
The three goals set forth in the Draft Strategic Plan are to:
Renew our regulatory policy focus to support innovation, capital formation, market efficiency, and investor protection - This goal promotes clear, fit-for-purpose rules that foster responsible innovation and deter misconduct. Modernizing and simplifying disclosure practices, expanding access to private markets, and enabling new capital-raising pathways are essential to ensuring that entrepreneurs and small businesses can thrive. One objective is to provide a firm regulatory foundation for digital assets and distributed ledger technologies through a rational, coherent, and principled approach.
Shift our regulatory practices to increase stakeholder engagement, facilitate compliance efforts of market participants, and effectively return our enforcement approach to Congress’ original intent - This goal seeks to increase Staff engagement with business and industry groups while restoring an enforcement approach that polices violations of established law such as fraud and manipulation rather than expanding regulatory reach through ad hoc enforcement actions. Other objectives include periodic, retrospective reviews of existing rules as well as an assessment of the agency’s administrative law framework.
Optimize our operational efficiency by enhancing our organizational structure, modernizing our technology, reforming employee performance management, and implementing robust internal performance reporting that incorporates accountability for resources and program success - This goal prioritizes technology modernization as a critical enabler of regulatory effectiveness. A comprehensive review of legacy systems—such as EDGAR—and the adoption of secure, scalable infrastructure will enhance data integrity, reduce operational risk, and support advanced analytics. The responsible use of artificial intelligence and blockchain technologies can further improve oversight, reduce costs, and unlock new efficiencies.
In developing the Draft Strategic Plan, the SEC considered the information gleaned from meetings with the many external parties with which the agency interacts on a regular basis, including members of Congress and congressional committees, investors, businesses, financial market participants, academics, and other experts and stakeholders.
SEC Draft Strategic Plan FY26-FY30
SEC Establishes Financial Reporting and Accounting Unit in the Enforcement Division
On August 5, 2026, the SEC announced it is establishing a new specialized unit within its Division of Enforcement to provide the dedicated expertise, focus, and capacity to pursue accounting and financial reporting fraud cases as well as general misconduct in the accounting and auditing areas. The Financial Reporting and Accounting Unit will work in close collaboration with SEC Staff across all relevant SEC divisions and offices to ensure its approach to enforcing federal securities laws is consistent with the Commission’s policy goals.
Mr. David Woodcock, Director of the SEC’s Division of Enforcement, stated that “this new unit—which expands on the Division’s current and historical efforts to crack down on bad actors in the accounting and auditing profession—will be critical in the SEC’s efforts to pursuing financial reporting fraud, as well as accounting and auditor misconduct more generally.”
The unit will be led by Mr. Timothy Zimmerman, who joined the SEC’s Division of Enforcement in May 2026 as a senior advisor to the Director. Prior to joining the agency, Mr. Zimmerman worked for 12 years at an international law firm, and most recently served as Deputy General Counsel at an international accounting and professional services firm.
The Financial Reporting and Accounting Unit will be staffed by both attorneys and accountants with specialized skills related to financial reporting, accounting, and auditing in securities regulation.
SEC Establishes Financial Reporting and Accounting Unit in Enforcement Division
SEC Staff Ends No-Action Relief Program for Shareholder Proposals – Updated Statement from the SEC Regarding the Division of Corporation Finance’s Role in the Rule 14a-8 Process
On August 14, 2026, the SEC’s Division of Corporation Finance announced it will no longer respond to any no-action requests under Rule 14a‑8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including those under Rule 14a‑8(i)(1), and will stop issuing “no objection” letters, effective immediately.
Previously, on November 17, 2025, the Division announced that, for the 2025–2026 proxy season (October 1, 2025–September 30, 2026), it would not respond to no-action requests or express any views regarding companies’ intended reliance on any basis for excluding shareholder proposals under Rule 14a-8, except for no-action requests to exclude a proposal under Rule 14a-8(i)(1). The Division also stated that, if a company wished to receive a response for any proposal that it intended to exclude pursuant to a basis other than Rule 14a-8(i)(1), the company or its counsel could include, as part of its notification pursuant to Rule 14a-8(j), an unqualified representation that the company had a reasonable basis to exclude the proposal based on the provisions of Rule 14a-8, prior published guidance, and/or judicial decisions. In those situations, the Division stated that it would respond with a letter indicating that, based solely on the company’s or counsel’s representation, the Division would not object if the company omitted the proposal from its proxy materials.
In order to focus Division resources on the review of Securities Act of 1933, as amended (the “’33 Act”) and Exchange Act filings, including those reviews that are statutorily required for the protection of investors and facilitation of capital formation, and in light of the extensive body of guidance from the Commission and the staff available to both companies and proponents on Rule 14a-8, the Division has determined to discontinue responding to Rule 14a-8 no-action requests entirely, including those submitted under Rule 14a-8(i)(1), effective immediately, unless and until the Division announces otherwise. It also will no longer respond to notices filed under Rule 14a-8(j) with a letter indicating that it will not object if a company omits a proposal from its proxy materials.
Companies will continue to be required under Rule 14a-8(j) to submit notices to the Commission containing the information required by the rule when they intend to exclude shareholder proposals from their proxy materials. Companies should submit those notices using the online “Shareholder Proposal Form.” In addition, the Division’s shareholder proposal email address is no longer functional. Companies and shareholder proponents should submit any questions or other correspondence using the Shareholder Proposal Form.
