SEC Brief: Recap of Autumn’s Busy Start
With the SEC’s rapid-fire first week of fall, it was blink and you miss it. Dechert has you covered. See below for a quick summary of notable actions, with CFTC and Treasury / IRS in the mix too.
Peirce Departs and SEC Prepares to Operate with Two Commissioners
Commissioner Peirce ended her influential term on October 2, and Chairman Atkins warmly thanked her for years of public service. The Commission also amended its quorum rule to ease the challenges of operating with two Commissioners.
Statement on Valuation of Private Assets
Continuing a theme from earlier in the year, the SEC’s Chief Accountant and IM’s Director Daly published guidance on valuation of private assets.
Quick Take: The Statement emphasizes the need for rigorous fair value practices and disclosures. While the Statement is framed around private credit, it can apply to any private asset. Expect this guidance to inform SEC engagement on retailization across Divisions, including Exams.
SEC Proposes to Codify and Modernize Repurchase Offers and Multi-Class Relief
The proposal would allow interval funds to make monthly repurchases and remove the need for closed-end funds and BDCs to obtain orders before issuing multiple share classes. Dechert unpacked the details in last week’s Newsflash.
Quick Take: The rule amendments, if adopted, would spare managers from applying for routine exemptive relief while making a few targeted, but helpful, improvements.
SEC Proposes Performance Fees for Retail Funds
The big theme of the week was responsible retail access to private markets. This proposal was a centerpiece, allowing mutual funds, ETFs and closed-end funds to charge performance fees on realized and unrealized capital gains, subject to conditions. Read more in this Newsflash.
Quick Take: The proposal would expand the options for product design, potentially enhancing choices for retail investors.
SEC Proposes Custody Rules Updates
The proposal has a strong emphasis on custody of crypto assets, including potential self-custody, but is not limited to addressing crypto assets.
Quick Take: The dense proposal means that coordinating comments with operations teams early will be important to identifying where adjustments are needed.
More Investors May Qualify as Accredited Investors
The SEC is proposing to add several credentials as additional ways for an individual to qualify as an “accredited investor” including passing an “accredited investor” exam (to be developed by FINRA), being a CPA, a CFA, or holding Series 79, 86 or 87.
New Exam Manual
At nearly 20 pages, this new handbook grows past the previous 5 page exam brochure and is an effort to be more transparent and provide a clear roadmap for what happens during the exam process.
Quick Take: Setting the right tone, being prepared, and open dialogue should serve as guiding principles during the exam process.
IM No-Action Letter - Directed Voting Programs for Funds
The new letter allows revocable, standing voting instruction from fund shareholders in favor of certain matters recommended by the fund's board of directors and unanimously approved by the fund's independent directors.
Quick Take: While a potentially useful tool for boosting retail participation in fund proxy campaigns, questions remain about whether funds will invest in the infrastructure needed to support such programs, particularly given the decision to carve out votes on primary advisory contracts and contested director elections. More to learn in Dechert’s upcoming OnPoint.
CorpFin No-Action Letter - Equity Linked Structured Notes
While the relief is not from the Division of Investment Management, the updated disclosure requirements may impact funds following disclosure guidance in a CorpFin no-action letter to Morgan Stanley & Co. from 1996.
Quick Take: Check for fund disclosure based on the 1996 Morgan Stanley letter.
Other Happenings
- CFTC. Comments were due October 5th on the CFTC’s proposal to reinstate CTA and CPO registration exemptions. Commenters generally endorsed the CFTC harmonization effort to recognize the SEC as the primary regulator of RIAs operating private funds and offered solutions to take account of market and CFTC/SEC regulatory changes since similar exemptions were rescinded 14 years ago.
- Treasury/IRS. Treasury and IRS issued Revenue Ruling 2026-20 providing guidance on section 351 contributions to ETFs. They also issued Notice 2026-62 to express concern and solicit comments on certain novel investment fund structures involving ETFs. Read more about this guidance here.
- Don’t forget in mid-September, the SEC issued the highly anticipated innovation exemptive relief to facilitate trading of tokenized NMS stock and proposed rescinding Rule 14a-8 (shareholder proposals) leaving the process to state corporate law.
