On October 15, the Staff of the Securities and Exchange Commission’s Division of Corporation Finance published several new Corporation Finance Interpretations, or CFIs, most of which relate to the use of Form S-8, the short-form registration statement used to register the offer and sale of securities issued pursuant to employee benefit and compensation plans under the Securities Act of 1933.  The Staff also revised several existing CFIs on the same topic.  In particular, new Securities Act Rules CFI 126.47 reflects an interesting interpretive position in terms of the Staff view of offers and sales of compensatory awards with vesting conditions, such as restricted stock awards, and the timing of these. 

CFI ReferenceGuidance
Securities Act Rules CFIs
Rule 457: New Question 240.19An issuer can rely on Securities Act Rule 457(o) to calculate the registration fee for an offering under a defined contribution plan.
Rule 701: New Question 271.28Before becoming an Exchange Act reporting company, an issuer relied on an exemption from Securities Act registration to grant compensatory awards, including restricted stock, stock options and restricted stock units.  Once the issuer becomes an Exchange Act reporting company, it can register the shares to be issued upon vesting of these previously-granted restricted stock awards and the securities underlying the outstanding stock options and restricted stock units on Form S-8.
Rule 701: New Question 271.29An issuer acquires an entity and assumes compensatory awards previously granted by the acquired entity.  The acquiror can rely on Rule 701 with regard to those awards held by persons whose employment or other service relationship with the acquired entity terminated prior to the acquisition as long as (i) the compensatory awards are assumed by the acquiror in the transaction and (ii) the acquiror is eligible to use Rule 701.
Securities Act Forms CFIs
Form S-8: Revised Question 126.14Company A acquires Company B and assumes outstanding Company B compensatory awards held by current and former employees of Company B.  Company A can use Form S-8 to register Company A shares associated with the compensatory awards held by former employees of Company B that are assumed by Company A. This is a reversal of previous Staff guidance, which held that where Company A assumes outstanding Company B options held by former employees of Company B, and these options become exercisable for Company A shares, such Company A shares could not be registered on Form S-8 (see General Instruction A.1(a)(3) to Form S-8).
Form S-8: Revised Question 126.19A company’s 401(k) plan provides for an automatic company contribution, employee contributions, and a company “matching” contribution, each up to a certain threshold.  The investment options for the 401(k) plan include the employer’s securities such that Securities Act registration is required. The company would not have to pay a fee for the automatic contribution since it is made without regard to employee contributions, but would have to pay a fee with respect to the employee contributions and the matching contributions to the extent these are invested in employer’s securities.  Registration is required for an indeterminate amount of plan interests that are securities of the plan; however, no separate fee is required with respect to plan interests (Rule 416(c) and Rule 457(h)(2)).
Form S-8: New Question 126.46An issuer registered on Form S-8 the offer and sale of securities underlying compensatory awards with vesting conditions, such as RSUs, and paid the filing fees.  The RSUs never vested and were forfeited, and the underlying securities became available for reissuance.  The issuer can apply the filing fees associated with the securities underlying the forfeited RSUs to future registrations of offers and sales of securities underlying RSUs, including those that became available for reissuance under the plan, on Form S-8.
Form S-8: New Question 126.47An Exchange Act reporting company granted awards of restricted stock and RSUs that vest based on specified conditions at a subsequent date; such awards settle in shares of the company’s common stock.  The company can register the offer and sale of the common stock issued upon settlement on Form S-8 by the date of vesting instead of the grant date as long as the company was also eligible to use Form S-8 on the grant date.
Exchange Act Rules CFIs
Form 4: New Question 135.05Form 4 must be filed by the end of the second business day following the date of the transaction being reported, calculated beginning with the date in the time zone where the transaction was executed.   For example, a transaction is completed on foreign exchange on August 25, 2026 at 9 a.m. local time (when it is August 24, 2026 in U.S. Eastern time), so the Form 4 must be filed by 10 p.m. U.S. Eastern time on August 27, 2026.

The new CFIs can be found here.

Webinar | October 26, 2026
11:00 a.m. – 11:30 a.m. EDT | 3:00 p.m. – 3:30 p.m. GMT | 4:00 p.m. – 4:30 p.m. CET
Register here.

The US regulatory landscape for structured products continues to evolve, bringing new opportunities, considerations, and challenges for market participants. Join SRP and Mayer Brown for a discussion on the SEC Staff’s expanded abbreviated disclosure framework for equity-linked structured notes, its practical implications for issuers, and its potential impact on the broader structured products market.