The SEC’s Division of Investment Management is responsible for reviewing Rule 14a-8 requests related to investment companies. To focus the Division of Investment Management’s resources on the review of investment company filings for the protection of investors and facilitation of capital formation, the Staff of the Division of Investment Management will take a substantially similar approach as set forth above. Any notices submitted pursuant to Rule 14a-8(j) related to investment companies must be submitted to the Division of Investment Management by email to IMshareholderproposals@sec.gov. Companies and shareholder proponents should submit any questions or other correspondence concerning investment companies to the attention of the Division of Investment Management’s Disclosure Review and Accounting Office at IMshareholderproposals@sec.gov or by calling 202-551-6921.
New SEC Fee Rate Advisory for Fiscal Year 2027
On August 21, 2026, the SEC announced that the fees that public companies and other issuers pay to register their securities with the Commission will decrease from $138.10 per million dollars to $87.00 per million dollars, effective October 1, 2026. The new fee rate will be applicable to the registration of securities under Section 6(b) of the ’33 Act, the repurchase of securities under Section 13(e) of the Exchange Act, and proxy solicitations and specified tender offers under Section 14(g) of the Exchange Act.
The securities laws require the Commission to make annual adjustments to the rates for fees paid under Section 6(b) of the 1933 Act, which also adjusts the annual fee rates under Sections 13(e) and 14(g) of the Exchange Act, as well as Rule 24f-2 under the Investment Company Act of 1940, as amended (the “’40 Act”). The Commission must set rates for the fees paid under Section 6(b) to levels that the Commission projects will generate collections equal to annual statutory target amounts. The Commission’s projections are calculated using a methodology developed in consultation with the Congressional Budget Office and the Office of Management and Budget. The Commission determined the statutory target amount for fiscal year 2027 to be $919,148,792 by adjusting the fiscal year 2026 target collection amount of $887,800,554 for the rate of inflation.
The Commission will issue further notices as appropriate to keep the public informed of developments relating to fees.
Filing Fee Rate Advisory for Fiscal Year 2027
SEC Publishes Notice of Application for Exchange-Listed and Tokenized Share Classes of Interval Funds
On August 24, 2026, the SEC issued a notice to extend exemptive relief (the “Notice”) to allow an interval fund to offer both exchange-listed shares and tokenized shares alongside existing repurchase-only share classes. This exemptive relief could combine private-market exposure with exchange-based and tokenized trading options.
The current application for the recent Notice was amended to permit the applicant to issue two additional types of share classes. First, exchange class shares which would be listed on a national securities exchange. The exchange class shares would provide investors with continuous secondary-market liquidity. Second, tokenized class shares which would be traded on one or more alternative trading systems or quoted on one or more other quotation mediums. The tokenized class shares would utilize blockchain infrastructure for settlement and transfer. Both new classes would coexist with the applicant’s existing interval fund share classes, which would continue to provide liquidity solely through periodic repurchase offers.
While the Notice included several conditions and structural requirements, there were two requirements that stood out. First, it would be required that if shares of any class are issued at a premium to the class’s current net asset value (“NAV”), then the fund will offer shares of all classes subject to the same premium. Second, shares of common stock in the fund should not be offered at a price below the current NAV unless the offer is made to holders of all classes of common stock.
The Notice has significant implications for interval funds seeking to broaden distribution of private-market strategies to a wider investor base. This Notice would allow an interval fund to keep its closed-end interval fund structure that permits holding higher levels of illiquid assets compared to retail mutual funds, while simultaneously offering a more liquid option to potential investors.
Risk Alert - Division of Examinations – Observations Regarding Lost Securityholder Rule Compliance
On August 28, 2026, the SEC’s Division of Examinations published a Risk Alert to assist transfer agents and broker-dealers, including paying agents, in meeting their lost securityholder compliance obligations. The Risk Alert addresses observations from examinations regarding transfer agent and broker-dealer instances of non-compliance with the Lost Securityholder Rule, including issues related to database searches and recordkeeping.
Risk Alert - Observations Regarding Lost Securityholder Rule Compliance
Corporate Finance Interpretations Update – Filings of Schedule 13D and 13G
On September 2, 2026, the SEC’s Division of Corporation Finance issued Corporation Finance Interpretations ("CFIs") that provide the Division's non-binding Staff guidance under Exchange Act Section 13(d), Section 13(g), and Regulation 13D-G, including Schedules 13D and 13G, that clarifies beneficial ownership reporting, Schedule 13D/13G requirements, and related compliance issues.
Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting
SEC Proposes Rescission of Political Contribution Rule for Investment Advisors
On September 3, 2026, the SEC proposed eliminating its 2010 “pay-to-play” rule for investment advisors, which currently bars an advisor from receiving compensation for advisory services provided to a government client for two years after certain political contributions are made to elected officials or candidates associated with that client. The proposal would also remove the related recordkeeping requirements. According to the SEC, other key regulatory obligations would remain in place, including fiduciary duties, anti-fraud provisions, compliance requirements, and codes of ethics. The agency says that over more than 15 years of experience administering the rule, it has observed significant unintended consequences. The SEC notes that some advisory firms have responded by restricting or prohibiting employees’ political contributions at the state and local level. Advisors have also reported that the rule is difficult and costly to administer and can function as a form of strict liability, where even minor or inadvertent contributions may trigger severe penalties, business restrictions, or enforcement actions. SEC Chairman Paul S. Atkins argued that the rule has become overly prescriptive and has effectively suppressed political speech by employees and advisors. He stated that firms can be penalized because of contributions made by employees, including donations made before those employees joined the firm. Atkins further contended that political contribution oversight is more appropriately handled through state laws, local ordinances, and federal election regulations rather than SEC regulation.
