Investment Management & Funds Regulatory Update – September 2026

Rules and regulations

SEC and CFTC further extend Form PF compliance date to July 1, 2027

On August 31, 2026, the SEC and CFTC published a joint final rule further extending the compliance date for the February 2024 Form PF amendments from October 1, 2026 to July 1, 2027 (Release No. IA-6992).[1] Form PF is the confidential reporting form for certain SEC-registered investment advisers to private funds, including those also registered with the CFTC as commodity pool operators (CPOs) or commodity trading advisors (CTAs).

The 2024 amendments to Form PF required, among other things, separate reporting for each fund in master-feeder and parallel fund structures, increased the scope and granularity of reporting obligations, and expanded filing thresholds. The amendments were originally scheduled to take effect on March 12, 2025, but the compliance date was previously extended to October 1, 2026, to provide additional time for advisers and the Commissions to prepare for the changes.

The further extension follows the Commissions’ April 2026 proposal of additional amendments to Form PF designed to reduce reporting burdens on advisers. Among other proposed changes, the April 2026 proposal would raise the large private fund adviser filing threshold from $150 million to $1 billion in private fund assets under management, eliminate certain reporting obligations, and streamline existing requirements. In the release accompanying the compliance date extension, Chairman Atkins stated that the Commissions are working to conclude their consideration of final amendments and that a short extension is practical given the “technical nature of the information collection.”

The extension became effective September 3, 2026. As a practical matter, annual filers would not be required to use the amended form until filings covering calendar year 2027, which would be due on April 30, 2028. Quarterly filers would not be required to use the amended form until filings covering the second quarter of 2027, which would be due on August 29, 2027.

SEC proposes rescission of investment adviser pay-to-play rule

On September 3, 2026, the SEC proposed rescinding Rule 206(4)-5 under the Investment Advisers Act (the “pay-to-play” rule) which prohibits, among other things, investment advisers from providing compensated advisory services to a government client for two years after the adviser or its covered associates make a political contribution to an elected official or candidate in a position to influence the selection of advisers by such government client (Release No. IA-6994).[2]  The proposed rescission would eliminate the rule’s two-year compensation ban, the covered associate framework, restrictions on third-party solicitors, and related recordkeeping requirements under Rule 204-2. The SEC stated that the rule’s implementation challenges have resulted in unintended consequences disproportionate to its objectives, and that existing Advisers Act requirements, including fiduciary duties, anti-fraud provisions, the compliance rule (Rule 206(4)-7), and the code of ethics rule (Rule 204A-1), are sufficient to address pay-to-play concerns. 

Chairman Atkins stated that political contributions are “more properly governed by local ordinances, state laws, and federal election regulations—not by the SEC.” Commissioner Uyeda stated that rescission would “remove an unduly complicated compliance obligation while reaffirming our commitment to constitutional protections.”

According to the proposing release, the rescission would not eliminate the obligation of registered investment advisers to maintain compliance policies and procedures addressing pay-to-play risks under Rule 206(4)-7. In the release, the SEC identified several factors it believes advisers should consider when developing tailored programs to address pay-to-play risks, including: 

• Risk identification – assessing the risk of personnel engaging in pay-to-play practices based on governmental relationships, personnel roles, and contribution patterns.
• Pre-clearance – considering whether to require pre-approval of contributions to government officials, scaled to the adviser’s size and risk profile.
• Risk mitigators – designing contribution windows, thresholds, or other controls tailored to the adviser’s risk assessment.
• Third-party solicitors – addressing pay-to-play risks from the use of third-party solicitors, such as requiring CCO approval or limiting solicitors to registered entities. 
• Periodic monitoring and remedial steps – incorporating compliance audits and a framework for addressing policy violations, including seeking return of contributions and disciplinary actions. 

The proposed rescission relates solely to the SEC’s pay-to-play rule for investment advisers, and advisers should remain mindful that local pay-to-play laws, federal anti-bribery statutes, FINRA Rule 2030, and MSRB Rule G-37 would all remain in effect.    Advisers should also review side letters with public pension plans, many of which contain independent pay-to-play undertakings, in connection with any compliance policy changes they may consider should the rescission ultimately take effect.

Comments on the proposal are due 60 days after publication in the Federal Register. Importantly, Rule 206(4)-5 remains in effect unless and until any rescission is finalized, and advisers should continue to comply with the rule’s requirements during the comment period and the 2026 election cycle.