Speakers will cover:

  • What the expanded abbreviated disclosure framework for equity-linked structured notes changes mean for issuers
  • Eligibility, scope and key considerations for reliance on the abbreviated disclosure approach
  • Misconceptions relating to the no-action letter
  • Potential impact on market for registered and exempt products
  • US regulatory outlook for structured products, including 871(m), action on certain ETFs, and other developments issuers should monitor

On October 9, 2026, the Commodity Futures Trading Commission (“CFTC”) took two coordinated actions addressing the scope of its jurisdiction over event contracts.  First, it issued an interim final rule (the “Interim Final Rule”) codifying its longstanding position that gambling products, including wagers placed on sportsbook and casino games, are excluded from the “swap” definition.  Second, it published a notice of proposed rulemaking (the “NPR”) that would further define “swap” to expressly include event contracts, including those based on sports-, politics-, cultural-, and weather-related events.

The Interim Final Rule adds a new paragraph (7) titled “Casino-style gambling products” to the “swap” definition in Section 1.3 of the Commodity Exchange Act (the “CEA”).  The exclusion has two components:

  • Provider Test.  The product must be offered by a person licensed or otherwise authorized to offer gambling or gaming products, or to accept wagers, under state law or tribal law, acting within the scope of that license, and the product must be regulated as gaming or gambling under applicable state or tribal law.
  • Product Test.  The product must not be traded on a board of trade, an organized exchange, a swap execution facility, or any other market in which trades are executed multilaterally or subject to individual negotiation.

The Interim Final Rule expressly identifies sports wagers, casino games, and other licensed games of chance (such as bingo, pool wagering, lotteries, and raffles) as excluded.  In distinguishing these products from event contracts, the CFTC emphasizes that gambling products are unilateral, priced by “the house,” not cleared, and historically subject to state regulation, whereas event contracts trade at market-set prices on a central orderbook and are centrally cleared.  The CFTC also notes that the exclusion is non-exclusive and that a product failing the tests is not necessarily a swap.

The NPR would add a new paragraph (2)(i)(G) to the “swap” definition in Section 1.3 of the CEA covering “[e]vent contracts, including those based on sports-, politics-, cultural, and weather-related events.”  The CFTC grounds the NPR in several independent bases.  It views event contracts as “commonly known to the trade as a swap,” pointing to the thousands of event contracts that DCMs have self-certified to the Commission.  It also views these as satisfying the prong covering events or contingencies “associated with a potential financial, economic, or commercial consequence,” stressing that the word “potential” is broad, and notes that many event contracts are structured as binary options on excluded commodities.  Separately, the CFTC asserts that its express statutory authority to “further define” the term “swap” supplies an independent legal basis for this determination.  The NPR would not reach casino-style gambling products, and the CFTC notes that it retains authority under Section 5c(c)(5)(C) of the CEA, which authorizes the CFTC to prohibit event contracts involving “gaming” that are “contrary to the public interest.”

Taken together, the Interim Final Rule and the NPR represent a coordinated effort to distinguish state-regulated gambling from federally regulated event contracts and to remove the argument that treating event contracts as swaps would federalize every sportsbook wager.  The releases are the latest in a series of CFTC actions affecting the prediction markets, including the June 2026 proposed rulemaking discussed in our prior post.  Read the CFTC’s press releases for the Interim Final Rule here and the Proposal here.

Effective on October 2, 2026, the Securities and Exchange Commission (the “Commission”) modified its quorum requirement, as set forth in SEC Organizational Rule 41 (“Rule 41”).  The rule remains unchanged in that it continues to provide that three commissioners constitute a quorum for the Commission, and if the number of commissioners in office is two or one, that number is sufficient for a quorum.  However, under the new modifications, if the number of commissioners in office minus the number disqualified from consideration with respect to a matter is two or one, then that number of commissioners constitutes a quorum for purposes of that matter.  In other words, if there are two commissioners in office, which is currently the case, and one commissioner is disqualified from acting on a matter, the remaining commissioner can take action unilaterally.  The changes were made without a notice and comment period under the Administrative Procedure Act because they “relate solely to agency management and organization and do not constitute a substantive rule.”

Section 4 of the Securities Exchange Act of 1934, as amended, established the Commission as a bipartisan body “composed of five commissioners to be appointed by the President by and with the advice and consent of the Senate.”  Further, “in making appointments members of different political parties shall be appointed alternately as nearly as may be practicable.”  Today’s Commission, however, looks different than that imagined by the drafters of the Exchange Act:  following the departures of Democratic commissioners Jamie Lizarraga in January 2025 and Caroline Crenshaw in January 2026, the Trump administration did not fill either spot.  The Commission was then comprised of three Republican members:  Chairman Paul Atkins, Commissioner Mark Uyeda and former Commissioner Hester Peirce.  Effective October 2, Commissioner Peirce left the Commission—leaving two commissioners and leading to the need to modify the Commission’s quorum provisions.