From a compliance perspective, this would represent a significant change for investment advisors, particularly firms that have built extensive political contribution monitoring programs around the current rule. While firms would still need to comply with applicable federal, state, and local campaign finance laws, the SEC’s specific pay-to-play restrictions would no longer apply if the proposal is finalized. If adopted, the proposal would rescind Rule 206(4)-5 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) in its entirety and revise the advisor recordkeeping rule to remove related provisions. The SEC has opened a 60-day public comment period following publication of the proposal in the Federal Register.
Proposed Rule Rescission: Political Contributions by Certain Investment Advisers
Risk Alert - Division of Examinations – Observations on Investment Advisor Annual Compliance Reviews
On September 14, 2026, the SEC’s Division of Examinations published a Risk Alert relating to the requirement that advisors conduct a review of their compliance policies and procedures at least annually to assess their adequacy and the effectiveness of their implementation. The Risk Alert encourages advisors to reflect upon their practices, policies, and procedures, and to implement any appropriate modifications to their annual review processes. The Risk Alert highlights certain areas advisors may want to consider when conducting their reviews, including:
Conducting timely annual reviews. The Staff observed advisors that did not perform reviews of their compliance policies and procedures, at least annually, to determine their adequacy and the effectiveness of their implementation, as required.
Adopting complete policies and procedures for conducting annual reviews. The Staff observed advisors that had compliance policies requiring annual reviews, but they did not adopt procedures or had incomplete procedures for their personnel to use when assessing whether the advisors’ policies and procedures were adequate and effectively implemented.
Conducting annual reviews consistent with written procedures. The Staff observed advisors that conducted timely annual reviews, but they were not conducted in a manner that was consistent with their written procedures.
Ensuring compliance policies and procedures fully address and align with practices. The Staff observed advisors that did not recognize, during their annual reviews, that their policies and procedures did not fully address or were not aligned with their practices. The Staff often identified these inconsistencies after observing issues in core areas of the advisors’ business, operations, and services, which were then compared to the advisors’ annual reviews and applicable written compliance policies and procedures.
Maintaining documentation made regarding annual reviews. The Staff observed advisors that created documentation when conducting their annual reviews, such as when performing testing and recommending corrective actions, but did not maintain the documentation in their books and records.
Taking corrective actions for issues identified in annual reviews. The Staff observed advisors that did not take corrective action after their annual reviews recommended changes to the advisors’ compliance policies or procedures, disclosures, and/or business practices. Also, the advisors did not make the recommended changes, including instances where the advisors indicated that corrective actions were already implemented but the issues identified during the prior annual reviews persisted.
In sharing examination observations regarding advisors’ compliance with the annual review requirements, the Division encourages advisors to reflect upon their own practices, policies, and procedures, and to implement any appropriate modifications to their annual review processes.
Risk Alert - Examination Observations Regarding Advisor Annual Compliance-Reviews
Investment Company Institute Compliance, Risk, and Legal Conference
On September 15–17, 2026, compliance, risk, and legal professionals from across the country (including 6 from Ultimus Fund Solutions and Northern Lights Compliance Services (“NLCS”)) travelled to Nashville, Tennessee for the Investment Company Institute’s (the “ICI”) inaugural Compliance, Risk, and Legal Conference. Noted panelists and speakers included: Mr. Keith Cassidy, Director of the SEC's Division of Examinations, Ms. Sarah ten Siethoff, Associate Director for Rulemaking of the SEC’s Division of Investment Management, Mr. Joshua White, Head, Chief Economist and Director of the SEC’s Division of Economic and Risk Analysis; and NLCS’s very own Martin Dean.
Topics at the Conference included:
Artificial Intelligence (“AI”) - By far the most talked about topic of the Conference was AI, which comes as no surprise as 85% of investment advisor firms named AI their top compliance topic for the year, according to a July ICI survey. AI can reduce manual work, strengthen monitoring, and catch problems earlier, but firms need clear decisions on governance, testing, documentation, data use, and human oversight. “AI can make disclosure cheaper to process, but it does not make the underlying information free to produce, to verify, or to stand behind. Information still must be collected, verified, and reconciled,” said Joshua White. With operations teams pushing to use AI to keep up with competitors, Compliance professionals need to acclimate to AI on the fly to provide adequate oversight and controls. Some best use cases for AI used by panelists include reviewing significant amounts of data, repetitive tasks, and low risk areas. The speakers and panelists cautioned that, like humans, AI will be wrong at some point and suggested that it shouldn’t be relied upon for areas or projects requiring precision or specificity. A frequent sentiment expressed during the Conference: all AI output must have human oversight prior to release or becoming an official document or record. This will continue to be a hot topic into 2027, as noted by many of the panelists and SEC Staff.
SEC Exam Priorities - Keith Cassidy said the SEC continues to let firms know of exam priorities by publishing the annual SEC Exam Priorities, Risk Alerts, and Enforcements Actions. The SEC will put an emphasis on finding bad actors while focusing more on the quality of exams compared to the quantity of exams with the hopes of fewer enforcement actions. Mr. Cassidy noted that the industry should continue to expect exams focused on new Rules, along with Valuation, Private Credit, Disclosures, and Interval and Alternative Funds. AI will most likely become a priority starting in 2027.
SEC’s Regulatory and Rulemaking Agenda - The SEC Staff at the Conference discussed the SEC’s expectations surrounding Regulation S-P, Rule 35d-1 (the “Names Rule”), anti-money laundering, adviser recordkeeping, e-delivery, Rule 17a-7 under the 1940 Act, and the pay-to-play rule. Staff emphasized that firms are expected to have policies and procedures in place by the applicable compliance dates for recently adopted rules. While the SEC indicated that it may be receptive to working with firms to address limited gaps or needed enhancements in existing policies, it expects firms to have implemented a compliance framework before the effective compliance date. All firms are encouraged to work with outside counsel and fund CCOs as necessary to ensure timely adoption and implementation of required policies and procedures.
