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.