Interestingly, when the Commission first adopted Rule 41 in 1995 in order to formally establish its historical practice that three members constitutes a quorum, it did not deem it “necessary at that time to provide that one Commissioner may constitute a quorum when disqualifications resulted in only one Commissioner being available to deal with a particular matter.”  While our current situation might have seemed unlikely at that time, circumstances have changed, and the Commission must still be empowered to act.  Although the modification of the quorum requirement was necessary, a full slate of bipartisan commissioners has value—it encourages debate, makes sure that voices from both sides of the aisle are heard, and ultimately engages in rulemaking that reflects a variety of experiences and perspectives. 

Read the Release here.

On September 30, 2026, the Securities and Exchange Commission (the “SEC”) issued two proposing releases containing amendments that would materially affect how business development companies (“BDCs”) that have elected to be regulated under the Investment Company Act of 1940, interval funds and other registered funds are structured, as well as their compensation and distribution models.

The proposals would modernize the interval fund framework, permit certain registered closed-end funds (“CEFs”) and BDCs to offer multiple share classes without individual exemptive relief and amend Rule 205-3 under the Investment Advisers Act of 1940 to expand the circumstances in which SEC-registered investment advisers may receive performance-based compensation, both from regulated funds (through a new “fund board channel”) and from accredited investors and funds whose investors are all accredited investors (through a new “accredited investor channel”).

Taken together, the proposals would facilitate retail access to private markets by providing greater flexibility for funds and their investment advisers. For sponsors of BDCs and other private asset CEFs, the proposals will have significant practical implications for portfolio construction, liquidity management and adviser compensation. The proposals also would narrow the commercial gap between interval funds and tender offer funds, and may be of interest to lenders and other counterparties to regulated funds.

We discuss the most significant proposed changes in this Legal Update.

Given the continued and growing interest in special purpose vehicles (“SPVs”) as a means of accessing private market investments, we are publishing a series of posts that examine different aspects of these structures.  This is our third post in the series, exploring structuring and regulatory issues that arise when SPVs are formed to invest in other SPVs.

In our prior posts on single-investment SPVs, we discussed the primary structures SPVs use to accomplish their objective of providing indirect or synthetic exposure to their reference investment. Adding another level of abstraction, some sponsors form SPVs that invest in other SPVs.  In this post, we consider the legal and regulatory issues these double-layer structures present.

Throughout this series, we considered the fictional company TechCo and hypothetical SPV structures that would invest either directly or synthetically in TechCo’s common stock.  Now consider the following scenario:

  • SPV-1, a Delaware limited partnership, holds TechCo common stock it acquired using the proceeds from the offer and sale of SPV-1 limited partnership units to SPV-1’s limited partners.
  • SPV-1 owns 1% of TechCo’s outstanding common stock.
  • SPV-2, also a Delaware limited partnership, purchases limited partnership units of SPV-1 using the proceeds from the offer and sale of SPV-2 limited partnership units to SPV-2’s limited partners.
  • SPV-2 owns 10% of the limited partnership units of SPV-1.
  • TechCo has a valuation of $10 billion.

In this scenario, SPV-1 owns $100 million of TechCo common stock.  SPV-2 does not own any TechCo common stock but does have an indirect interest in $10 million of TechCo common stock, i.e., SPV-2 has an indirect 0.1% interest in TechCo.

Through the Looking Glass

As mentioned in our introductory post, sponsors must consider when to look through entities, how to treat investors that rely on similar exemptions and whether affiliated vehicles should be integrated.  The Section 3(c)(1) exemption under the Investment Company Act generally limits a fund to no more than 100 beneficial owners.  One motivation to form a double-layer structure is to work around that investor cap:  if SPV-1 already has 99 investors, it might have headroom to admit SPV-2 as a limited partner and thereby provide economic access to several additional investors (SPV-2’s LPs) who would not be able to invest directly as SPV-1 LPs.  However, the look-through rules are complex, and a full discussion of them is beyond the scope of this series.  If SPV-1 and SPV-2 both rely on the Section 3(c)(1) exemption and the look-through rules require SPV-1 to “look through” SPV-2 to its beneficial owners, then the LPs in SPV-2 could count against SPV-1’s 100-beneficial owner limit, and SPV-1 risks inadvertently exceeding that limit.  For this reason, it is important for SPV planners and their legal counsel to pay careful attention to the complex and often intricate provisions of the Investment Company Act and related SEC rules governing fund formation.