Rapid Technology Adoptions - In digital assets and private markets, firms are making decisions within a regulatory framework that is still taking shape, making peer discussions on tokenization, digital assets, and private markets especially useful.
Bringing compliance, risk, and legal professionals together to hear from regulators, explore emerging technologies, and learn from peers, helps firms navigate change with confidence. These connections strengthen practices industrywide, protect our shared reputation, and preserve what matters most: investor trust.
SEC’s Director of the Division of Investment Management Issues a Statement on Fair Value Measurement and Disclosure Considerations for Private Assets
On September 28, 2026, Mr. Brian Daly, Director of the SEC’s Division of Investment Management, issued a statement that highlighted considerations relating to valuation and disclosure for private assets. Investment in private assets continues to grow, including for an increasing number of registrants that are required to subsequently measure these investments at fair value, such as registered closed-end funds, interval funds, tender offer funds, business development companies, and private funds registered under the Exchange Act. The growing accessibility of private assets, including private credit, calls for a critical reminder that registrants maintain rigor over how these assets are valued and how those valuations and asset risk characteristics are disclosed to investors. Likewise, these issues are relevant for auditors who are responsible for evaluating management’s judgments and the sufficiency of a registrant’s disclosures.
This statement offers reminders from the Staff of the SEC’s Office of the Chief Accountant and the Division of Investment Management regarding areas of significant judgment under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement, and the importance of targeted and transparent disclosure. The Staff believes that reinforcing existing requirements under US generally accepted accounting principles (“US GAAP”)—and, for certain registrants, including business development companies, the regulatory framework under the ’40 Act—will promote greater consistency and clarity in the financial information provided to investors.
Statement on Fair Value Measurement and Disclosure Considerations for Private Assets
SEC’s Division of Examinations Announces New Exam Handbook
On October 1, 2026, the SEC’s Division of Examinations published its new handbook, “The SEC Exam Handbook: A Practical Guide on Process and Engagement,” which replaces and expands upon the previous examination brochure by providing registrants with more insight and detail about what to expect during an examination.
The new handbook provides a clear roadmap of the process used by division examiners across the country to help ensure consistency and is designed to emphasize the Commission’s commitment to approach each examination with an accessible and collaborative mindset. In addition to supporting the SEC’s mission, division examinations are designed to improve industry practices and compliance, monitor risk, and prevent fraud.
“The Division of Examinations is a crucial part of how the SEC provides market oversight and protects investors. The Division’s new handbook clarifies the examination process, offering regulated entities greater insight into what to expect during an exam and establishing clear expectations,” said SEC Chairman Paul S. Atkins. “The transparency this handbook provides will make examinations more effective and further help the SEC fulfill its mission of protecting investors, facilitating capital formation, and maintaining fair, orderly, and efficient markets.”
“The division’s goal to be more accessible provides registrants and the Commission with a more efficient and effective examination program,” said Keith Cassidy, Director of the SEC’s Division of Examinations. “By answering the call from registrants to provide more clarity to the exam process, we aim to make the process more consistent and predictable for everyone involved.”
The handbook covers each stage of an exam, from the risk assessment process through to the disposition letter, along with several avenues to provide feedback or ask questions. The handbook also provides registrants with practical tips and helpful resources to prepare for an exam and stay current on compliance obligations.
SEC Releases 2027 Examination Priorities
On October 23, 2026, the SEC’s Division of Examinations announced its Fiscal Year 2027 examination priorities (the “FY 2027 Priorities”). The annual report identifies key areas of focus as the Division carries out its mission to promote compliance, prevent fraud, identify and monitor risk, and inform Commission policy.
The FY 2027 Priorities were developed in coordination with divisions and offices across the SEC and reflect examination observations, market developments, investor concerns, industry engagement, and emerging trends affecting the US capital markets. They highlight areas that the Division believes currently present heightened risks to investors or market integrity and will help guide its risk-based program during the fiscal year.
In addition, the Division is working to be more accessible to registrants on how they receive examination observations and engage with Staff through the examination process. It is also strengthening its integration process with SEC policymaking divisions and offices, as well as fellow regulators, to promote consistency in the application of the federal securities laws.
“Examinations are one of the Commission’s most important tools for promoting compliance with the federal securities laws and helping protect investors,” said SEC Chairman Paul S. Atkins. “Examinations provide critical insight into emerging risks, evolving business practices, and market developments across our financial system. Through a rigorous and analytically-driven program, the Division helps strengthen compliance, support the integrity and resilience of American capital markets, and reinforce investor confidence.”
The FY 2027 priorities emphasize a broad range of examination activities across the Division’s more than 34,000 registrants, including investment advisors, investment companies, broker-dealers, self-regulatory organizations, clearing agencies, municipal advisors, transfer agents, funding portals, security-based swap entities, and others.
Key fiscal year 2027 areas of focus include:
Investment advisors’ fiduciary obligations, conflict of interest, investment recommendations, and compliance programs.
Retail investor protection, particularly regarding complex, higher-risk, and illiquid products.
Private funds, private credit, and other complex investment strategies.
Broker-dealer financial responsibility, trading practices, supervision, and anti-money laundering compliance.
Operational resiliency, cybersecurity, and protection of customer information.
Emerging technologies, including super intelligence and other advanced technologies that may affect market operations, compliance, fraud prevention, and investor protection.
Risks associated with evolving market infrastructure, including Treasury clearing reforms, tokenization, and related developments.
Oversight of self-regulatory organizations and other critical market participants.
