USA Trends and Developments Contributed by: Scott Naidech, Basil Godellas, Alan Roth and Jacqueline Hu, Winston & Strawn
Financial institution investment and Community Reinvestment Act One advantage of being an SBIC is the ability to have financial institutions as investors. Generally, financial institutions are precluded from investing in private equity and venture capital funds. Further, an invest - ment by a financial institution in an SBIC (leveraged or unleveraged) whose regional focus includes the financial institution’s Community Reinvestment Act (CRA) assessment area is specifically identified as a type of investment that will be presumed by the regu - latory agencies to promote economic development and meet the standards of a “Qualified Investment” for CRA purposes. Thus, an investment in an SBIC by a regulated financial institution is eligible for full credit under CRA, with full credit being defined as 100% of the dollar amount of the investment in the SBIC. US Regulatory Trends The regulatory landscape for private funds remains complex, but deregulation is the current theme at the U.S. Securities and Exchange Commission (SEC) and various other regulatory authorities. The following are some highlights of court actions, new or proposed rules and regulatory initiatives. Courts Dealer rule vacated In November 2024, the US District Court for the North - ern District of Texas vacated recently adopted rules 3a5‑4 and 3a44‑2 (the “Dealer Rules”). On 6 Febru - ary 2024, the Securities and Exchange Commission (SEC) adopted the Dealer Rules, which expand the definition of a “dealer” and “government securities dealer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In short, the Dealer Rules required market participants that take on signifi - cant liquidity-providing roles to register with the SEC, become members of a self-regulatory organisation, and comply with federal securities laws and regulatory obligations. The SEC initially appealed the decision, but with the change in administration, dropped the appeal in February 2025.
Status of certain new rules Beneficial ownership reporting only required for certain non-US entities Private fund managers formed under the laws of the United States are no longer subject to potential reporting and structural implications that result from the Corporate Transparency Act (CTA), and the regula - tions implementing the beneficial ownership informa - tion (BOI) reporting requirements of the CTA (the “BOI Reporting Rule”). FinCEN published an interim final rule on 26 March 2025, that revised the definition of “reporting company” in its regulations implementing the 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 jurisdiction by the filing of a document with a secretary of state or similar office. Delayed effectiveness of Investment Adviser Anti- Money Laundering Rule On 4 September 2024, FinCEN published a final rule that imposes certain anti-money laundering and com - bating the financing of terrorism programme and other Bank Secrecy Act-related obligations (the “IA AML Rule”) on most private fund managers, including RIAs and “exempt reporting advisers” (“Covered IAs”). The final rule was originally effective from 1 January 2026. On 5 August 2025, FinCEN issued an order providing exemptive relief for Covered IAs from all requirements of the IA AML Rule until 1 January 2028. During the postponement of the IA AML Rule, FinCEN stated that it intends to issue a notice of proposed rulemaking (NPRM) to propose a new effective date for the IA AML Rule no earlier than 1 January 2028. We expect that this NPRM could include substantive changes to the IA AML Rule, considering FinCEN’s earlier announcement that it intends to revisit the substance of the IA AML Rule together with the FinCEN-SEC joint proposed rule establishing customer identifica - tion programme rule requirements for Covered IAs. Certain proposed rules withdrawn Proposed Safeguarding Rule withdrawn On 15 February 2023, the SEC issued a proposed rule to significantly amend Rule 206 (4)-2 of the Advisers Act (the “Custody Rule”). The proposed rule would have replaced the Custody Rule with Rule 223-1 (the “Safeguarding Rule”), and would have greatly expand -
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