IMpact: Investment Management News

Welcome to IMpact: Investment Management News. In this regular bulletin, DLA Piper lawyers share their insights on key developments that are impacting the investment management industry.

1. Upcoming compliance requirements for investment advisers

Pursuant to rules issued in 2024 and expected to take effect January 1, 2026, registered investment advisers and exempt reporting advisers will be required to implement anti-money laundering and countering the financing of terrorism (AML/CFT) programs. These rules also impose associated reporting and recordkeeping requirements.

To ensure compliance, advisers are encouraged to begin preparing now by evaluating their current policies and procedures for alignment with the new regulatory framework. This includes ensuring their employees are appropriately trained to administer AML/CFT policies. Notably, advisers will remain liable for outsourced AML/CFT functions. As such, businesses should consider reviewing the AML/CFT policies of their service providers.

The Securities and Exchange Commission (SEC) has already initiated enforcement actions against investment advisory firms for misleading disclosures related to their voluntary AML programs. Given the national security implications and the SEC’s recent focus in this area, advisers may anticipate heightened enforcement efforts. Willful violations may result in civil penalties, as well as referral to the Department of Justice for criminal prosecution.

For more information, see our recent client alerts:

• National security risks headline new AML requirements for investment advisers – and more to come?
• SEC actions signal warning to investment advisers over-promising on AML

2. Increased interest in co-investments

Investment advisers across asset classes are experiencing growing demand for co-investment opportunities. Co-investment capital enables advisers to pursue attractive, big-ticket assets while maintaining compliance with diversification requirements and other portfolio construction considerations. To incentivize participation, advisers frequently charge reduced management fees and/or carried interest on these investments.

Institutional investors are increasingly seeking side letter assurance that provides priority access to co-investment opportunities, potentially including pre-negotiated economics, as a means of reducing their blended fee load with an investment adviser. While many advisers have historically been reluctant to make firm commitments regarding co-investment opportunities, some have implemented programmatic strategies to attract investors seeking exposure.

3. Recent SEC guidance may increase use of Rule 506(c)

Many investment advisers have been reluctant to utilize Rule 506(c) of Regulation D – which permits general solicitation – due to the requirement that the issuer take reasonable steps to verify that all purchasers are accredited investors. However, the recent SEC No-Action Letter guidance allowing the use of minimum investment amounts as verification standards for certain categories of investors may encourage fund managers to reconsider.

This development could provide more flexibility for advisers to engage in activities that may have been considered general solicitation, such as using social media or participating in industry conference panels. Provided that issuers comply with the new guidance when admitting investors, these activities may be more freely conducted.

As noted in our September 2024 bulletin, alternative investment managers have increasingly sought to access the retail investor market. The evolution of Rule 506(c) could reinforce those efforts by potentially opening avenues to more direct investor engagement – potentially reducing reliance on intermediaries, such as wealth management firms.

4. Elimination of Private Fund Requirements

On May 19, 2025, SEC Chairman Paul Atkins delivered remarks at the Practicing Law Institute’s “SEC Speaks” event, signaling a potential shift in the Commission’s approach to retail investor access to private funds.

Chairman Atkins highlighted a need for the SEC to adopt a more flexible approach, referencing existing staff guidance that requires closed-end funds with 15 percent or more of their assets in private funds to impose a $25,000 minimum investment, and to limit sales to accredited investors (together, the Private Fund Requirements). Chairman Atkins stated his intent to have the SEC revisit this practice to expand retail investor access, stating that the SEC “must consider and resolve important disclosure issues for these products, particularly for those that trade on exchanges, including conflicts of interest, illiquidity, and fees.” Notably, the Private Fund Requirements were not mandated by statute or formal SEC rulemaking.

Chairman Atkins acknowledged that much has changed since the guidance was introduced 23 years ago, “including the growth of private markets and the increased oversight and enhanced reporting by both private fund advisers and registered funds.” In recent years, the SEC staff have not imposed the guidance to closed-end funds pursuing certain real estate and infrastructure strategies.

Eliminating the Private Fund Requirements could broaden access to previously exclusive investment opportunities. As individuals take on more responsibility for retirement planning, this change would expand options for smaller investors while maintaining the investor protections provided under the Investment Company Act for registered and closed-end funds.