“The markets we oversee continue to evolve rapidly, and the examination program must evolve with them,” said Keith Cassidy, Director of the SEC’s Division of Examinations. “Our approach enables us to adapt to changing market conditions, identify developing risk patterns, respond to emerging threats, and anticipate areas where investors and the markets may be vulnerable. By continuously assessing risks across registrants, products, and market activities, we can deploy examination resources where they can have the greatest impact while remaining responsive to innovation and market change.”
The Division emphasized that the FY 2027 Priorities are not an exhaustive list of the matters that examiners will review during fiscal year 2027. Rather, they identify areas warranting heightened attention based on current risk assessments. The Division will continue to examine compliance with federal securities laws and regulations across the full spectrum of registrant activities and expects firms to maintain strong, risk-based compliance programs tailored to their businesses.
The Division will continue to assess risks throughout the year and may adjust its focus areas in response to market events, investor concerns, emerging technologies, new products and services, and other developments affecting the securities markets.
FY 2027 Examination Priorities
FASB, CFTC, SEC and IRS Proposed Rules
FASB Issues Proposed ASU Related to Fair Valuation for Investment Companies
On July 1, 2026, the Financial Accounting Standards Board (“FASB”) proposed an Accounting Standards Update (“ASU”) intended to improve investment company financial reporting by amending how investment companies measure the fair value of equity securities subject to contractual sale restrictions such as lock-up or market standoff agreements.
Under the previous standard an entity did not consider a contractual restriction on selling an equity security when measuring that security at fair value. As a result, an entity holding a restricted and an unrestricted equity security issued by the same company generally would measure fair value using the market price of the unrestricted security.
On September 9, 2026, FASB issued ASU 2026-03, which amends ASC 820 to require investment companies within the scope of ASC 946 (includes Registered ’40 Act entities) to consider the effect of a contractual sale restriction when measuring an equity security’s fair value. The effect of the restriction is to apply a discount to the equity security’s fair value. The discount reflects the amount that market participants would demand because of the risk associated with being unable to sell the equity security during the specified restriction period. The investment company would apply this guidance regardless of whether the contractual sale restriction is a characteristic of the reporting entity holding the equity security, or the security itself.
The amendments apply only to investment companies and only to equity securities. They do not apply to other asset classes, such as debt securities or crypto assets within the scope of Subtopic 350-60. The new guidance does not require a discount for restrictions on equity securities when the restriction is reflected in the economics of another transaction, such as a borrowing in which the securities are pledged as collateral. In addition to complying with the existing disclosure requirements in ASC 820-10-50-6B for equity securities subject to contractual sale restrictions, an investment company must disclose “the amount of the discount attributable to contractual sale restrictions included in the fair value measurement.” While the ASU only applies to investment companies FASB has decided to add a project to its technical agenda to separately address the fair value measurement of equity securities subject to contractual sale restrictions for all entities.
The ASU is effective for annual reporting periods beginning after December 15, 2027, including interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period on any date on or after the issuance date of the ASU.
Proposed Accounting Standards Update, Fair Value Measurement (Topic 820)
CFTC Proposes Commodity Pool Operator and Commodity Trading Advisor Registration Exemptions
On August 18, 2026, the Commodity Futures Trading Commission (the “CFTC”) published a Notice of Proposed Rulemaking seeking public comments on amendments to part 4 of the CFTC’s regulations. These amendments address registration requirements for commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”), and the proposed rule aims to reduce duplicative and overlapping regulation.
“By continuing to address overly burdensome and duplicative rules for its registrants, the CFTC is delivering on its mandate to promote US market competitiveness,” said Chairman Michael S. Selig. “This proposal is yet another step to unwind overregulation and cut red tape for American businesses while still preserving market integrity.”
The proposed rule specifically would:
Add an exemption from CPO registration for certain investment advisors registered with the SEC in relation to commodity pools for which the participants are limited to certain sophisticated investors and which meet other conditions discussed in the proposal.
Add a related registration exemption for CTAs.
Increase the capital contribution threshold in the current CPO registration exemption for small commodity pools, also known as the small pool exemption, to reflect inflation.
Comments will be accepted for 45 days following publication in the Federal Register.
Proposed Rule - CFTC Regulations
SEC Proposes New Regulation Crypto Assets
On August 18, 2026, the SEC proposed new rules that would create a clear framework for certain investment contracts involving crypto assets. The SEC has stated that these proposed new rules create a comprehensive, tailored securities offering regime that is intended to address long-standing barriers to responsible capital formation and innovation within domestic crypto asset markets while preserving investor protections under federal securities laws.
The proposed rules include two exemptions from the registration requirements of the ’33 Act. First is a one-time exemption that permits offerings of up to $5 million during a four-year period. Second is an exemption that permits offerings of up to $75 million during each 12-month period. Under both exemptions, issuers would be required to make certain principles-based narrative disclosures available to their investors. Additionally, issuers using the second exemption would be required to provide financial statements and would be subject to ongoing reporting requirements, like requirements of other securities products.
The proposed rules would also include a conditional safe harbor from the term “investment contract” within the definitions of a “security” as defined in the ’33 Act and the Exchange Act. If the conditions of this safe harbor are satisfied, then a crypto asset would be deemed to not be an investment contract and therefore not defined as a security. Additionally, the proposed rule would preempt state securities law registration and qualification requirements with respect to offers and sales and certain secondary markets.
Proposed Rule - Regulation Crypto Assets
Fact Sheet - Regulation Crypto Assets
SEC Proposes to Modernize Rules for Registered Transfer Agents
On September 1, 2026, the SEC proposed update to the rules and forms that apply to registered transfer agents. Transfer agents are a key component of the national clearance and settlement system. Transfer agents now perform a more diverse array of functions and services that may not be adequately addressed by the Commission’s transfer agent rules, which have not been substantively updated since the first rules were adopted in the late 1970s and early 1980s. The rule proposal would modernize the federal transfer agent rules, while continuing to facilitate the safe and efficient functioning of the US securities markets and the national clearance and settlement system.
