Private Fund Insights Blog

The U.S. government’s Outbound Investment Security Program, stemming from Executive Order 14105 issued in August 2023 and finalized in the Treasury’s rules effective Jan. 2, 2025, reflects ever-increasing U.S. governmental concerns at the intersection of global capital flows and national security. The OISP targets U.S. investments in sensitive technologies in “countries of concern,” primarily the People’s Republic of China (including Hong Kong and Macau), but it doesn’t just add another layer of compliance. Instead, it fundamentally alters how general ...

On March 12, 2025, the Securities and Exchange Commission (SEC) issued a No-Action Letter (NAL) that clarified and expanded the definition of “reasonable steps” an issuer must take when making an offering under Rule 506(c). The new guidance increases the ability for small funds to raise capital and solicit investors by decreasing the administrative burdens previously applicable to Rule 506(c) offerings.

Background: SEC Rules 506(b) and 506(c)

Generally, under Section 5 of the Securities Act of 1933, any offers or sales of securities must be registered with the SEC unless an ...

On Sept. 4, 2024, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) published a final rule imposing new anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements on certain registered investment advisers and exempt reporting advisers. The final rule takes effect on Jan. 1, 2026. The requirements of the new rules are risk-based, and will require advisers to buyout, venture capital, real estate and other types of private funds to analyze the risks that their funds may be used in connection with illicit activities.

Under Section 5 of the Securities Act of 1933, all offers and sales of securities, including offers or sales of limited partnership interests or membership interests in a private fund, must be registered with the Securities and Exchange Commission, unless an applicable exemption applies to such an offer or sale. Regulation D, promulgated under the Securities Act, and Section 4(a)(5) of the Securities Act both contain commonly used exemptions that permit issuers to offer and sell securities without having to register the offering with the SEC; however, such offerings are not ...

As in most industries, private fund sponsors are increasingly assessing and beginning to adopt artificial intelligence-powered tools to rapidly analyze large volumes of data, identify trends and patterns and to generally make more informed decisions both in connection with internal operations and management of their funds and for enhancing efficiencies at their portfolio companies. AI technology’s ability to process information from disparate sources, such as financial reports, news articles and social media, and to purportedly predict market movements and inform ...

In March, we discussed how net asset value loans are an effective and versatile tool for private investment fund managers, the use of which has ballooned in recent years. In response, the Institutional Limited Partners Association recently released guidance outlining best practices for both fund managers and LPs in approaching NAV loans. This post highlights key takeaways from ILPA’s guidance for consideration by fund investors and managers.

Potential Risks

While the ILPA guidance highlights a variety of beneficial use cases for NAV loans, it also warns they can create ...

In June, California approved amendments to its October 2023 law, Fair Investment Practices by Venture Capital Companies (California VC Diversity Law). The California VC Diversity Law requires covered venture capital investment vehicles to report aggregated demographic information about the founding members of their portfolio companies.

Covered Entities

The California VC Diversity Law applies to “venture capital companies” that meet the following two requirements. First, the venture capital company must primarily engage in the business of investing in startup ...

Registered investment advisers are subject to record-keeping requirements regarding certain written communications, and in the last several years, the U.S. Securities and Exchange Commission has increased enforcement efforts against “off-channel communications” (i.e., business-related communications on unapproved electronic devices and systems, such as texts) that it believes violate these requirements.¹ In a recent matter, on April 3, 2024, the SEC issued an enforcement action against Senvest Management LLC for violations of these rules and of Senvest’s own ...

Yesterday, a three-judge panel of the United States Court of Appeals for the Fifth Circuit unanimously vacated the Private Fund Adviser Rules adopted by the Securities and Exchange Commission (which we previously summarized) in their entirety, holding that the SEC exceeded its statutory authority in adopting the PFA Rules in August of 2023. The case was brought against the SEC by a group of industry associations that represent the interests of fund managers and investment sponsors. It is possible that the SEC will seek rehearing en banc by the Fifth Circuit or petition the Supreme ...

Fund sponsors often engage investment banking or placement firms to help raise capital or generate deal flow for their funds. In exchange, the sponsor may offer a cash fee, a piece of the sponsor’s carried interest, equity in the applicable portfolio company, or some other form of compensation. Many sponsors and advisors are unaware that these activities can trigger broker-dealer registration requirements under federal and state law. The registration process is cumbersome and expensive, but the unregistered status of a firm that engages in such activities can create serious ...