USA – NEW YORK Trends and Developments Contributed by: Aaron Bourke, Tom Scriven, Bjorn Sorenson and Joshua Teitelbaum, RPCK Rastegar Panchal
At the same time, these structures create opportu - nities for niche and emerging managers to access capital that would otherwise be out of reach. The rein - vestor SBIC licence offers one pathway for directing capital toward underserved managers, but the logic is broader: blended features allow funds of all sizes and strategies to mobilise a deeper pool of capital, expand investor diversity, and achieve alignment among stakeholders who would not ordinarily partici - pate in the same vehicle. Regulatory Reset: Innovation Under Constraint The regulatory environment in 2024–25 created both relief and new complexities. • Private Fund Adviser Rules: In June 2024, the Fifth Circuit vacated the SEC’s Private Fund Adviser Rules. While this removed a set of obligations around audits, disclosures, and consents, the SEC has indicated that it will continue pursuing many of the same policy objectives through examinations and enforcement. • Chevron Deference Overturned: The Supreme Court’s Loper Bright decision requires courts to interpret ambiguous statutes without deferring to agency interpretations, limiting regulatory discre - tion but increasing uncertainty. • Corporate Transparency Act: Beneficial ownership information (BOI) reporting requirements came into effect in 2024, but subsequent litigation has created a patchwork of injunctions. An interim rule currently exempts US-formed entities and US per - sons from BOI reporting. Sponsors need to moni - tor the CTA’s status and associated rulemaking to evaluate their BOI reporting requirements. • FinCEN AML Rule: Finalised in 2024 with a 2026 compliance date, the investment adviser Anti-Mon - ey Laundering rule has been delayed until 1 Janu - ary 2028. Managers should continue to monitor the FinCEN AML Rule and begin planning for AML programme design. • Regulation S-P Amendments: Adopted in May 2024, these require advisers to implement written incident-response programmes, data protection protocols, and customer notifications. • DOL QPAM Amendment: The Amendment raises thresholds, introduces mandatory filings, and imposes disqualification triggers.
• New Dealer Rules: The Rules expand the defini - tion of “dealer” under the Exchange Act, potentially capturing certain liquidity-providing hedge fund strategies. The consistent theme is that structural innovation must be grounded in compliance. New fund designs should, in most instances, anticipate AML, BOI, data security, and/or ERISA-related obligations from the outset. Alternatives on the Rise The shifting investor base is also driving structural innovation, as high net worth and mass affluent inves - tors take on a larger presence in the market. Interval, tender, and evergreen funds are being tailored to this audience, often distributed through wealth platforms. This broadens the capital base but creates new chal - lenges. Managers must address liquidity mismatches between assets and redemption terms and ensure valuation and performance reporting are defensible. SBICs as a Case in Point The SBIC programme continues to attract strong inter - est as a fundraising avenue. SBA leverage enhances returns and capacity, and CRA credit creates a com - pelling rationale for financial institution participation. Among the licence types, reinvestor SBICs are nota - ble for directing capital toward underserved manag - ers, who then deploy it into small businesses. This extends the programme’s reach while reinforcing its public-private character. Looking Forward: Design for Alignment Across continuation vehicles, evergreen funds, pri - vate credit annexes, blended tranches, and regulatory compliance programmes, a common theme is align - ment. Structures are being designed to better match investment horizons, liquidity needs, and risk toler - ances across a diverse investor base. What was once considered “alternative” is increas - ingly the market standard. Fund design is now central to strategy, investor relations, and regulatory compli - ance.
341 CHAMBERS.COM
Powered by FlippingBook