“This proposal would streamline and modernize the Commission’s rules to reflect transfer agents’ current processes and operations, including the use of electronic communications and blockchain technology in connection with securities offerings and the transfer of shares,” said SEC Chairman Paul S. Atkins.
“As technology changes and the competitive marketplace evolves, good government requires revisiting legacy rules and regulations,” said Jamie Selway, Director of the SEC’s Division of Trading and Markets. “This proposal is another important step in Chairman Atkins' efforts to advance our regulatory framework for the modern era."
The proposed rule updates reflect the technological environment in which transfer agents operate, including the widespread use of electronic recordkeeping and communications, and the services they provide to issuers, investors, and other market intermediaries. The proposal would amend existing rules and forms, would rescind a rule, and would introduce new rules that apply to registered transfer agents and their activities.
The public comment period will remain open for 60 days after the date of publication in the Federal Register.
IRS Notice 2026-62: Potentially Abusive Investment Fund Strategies
On September 28, 2026, the Treasury Department and the Internal Revenue Service (“IRS”) issued Revenue Ruling 2026-20, accompanied by Notice 2026-62, signaling increased scrutiny of certain exchange-traded fund (“ETF”) and investment fund tax strategies that the agencies believe produce results inconsistent with the intent of the Internal Revenue Code of 1986, as amended (the “Code”). The guidance focuses on transactions that rely on atypical uses of Section 852(b)(6) of the Code, the provision that generally allows ETFs to distribute appreciated securities in redemption transactions without recognizing gain. Importantly, the IRS emphasized that ordinary ETF creation and redemption activity is not being challenged; rather, the focus is on strategies designed primarily to avoid income recognition, alter tax character, or circumvent statutory limitations. The agencies have also indicated that future guidance could apply retroactively and that some transactions could ultimately be designated as transactions of interest or listed transactions.
For registered mutual funds and ETFs, the most significant concerns involve three targeted strategies. First, the IRS is challenging certain "box spread" ETFs that seek to transform interest-like returns into deferred capital gains through redemption transactions. Second, the notice targets "record date" strategies used by some ETF-of-ETF structures to avoid recognizing dividend income by distributing shares of acquired ETFs immediately before dividend record dates while maintaining substantially the same market exposure. Third, and potentially most significant, the IRS has identified arrangements in which commodity, digital asset, or other alternative-strategy ETFs use in-kind redemptions to avoid recognizing gains that could constitute non-qualifying income for purposes of the regulated investment company (“RIC”) 90% gross income test. The IRS has indicated that these transactions may undermine fundamental RIC qualification requirements.
Investment advisors, CCOs, and directors should consider whether any funds under their oversight employ box spread strategies, same-index ETF-of-ETF structures, commodity or digital asset exposure, or other arrangements that rely heavily on Section 852(b)(6) redemptions. Boards should expect discussions regarding potential tax, compliance, disclosure, and RIC qualification implications, while advisors and compliance personnel should coordinate with tax counsel, auditors, and fund service providers to assess current and historical exposure. Funds utilizing potentially affected strategies should also evaluate whether updates to prospectus disclosures, tax risk factors, compliance monitoring, and board reporting are warranted. Written comments on Notice 2026-62 were due by October 28, 2026, and additional regulatory guidance is expected.
SEC Proposes Amendments to Expand Responsible Retailization of Private Markets
On September 30, 2026, the SEC issued two proposing releases designed to expand retail investor choice and facilitate capital formation in the public and private markets by promoting innovation in regulated fund structures.
I. Investment Advisor Performance-Based Compensation Modernization
This proposal would amend the qualified client definition in Rule 205-3 under the Adviser Act to expand the ability of an investment advisor to regulated funds1 to enter investment advisory contracts with performance-based compensation arrangements, provided the following conditions are satisfied:
The performance-based compensation on capital gains or capital appreciation would not exceed 20% of the regulated fund’s net capital gains or net capital appreciation over a specified period;
The regulated fund satisfies Rule 0-1(a)(7) under the ’40 Act which includes much of a regulated fund’s board made up of independent directors (the “Board”), like other certain rules under the ’40 Act; and
The Board would determine as part of its initial and annual review and approval as required under Section 15(c) of the ’40 Act that the performance-based compensation arrangement is in the best interest of the fund and its shareholders, and make specific written findings regarding the arrangement’s appropriateness, structure (including the measurement period over which performance is accessed), and investor protection features
An alternative shareholder-eligibility path would remain available where every equity owner is a qualified client.
The proposal would require the fund’s prospectus (Forms N-1A and N-2, as appropriate) be revised to include details regarding the separate performance fee within its fee table and a graphical illustration showing fee calculations across hypothetical performance scenarios. A management discussion narrative would address the fee rate, calculation basis, measurement period, deductions, and protective features. The proposal also would broaden qualified-client eligibility to include accredited investors and remove the separate net worth and assets-under-management tests. Proposed Form N-CSR disclosure would describe the Board’s evaluation of the performance-fee arrangement and mirror the required written findings for arrangements relying on the proposed fund-level conditions. The proposal contemplates a 12-month compliance period for the form amendments, but a fund first relying on the new provision would need to satisfy the applicable disclosure amendments at first reliance.
II. Interval Fund Modernization and Multiple Share Class Expansion to Closed-End Funds
This proposal would permit newly organized interval funds up to two years before the first repurchase offer, regardless of the length of a fund’s periodic interval. This would allow the fund to more effectively develop a long-term investment portfolio.