Continue reading.

On September 17, 2026, the Staff of the Division of Trading and Markets (the “Division”) of the Securities and Exchange Commission (the “SEC”) issued two no-action letters addressing the net capital and customer protection implications of “zero cash balance” brokerage account models.  The letters were issued to eToro USA Securities Inc. (“eToro”), an introducing broker, and Alpaca Securities LLC (“Alpaca”), a carrying/clearing firm.  Each seeks to offer a “zero cash balance” brokerage account in addition to its traditional brokerage account offerings.

How the “zero cash balance” model works

Under the zero cash balance model described in the letters, brokerage customers choose not to deposit and maintain their funds in their brokerage accounts, but instead in external accounts maintained either by a state-licensed money services business registered with the Financial Crimes Enforcement Network (an “MSB”) or by a bank (each, an “External Cash Account”).  When a customer places a securities buy order, the customer instructs the MSB or bank to transfer funds from the customer’s External Cash Account to the customer’s brokerage account at the carrying firm.  When a customer sells securities, the carrying firm, in accordance with the customer’s standing authorization, promptly transfers the cash proceeds from the customer’s brokerage account to the customer’s External Cash Account.  Customers do not directly fund or otherwise maintain funds in their brokerage accounts.

The two letters address different regulatory aspects of this model, reflecting the different roles of the firms:

The eToro Letter – Net Capital Treatment under SEC Rule 15c3-1

eToro operates as an introducing broker-dealer that seeks to introduce zero cash balance brokerage accounts to its carrying broker-dealer on a fully disclosed basis.  The carrying broker-dealer carries all of eToro’s customer brokerage accounts and is responsible for all books and records pertaining to those accounts as is customary of a clearing broker-dealer.  eToro does not receive, directly or indirectly, hold funds or securities for, or owe funds or securities to, customers, does not carry customer accounts, and does not engage in any of the activities described in paragraphs (a)(2)(i) through (v) of SEC Rule 15c3-1.  The Staff stated that it will not recommend enforcement action against eToro under Section 15(c)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”) or Rule 15c3-1(a) thereunder if eToro operates the zero cash balance model while maintaining a minimum net capital of the greater of $5,000 or the amount required under SEC Rule 15c3-1(a)(1), subject to the conditions detailed in the request letter, as outlined below under Common Principles.

Continue reading

Earlier this week, the Securities and Exchange Commission continued to implement its capital-formation agenda by publishing a number of notices aimed at modernizing the definition of “accredited investor,” including introducing the possibility of a long-discussed accredited investor exam.

Continue reading this Legal Update.

On September 30, the Securities and Exchange Commission (the “Commission” or the “SEC”) published a number of notices aimed at modernizing the definition of “accredited investor,” including the possibility of a long-discussed accredited investor exam. 

In their proposals, the Commission cited various potential benefits to issuers of expanding the pool of accredited investors, including “greater capital formation, lower cost of capital, and greater efficiency in raising capital due to an expanded pool of accredited investors (especially for issuers that are small or do not have access to a network of institutional accredited investors or persons with the required net worth or income to qualify as accredited investors).”  For investors, the Commission notes that expanding the definition could enable more individuals to qualify as accredited, thereby allowing them to access a broader range of investment options, “potentially enhancing their ability to diversify and optimize portfolio allocations.”

Securities Act Rule 501(a)(10), adopted in 2020, provides that any natural person holding standing one or more professional certifications or designations or credentials from certain accredited educational institutions, in good standing, qualifies as an accredited investor.  The Commission has the authority to designate which certifications or designations meet this threshold, based on a non-exclusive list in Rule 501(a)(10).  Currently, this includes certain licenses granted by the Financial Industry Regulatory Authority (“FINRA”).   As the proposals point out, the Commission has now had over five years of experience working with Rule 501(a)(10), and “there is no evidence that we are aware of to suggest that the expansion in 2020 of the accredited investor definition to include these types of financially sophisticated investors has created investor protection concerns.”  Therefore, each of the proposed changes would rely on the Commission’s authority under the rule to expand the group of accredited investors.