CFTC proposes amendments to CPO and CTA registration requirements

On August 18, 2026, the CFTC published a Notice of Proposed Rulemaking seeking comments on proposed amendments to Part 4 of its regulations regarding commodity pool operator (CPO) and commodity trading advisor (CTA) registration requirements.[3]

The proposed amendments would: (1) add an exemption from CPO registration for certain SEC-registered investment advisers whose commodity pools are limited to sophisticated investors; (2) add a related exemption from CTA registration; and (3) increase the capital contribution threshold for the existing small pool CPO exemption under CFTC Regulation 4.13(a)(1) to reflect inflation since the threshold was last adjusted. The proposed exemption would restore, with certain modifications, the CPO registration exemption formerly set forth in Regulation 4.13(a)(4), which was rescinded in 2012 but substantially reinstated through the issuance of a CFTC staff no-action letter in December 2025 (Letter 25-50).

The proposed CPO registration exemption would be available to SEC-registered investment advisers that operate commodity pools with participation limited to certain “qualified eligible persons” (QEPs) (as defined in CFTC Regulation 4.7(a)(6)) and certain other specified categories of qualified investors, provided that pool interests are exempt from Securities Act registration and are not marketed to the public in the United States.  (The restriction on public marketing would not apply to a pool offered under SEC Rule 506(c), which permits general solicitation provided that all purchasers are accredited investors and the issuer takes reasonable steps to verify accredited investor status.) 

To be eligible for the exemption, all non-natural person participants in the relevant commodity pool would need to be QEPs, as defined under Rule 4.7(a)(6), or “accredited investors” as defined in SEC Rule 501(a)(1)–(3), (a)(7), or (a)(8).  Natural person participants would need to be QEPs as defined in Rule 4.7(a)(6)(i). This is a narrower eligibility standard than provided for under Letter 25-50, which allowed both natural and non-natural person participants in a commodity pool to qualify under any prong of the QEP definition set forth in Rule 4.7(a)(6). 

Because all “qualified purchasers” under the Investment Company Act are automatically QEPs under Rule 4.7(a)(6)(i)(H), the natural person eligibility restriction may have a greater practical impact on funds that are excluded from regulation as investment companies under Section 3(c)(1) of the Investment Company Act than on those relying on Section 3(c)(7), which requires all participants to be qualified purchasers. 

As a condition of the exemption, the CPO would be required to file Form PF with respect to the pool, but only if the CPO is otherwise required to do so under applicable SEC regulations or Form PF itself.  This is a departure from Letter 25-50, which required Form PF filing in all cases. 

The proposal would also require CPOs claiming the new exemption to notify pool participants and offer them a right to redeem their interests, a requirement that was not included in Letter 25-50.  Existing funds operated in reliance on Letter 25-50 would generally be grandfathered from this redemption requirement. The related CTA registration exemption would be available to advisers that provide commodity trading advice solely to pools operated by exempt CPOs under the proposed rule.

CFTC Chairman Selig stated that the proposed amendments continue the agency’s efforts to address “overly burdensome and duplicative rules” and promote U.S. market competitiveness. Comments on the proposal are due October 5, 2026.

Industry update

SEC requests public comment on novel exchange-traded funds

On June 30, 2026, the SEC issued a request for public comment on exchange-traded funds (ETFs) seeking to invest in innovative asset classes or engage in novel investment strategies.[4] The request specifically identified a number of areas of innovation, including crypto assets, commodity-focused instruments, single-stock strategies, heightened leverage, blockchain-enabled opportunities, private assets, and event contracts.

Chairman Atkins stated that the Commission’s request seeks input on how the U.S. ETF market can “continue to grow and innovate while serving investors effectively.” The request posed questions across several areas, including: the circumstances under which novel ETFs should be treated as investment companies under the Investment Company Act; the applicability and potential limitations of Rule 6c-11 under the Investment Company Act; investor understanding and risk tolerance with respect to novel products; the registration and review process for novel ETFs; and competitive pressures facing the U.S. ETF industry.

The comment period closed on August 31, 2026. The request is relevant for fund sponsors and advisers evaluating novel ETF products, as the Commission’s approach to the issues raised may inform the regulatory framework for a range of emerging ETF strategies.

SEC charges 38 entities for false adviser filings to lure retail investors

On August 27, 2026, the SEC charged 38 entities alleging material misrepresentations in Forms ADV filed between 2025 and 2026.[5] According to the SEC, the defendants filed Forms ADV containing false and misleading information to create the appearance that they were legitimate, SEC-registered advisory firms, thereby luring retail investors.