The proposal would allow interval funds the ability for the fund’s fundamental periodic repurchase offers monthly. Certain aspects of these proposed amendments differ from the terms and conditions provided in the exemptive relief. Rule 23c-3 under the ’40 Act would be revised for the timing requirements of monthly repurchases. The proposed amendments would allow funds to make discretionary repurchases yearly rather than every two years as is currently permitted. An existing interval fund would be required to obtain majority shareholder approval because this would be an update to the fund’s fundamental policy.
The proposal would remove the requirement that a fund hold at least 100% of the repurchase offer amount in sufficiently liquid assets and replacing it with a more principles-based liquidity management provision through a possible combination of liquidity sources, including investor inflows, portfolio cash flows from maturing loans and scheduled amortization, or targeted asset dispositions, backed up with a strategically paired bank facility if needed to bridge any remaining cash flow gaps.
The proposed amendments would permit interval funds to deduct deferred sales loads from repurchase proceeds, provided the deferred sales load is effected in compliance with the provisions of Rule 6c-10, Rule 11a-3, and, to the extent the deferred sales load is waived, varied, or eliminated, Rule 22d-1 under the ’40 Act.
The proposal would replace individual exemptive orders with a rules-based framework for regulated closed-end funds to issue multiple share classes.
Proposed Rule: Investment Advisor Performance-Based Compensation Modernization
SEC Proposes Crypto Asset Custody Rules for Advisors and Funds
On October 1, 2026, the SEC proposed new rules and amendments to address how regulated investment companies may custody crypto securities and similar investments and registered investment advisors may custody client crypto funds and securities, and amendments to the related reporting and recordkeeping requirements. The SEC also proposed to amend the current custody rules to modernize their requirements, to better address current industry practices and feedback, and to implement certain conforming amendments. Additionally, the SEC also proposed redesignating the custody rule under the Advisers Act.
Proposed Rule: Advisor and Regulated Fund Custody Rules; Crypto Custody Rules
SEC Proposes Expanding Securities Eligible for Cross Trading by Registered Funds
On October 9, 2026, the SEC proposed amendments to Rule 17a-7 under the ’40 Act, the “cross-trading rule,” which permits transactions in securities between a registered fund and its affiliates under certain conditions. The proposed amendments would modernize and expand the cross-trading rule and would allow cross trades that are beneficial to registered funds and their shareholders (by, for example, reducing a fund’s trading costs), subject to enhanced investor protection measures.
“Today, the Commission took another step toward modernizing our regulatory frameworks to meet the realities of today’s markets by proposing amendments to Rule 17a-7 under the ’40 Act, which permits trades in securities between registered funds and certain affiliates. When executed appropriately, cross trades allow registered funds to avoid costs associated with open market trades and to then pass those savings on to investors. The amendments we are proposing today would modernize and expand the cross-trading rule, helping to deliver additional cost savings to those investors,” said SEC Chairman Paul S. Atkins in a statement.
Following the initial adoption of Rule 17a-7 in 1966, registered funds relied on the cross-trading rule to trade both equity and fixed-income securities. However, adoption of the ’40 Act’s “fund valuation rule” in 2020 effectively restricted cross trading most fixed-income securities, although at the time the Commission recognized that potential revisions to the cross-trading rule were under consideration.
The proposed amendments would restore the ability to cross trade most fixed-income securities and modernize the rule’s conditions, including those related to pricing and oversight of cross trades. These modernizations would, among other things, recognize market developments that have led to pricing that is more verifiable and transparent. The proposal would also require aggregated reporting of trading activity and cross trades by registered funds that engage in cross trading to provide additional transparency.
The proposal will be published on SEC.gov and in the Federal Register. The comment period will remain open for 60 days after publication in the Federal Register.
Proposed Rule: Investment Company Cross Trading
SEC Final Rules
SEC Adopts Technical Amendments to Fund Governance Requirements
On August 4, 2026, the SEC adopted technical amendments to a rule under the ’40 Act related to registered investment company and business development company (collectively “regulated funds”) governance standards to reflect a Federal court’s vacatur of certain amendments to those standards that the Commission adopted on July 27, 2004. Rule 0-1(a)(7) under the ’40 Act (the “Rule”) establishes governance standards for regulated funds that rely on certain exemptive rules. As originally adopted in 2001, the Rule required fund boards to have many disinterested directors. In 2004, the SEC amended the Rule to add several requirements, including that at least 75% of a fund’s directors and the board chair be disinterested. In 2006, a federal court vacated the 75% and board-chair requirements but did not address the Rule’s other provisions. The SEC’s technical amendments codify the court’s vacatur in the Code of Federal Regulations by removing those two requirements. All other provisions of the Rule remain unchanged.
Final Rule: Investment Company Governance Technical Amendments
Guidance for Registered Funds and Advisors on Self Custody Issues (No-Action Relief)
On August 24, 2026, the SEC granted an advisor no-action relief allowing its registered funds to hold shares of its blockchain-based OnChain US Government Money Fund (“BENJI”) without complying with certain physical custody rules under the ’40 Act.
Overview of the Relief
The advisor received a no-action letter from the SEC’s Division of Investment Management, permitting its mutual funds and ETFs to invest in the BENJI fund, a tokenized money market fund, using a blockchain-integrated custody system. This relief exempts the funds from specific provisions of Rule 17f-2 under the ’40 Act, which normally require physical vault custody and certificate notation for securities. The decision enables operational benefits such as hourly net asset value calculations, intraday trading, faster settlement, and reduced costs.