Potential DesignationDescription
Accredited Investor Exam Administered by FINRAFINRA is developing an accredited investor exam specifically to satisfy the requirements of Rule 501(a)(10) and to assess a candidate’s comprehension and sophistication of securities and investing, including if the candidate has sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of a prospective investment.  Specific topics tested would include definitions and structures of securities, investment risks, disclosures and regulatory requirements, financial statements, conflicts of interest and corporate governance.
FINRA Investment Banking Representative License (Series 79) and Research Analyst License (Series 86 and Series 87), held in good standingHolding a Series 79, 86 and/or 87 license requires passing an exam demonstrating “knowledge and skill” in the functions of an investment banking representative or research analyst, as applicable.  Candidates for such licenses must be sponsored by a FINRA member or other applicable self-regulatory organization member firm. 
U.S. Certified Public Accountant (“CPA”) License, held in good standingCriteria for obtaining a license includes (i) meeting certain educational and experience requirements, which vary by jurisdiction, but generally include supervised employment experience, and (ii) passing the Uniform CPA Examination, which tests accounting skills and knowledge. 
Chartered Financial Analyst (“CFA”) Designation, held in good standingHolders of CFA charters must (i) meet eligibility requirements related to education and work experience, (ii) enroll in the CFA Program, (iii) pass all three levels of the CFA exam, which tests “CFA candidates’ knowledge and skills related to investment analysis, valuation, portfolio construction, and ethical decision-making,” and (iv) join the CFA Institute and annually reaffirm adherence to the CFA Institute Code of Ethics and Standards of Professional Conduct.
Certified Financial Planner (“CFP”) Certification, held in good standingCFPs must (i) satisfy educational and experience requirements and (ii) pass the CFP exam, which tests candidates’ “knowledge and skills in the areas identified by the CFP Board as relevant to the CFP certification,” such as financial planning and risk management. 

SEC Chairman Paul S. Atkins noted his agreement with the sentiment underlying the proposed changes, namely that “accredited investor access to private offerings should not be limited solely to individuals satisfying financial thresholds and that such thresholds are not the sole indicators of a person’s ability to assess the merits and risks of an investment.”  Commissioner Hester Peirce, while overall in favor of the changes, questioned the Commission’s continuing role as “judge” in “evaluating the merits of particular credentials, degrees, or certifications,” and noted that an exam “still embodies a government-as-gatekeeper mentality.”

Find more information about the proposed designations here.  Read Chairman Atkins’ statement here and Commissioner Peirce’s statement here.  Comments can be submitted based on the instructions in each notice, and are due 60 days after the date of publication in the Federal Register.

On September 30, 2026, the Securities and Exchange Commission (the “SEC”) proposed amendments intended to provide additional flexibility for regulated funds and their investment advisers.  The proposals address performance-based compensation, interval fund repurchase requirements and multiple share classes for registered closed-end funds and business development companies (“BDCs”).  The SEC also separately requested comment on potential changes to the accredited investor definition.

The proposed amendments would provide greater flexibility for performance-based compensation arrangements between investment advisers and certain regulated funds.  Under the proposed changes, advisers would have greater flexibility to structure compensation based on capital gains or capital appreciation, subject to applicable conditions.  The SEC is also proposing related disclosure requirements intended to provide greater transparency regarding these arrangements.  The SEC stated that the proposed changes are intended, among other things, to facilitate access to private market investment strategies through regulated fund structures.

The SEC also proposed amendments to Rule 23c-3 under the Investment Company Act of 1940 to provide interval funds with additional flexibility in structuring repurchase offers.  Among other changes, the proposal would permit an interval fund to defer its initial repurchase offer for up to two years and would add monthly repurchase intervals to the existing three-, six-, and twelve-month options.  The SEC also proposes replacing the current prescriptive liquidity requirement during repurchase periods with a principles-based requirement focused on a fund’s ability to satisfy repurchase requests without selling portfolio investments at prices that deviate significantly from their value.

In addition, the SEC proposed permitting registered closed-end funds, including BDCs, to offer multiple classes of common stock without obtaining individual exemptive relief, subject to compliance with specified conditions.  The proposed framework would address matters including the allocation of expenses and distributions among classes, as well as certain voting and repurchase-related issues.  Related amendments to Forms N-2 and N-CEN would provide for additional disclosure concerning multiple share classes and expenses.

Separately, the SEC requested comment on potential changes to the accredited investor definition, which we will address in a separate post.  Taken together, the proposals would provide additional flexibility for regulated funds and their advisers while retaining specified conditions and disclosure requirements.

The SEC is seeking public comment, with the applicable comment periods generally running for 60 days following publication of the proposals in the Federal Register.

We will provide a more detailed analysis of the proposals and their potential implications for investment advisers, interval funds, BDCs and other registered closed-end funds in an upcoming client alert.  A link to the SEC’s proposed amendments can be found here.