On August 15, 2025, the SEC’s Division of Investment Management issued Accounting and Disclosure Information (ADI) 2025-16, announcing a major policy shift for registered closed-end funds investing in private funds (CE-FOPFs).
Overview of New SEC Guidance ADI 2025-16
Under the new guidance, SEC staff will no longer request that CE-FOPFs:
- Limit private fund investments to 15% of assets, or
- Restrict offerings to accredited investors with $25,000 minimum investments.
This marks the end of a 23-year informal practice that limited retail investor access to private fund strategies.
At the May 2025 SEC Speaks Conference, Chairman Paul Atkins emphasized that the private markets have grown substantially, tripling in size over the past decade, and that regulatory oversight has expanded significantly since the original 15% policy was adopted nearly two decades ago. He framed the change as a balanced approach to financial innovation while maintaining investor protections.
Former Division Director Natasha Greiner confirmed that the SEC will:
- Collaborate with filers as new products emerge,
- Continue to scrutinize disclosures on fees, liquidity, and conflicts of interest, and
- Encourage early engagement with SEC staff on product design and filings
Key Takeaways for Fund Managers
- Review ADI 2025-16
- Ensure registration statements meet Form N-2 requirements, with clear disclosures.
- Address risks (where material) related to underlying private funds, including fee structures, liquidity restrictions, and tax implications.
- Consider filing amendments under Rule 486(a) or Rule 424, depending on materiality.
Fund managers are encouraged to engage proactively with SEC staff to ensure compliance and transparency as they adapt to this new regulatory guidance.
Author: Sarah McMekin, CPA | [email protected]
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