Fund and Custody Structure
BENJI operates across Stellar, Ethereum, and Solana blockchains while maintaining a stable $1 share price. The fund’s registered transfer agent, and affiliate of the funds, serves as custodian. The transfer agent maintains the master securityholder file using a proprietary system that integrates blockchain transaction data with internal book-entry records.
The custody system includes:
Segregated blockchain wallets for each investing fund.
Multi-signature and multi-party computation security.
Geographically distributed signers and offline recovery capabilities.
Administrative authority to correct errors, freeze or migrate wallet records, and restore official ownership.
Conditions and Safeguards
The SEC’s no-action position is conditional on ongoing safeguards:
Annual approval and review by each fund’s board of directors.
Independent auditors performing at least three verifications per year.
Daily reconciliation of transactions against fund authorizations.
Transaction confirmations routed to personnel separate from those initiating instructions.
Regulatory Context
The relief is analogous to a 1992 SEC no-action letter that allowed affiliated master-feeder fund custody through book-entry records rather than physical certificates. The SEC determined that the advisor’s proposed blockchain custody arrangement is sufficiently similar to the prior book-entry model, justifying the exemption from physical custody requirements.
Implications
This no-action relief paves the way for institutional adoption of tokenized funds within traditional finance, allowing registered funds to hold blockchain-based assets while maintaining compliance with SEC oversight. It demonstrates a regulatory precedent for blended on-chain and off-chain custody solutions and may influence future SEC considerations for tokenized investment products.
SEC Staff Greenlights Directed Voting Programs for Funds
On September 29, 2026, the SEC’s Division of Investment Management issued a no-action letter permitting registered funds and business development companies to implement a voluntary “Directed Voting Program,” subject to specific conditions. The program would allow retail shareholders to give a revocable standing instruction to vote in favor of recommendations approved by the fund’s board and unanimously supported by its independent directors. The relief covers specified proxy rules under the Exchange Act and extends the SEC Staff’s earlier no-action positions regarding similar retail voting programs to the fund context.
The program is subject to significant governance and investor-protection safeguards. The program must be offered to all retail shareholders at no cost, approved by the full board and unanimously by the independent directors, and reviewed and reapproved at least every three years. Shareholders must continue receiving proxy materials and may override their standing instruction for any meeting or cancel it prospectively. Standing instructions would not apply to contested director elections or changes to the primary investment advisory agreement, and shareholders could separately exclude certain fund mergers and increases in Rule 12b-1 fees. Funds must provide prominent disclosures, make required SEC filings, and issue annual and event-specific reminders.
For fund leadership, the no-action position creates a potential path to reduce the cost, delay, and uncertainty of repeated proxy solicitations while leveraging independent-director oversight. However, the letter is narrowly fact-specific and addresses enforcement posture only; it is not a legal conclusion, rule, or Commission endorsement. Any implementation would therefore need to adhere closely to the stated conditions and remain consistent with the ’40 Act, applicable state law, governing documents, exchange requirements, and required shareholder approval standards.
State Compliance Matters
Update Relating to CIPA Website Litigation
On September 30, 2026, California Governor Gavin Newsom signed Senate Bill No. 690 (“SB 690”) into law after the California Legislature unanimously passed it on August 28, 2026. The law responds to a surge of litigation targeting businesses for their use of common website tracking technologies. SB 690 eliminates the private right of action under the pen register and trap-and-trace (“pen/trap”) provision of the California Invasion of Privacy Act (CIPA), California Penal Code Section 638.51, for claims arising from conduct on an internet website, online application, or mobile application. Going forward, only the California Attorney General may enforce these claims. SB 690 takes effect January 1, 2027.
CIPA, originally enacted to address wiretapping and telephone communications, had become one of the most active sources of privacy-related litigation for businesses with public-facing websites. Plaintiffs were 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.
California Invasion of Privacy Act (CIPA)
SEC Administrative or Enforcement Proceedings
SEC Institutes Settled Order as to Investment Advisor and Its Principal for Breach of Fiduciary Duties
On September 18, 2026, the SEC filed settled administrative and cease-and-desist proceedings against a registered investment advisor (“Advisor”), and its principal (“Principal”), for recommending a high-risk liquidation transaction in breach of their fiduciary duties to their clients.
According to the SEC’s order, in 2021 the Principal and the Advisor recommended a transaction to the board of directors of several registered funds (the “funds”) after the board had asked the Advisor to explore liquidation options with the goal of distributing all proceeds to shareholders. The order explains that the recommended transaction, which the board approved, involved the funds exchanging their entire portfolios of illiquid, alternative assets for preferred shares of a former private startup (“new company”) that purported to offer liquidity solutions to holders of alternative assets, selling their preferred shares upon the new company’s contemplated initial public offering, and distributing the cash to the shareholders.
The order finds that the Principal and the Advisor ignored multiple red flags associated with the new company that arose during the due diligence process and that they did not understand the terms of the transaction or that it would not achieve the board’s goals or allow the funds’ shareholders to recoup their investments in the funds. The order further states that the Principal conducted due diligence on the transaction almost entirely on their own and that they ignored advice from the Advisor’s fractional CFO not to follow through with the transaction. According to the order, when the new company eventually went public through a special purpose acquisition company merger in 2023, its shares plummeted in value, resulting in losses of approximately $300 million to the funds. The order finds that the Principal and the Advisor did not have a reasonable basis to conclude that the transaction would be in the funds’ best interest and provide either the liquidity the funds were seeking for shareholders or a path to liquidate and terminate the funds.
The order finds that the Advisor and the Principal willfully violated Section 206(2) of the Advisers Act. Without admitting the order’s findings, the Advisor and the Principal agreed to a cease-and-desist order and censures, and the Principal agreed to pay a civil penalty of $250,000.