USA Law and Practice Contributed by: Scott Naidech, Basil Godellas, Olga Loy and Beth Kramer, Winston & Strawn
would be deemed to be engaged in a US trade or business as well, and would have to file US income and possibly state income tax returns and pay US federal and state tax. 2.6 Non-Traditional Assets There are no special limitations regarding the types of assets in which a fund may invest, although special US federal and/or state rules may apply, depending on the nature of the fund’s assets. For example: • Digital asset or cryptocurrency funds are typi - cally structured utilising open-ended hedge fund structures. The SEC has clarified in guidance over the years that it will view these types of assets as “securities” and hence subject to US federal secu - rities laws. • Cannabis funds are typically structured utilising private equity fund structures. However, in deter - mining the fund’s domicile within the USA, fund sponsors should give due consideration to the vari - ous state-by-state differences in US state cannabis regulations, as well as the risks inherent in this strategy given that cannabis remains illegal under US federal law. • Private credit funds that originate loans may be subject to applicable state regulations. See 2.5. Loan Origination . 2.7 Use of Subsidiaries for Investment Purposes Alternative fund structures can be utilised to accom - modate the tax, regulatory and other legal needs of the investment adviser and the fund and its investors. For example, non-US investors who seek to avoid cer - tain US tax filing obligations or other adverse tax con - sequences may invest in a fund via feeder funds that are treated as corporations for US federal income tax purposes or by investing directly or indirectly in par - allel funds or alternative investment funds that utilise blocker corporations. See 2.4 Tax Regime for Funds and 4.8 Tax Regime for Investors . 2.8 Local/Presence Requirements for Funds Generally, US states (including Delaware) do not require managers to have a local presence (or appoint local directors) to form an entity. Delaware, for exam - ple, only requires the entity to maintain a registered
agent and registered office in Delaware (amongst oth - er limited requirements). Depending on the scope of their intra-state activities (eg, opening an office, hiring employees, etc), entities may be required to register to do business in one or more US states. 2.9 Rules Concerning Service Providers Broad Discretion to Appoint Service Providers Under relevant federal law, alternative funds and their managers have discretion to appoint service provid - ers. Custodians – SEC Custody Rule Under the Advisers Act, where a SEC-registered investment adviser (RIA) is deemed to have “custody” of a fund’s assets, the adviser becomes subject to Rule 206 (4)-2 of the Advisers Act, more common - ly known as the custody rule (the “Custody Rule”), which, among other things, requires the RIA to place the fund’s securities with custodians who meet the definition of “qualified custodian” and to deliver audit - ed annual financial statements of the fund to its inves - tors (by delivering audited financial statements, the RIA is relieved of various other requirements of the Custody Rule). 2.10 Anticipated Changes for Funds Many new rules proposed by the SEC and other regu - latory authorities in 2024 have either been rescinded or postponed in 2025. In February 2025, the SEC dropped its appeal of the decision by the US District Court for the Northern Dis - trict of Texas to vacate recently adopted rules 3a5‑4 and 3a44‑2 (the “Dealer Rules”) (which would have required market participants that take on significant liquidity-providing roles to register with the SEC, become members of a self-regulatory organisation, and comply with federal securities laws). On 26 March 2025, the Treasury’s Financial Crimes Enforcement Network (FinCEN) published an interim final rule that revised the definition of “reporting com - pany” in its regulations implementing the Corporate Transparency Act (CTA) to mean only those entities formed under the law of a foreign country that have registered to do business in any US state or tribal
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