USA Trends and Developments Contributed by: Yana M. Mereminsky, Ramya S. Tiller, Erik J. Andrén and Vadim Avdeychik, Debevoise & Plimpton LLP
“retailization” of private funds, it provides fund spon - sors with an additional path to raise capital. In June, the SEC formally withdrew a number of rule proposals – many of which reflected Chair Gensler’s scepticism towards the investment management industry – that affected investment advisers to private funds. These proposals include the following. • Cybersecurity Risk Management – This proposal would have required advisers and funds to adopt and implement cybersecurity programme and inci - dent reporting. • Enhanced Disclosures by Investment Advisers About Environmental, Social, and Governance Investment Practices – This proposal would have required advisers and 1940 Act funds to provide detailed disclosures regarding their ESG practices. • Safeguarding Advisory Client Assets – This pro - posal represented a comprehensive overhaul of the Custody Rule, including eliminating the trading exemption and imposing significant new obliga - tions on advisers and custodians. • Outsourcing by Investment Advisers – This propos - al would have required advisers to perform exten - sive due diligence and monitoring of third-party service providers. • Conflicts of Interest Associated with the Use of Predictive Data Analytics by Broker Dealers and Investment Advisers – This proposal would have required advisers to eliminate conflicts resulting from any manner of technology affecting advisory clients. Registered funds In the 1940 Act fund space, the SEC has unfrozen an effective moratorium on exemptive relief and now per - mits private business development companies (BDCs) to issue securities in multiple share classes, a move that should enable privately offered BDCs to create a greater number of direct distribution channels to a broader set of investors. Furthermore, it is believed the multi-share class relief for private BDCs should enable sponsors to achieve broader distribution with reduced regulatory friction, as it allows them to bypass the overly burdensome Blue Sky registration process that is required for publicly offered non-traded BDCs.
The SEC has also begun to consistently modernise BDC exemptive relief for co-investment transactions to permit BDCs, among other things, to engage in certain transactions without board approval and to engage in transactions in which a related party has a pre-existing interest. And on the interpretative side, the Division of Investment Management announced in May its elimination of a long-standing informal prac - tice of prohibiting 1940 Act closed-end funds from investing more than 15% of their assets in private funds absent the requirement that all investors be “accredited investors”. This represents a significant shift in policy after decades of adherence to an infor - mal, unpublished staff requirement. 401 (k) Market Access Perhaps the most headline-grabbing regulatory theme in summer 2025 was the growing support for expand - ing access to private market investments through US retirement plans, including 401 (k)s. At the time of publication of this guide (11 September 2025), President Trump appears poised to issue an exec - utive order to “investigate and explore avenues for increasing access to asset allocation funds containing investments in alternative assets for applicable retire - ment plans”. Such an order is expected to return to plan fiduciaries – as contemplated by ERISA – plenary authority to decide what investments are to be made available for selection by plan participants, subject to their obligation to follow a prudent process in making that decision and acting in the best interests of plan participants in doing so. Looking Ahead Move into the second half of 2025, private fund spon - sors face a regulatory landscape that appears more stable and constructive. A principles-based approach to innovation, increased openness to retail access, and a focus on practical reforms may all support prod - uct development and capital formation. The authors will continue to monitor these develop - ments closely and work with clients to navigate the evolving landscape – balancing opportunity with thoughtful risk management as the regulatory agenda takes clearer shape under the SEC’s new leadership.
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