The SEC alleged that a number of the defendants used IP addresses tracked to foreign jurisdictions to file registration documents with the Commission. According to the complaints, the entities listed fake business addresses in Colorado, disconnected phone numbers, identical ownership structures across purported exempt reporting advisers (ERAs), and claims of audits by nonexistent accounting firms. The SEC further alleged that some of the defendants were marketed on websites displaying fake SEC registration certificates.

The SEC brought charges under Sections 204(a) and 207 of the Advisers Act. In connection with the enforcement action, the SEC’s Office of Investor Education and Assistance issued an investor alert warning that scammers are using ERA filings to create a false impression of legitimacy. The ERA filings of the 38 entities have been removed from the Commission’s website. The SEC acknowledged the assistance of the Federal Bureau of Investigation (FBI) and its Operation Level Up in the investigation.

The enforcement action underscores the importance of conducting thorough due diligence on investment advisers, including verifying the accuracy of Form ADV filings and confirming the physical presence and operational legitimacy of advisory firms. The SEC’s investor alert serves as a reminder that filing as an exempt reporting adviser with the SEC and SEC registration do not guarantee the legitimacy or quality of an investment adviser.

Litigation

SEC settles charges against ETF adviser in first Rule 18f-4 enforcement action

On July 27, 2026, the SEC settled an enforcement action against an ETF adviser for multiple violations of the Investment Company Act, in what represents the first enforcement action under Rule 18f-4.[6] Rule 18f-4 was adopted in October 2020 and established a comprehensive framework governing the use of derivatives by registered investment companies, including limitations on fund leverage risk based on value-at-risk (VaR) testing.

The SEC found that the adviser caused an ETF to exceed the applicable VaR-based leverage limits under Rule 18f-4 on multiple occasions and failed to timely notify the fund’s board of directors and the SEC of such breaches, as required under the rule. The SEC also found that the adviser engaged in prohibited affiliated transactions under Section 17 of the Investment Company Act that resulted in tax benefits to an affiliate of the adviser.

In addition, the SEC found that from 2021 through 2024, the adviser caused seven ETFs to fail to provide required notices informing shareholders that distributions included returns of capital. The SEC further found that the adviser lacked compliance policies and procedures reasonably designed to prevent violations of the federal securities laws, in contravention of Rule 38a-1 under the Investment Company Act.

The adviser agreed to a cease-and-desist order and the payment of a $400,000 civil penalty. The enforcement action is significant as it signals increased SEC scrutiny of ETF compliance with Rule 18f-4, leverage risk management practices, shareholder distribution disclosures, and the overall effectiveness of fund compliance programs. Fund advisers should review their Rule 18f-4 compliance programs, including VaR testing procedures, board reporting protocols, and policies governing the timely notification of leverage limit breaches.

SEC charges private fund adviser and CEO with fraud

On August 10, 2026, the SEC charged a private fund adviser, its CEO, and three affiliated general partners with defrauding investors in connection with investments in pre-IPO shares.[7] The complaint was filed in the United States District Court for the Southern District of New York.

According to the complaint, from April 2019 through December 2024, the defendants allegedly engaged in a course of conduct designed to defraud investors and misappropriate fund assets. The SEC alleged that the defendants: (1) used false claims to solicit investors, including falsely claiming that the funds held shares they did not in fact own; (2) took unsecured loans from client funds on favorable terms without authorization or disclosure; (3) purchased pre-IPO shares and resold them to client funds at marked-up prices without obtaining required consent for principal transactions; (4) overcharged millions of dollars in unauthorized “acquisition fees”; and (5) pledged client assets as collateral for a $10 million line of credit for the benefit of the general partners.

The SEC further alleged that the adviser failed to register as an investment adviser, relying on a venture capital fund exemption under Section 203(l) of the Advisers Act that the SEC alleges it did not qualify for, with approximately $465 million of regulatory assets under management. The complaint charges violations of the antifraud provisions of the Securities Act, the Securities Exchange Act, and the Advisers Act, as well as registration violations under the Advisers Act.

The defendants consented to permanent injunctions. Disgorgement, prejudgment interest, and civil penalties are to be determined by the court at a later date. The CEO also agreed to an associational bar with the right to reapply after three years. The case underscores the SEC’s continued focus on private fund advisers’ compliance with the federal securities laws, particularly with respect to fee practices, conflicts of interest, principal transactions, and adviser registration requirements.