In brief
December 2025 and January 2026 brought significant regulatory developments affecting alternative asset managers and market infrastructure participants. US regulators issued multiple no‑action letters providing targeted relief to swap market participants, private fund advisers, and clearing agencies, while Congress enacted and advanced legislation reshaping insider reporting, capital formation, and investor access. Notably, directors and officers of foreign private issuers will soon become subject to Section 16 reporting, the Commodity Futures Trading Commission (CFTC) moved to harmonize cross‑border swap definitions, and the Securities and Exchange Commission (SEC) proposed substantial revisions to its small‑entity framework and approved a pilot for tokenized securities at Depository Trust Company (DTC). Together, these actions reflect a broader effort to modernize regulatory frameworks, reduce duplicative oversight, and promote efficiency and innovation across US financial markets.
In more detail
CFTC Issues No‑Action Relief Harmonizing “US Person” and "Guarantee" Definitions Across Cross‑Border Swap Rules: The US CFTC Market Participants Division, together with the Division of Clearing and Risk and the Division of Market Oversight, jointly issued CFTC No‑Action Letter No. 25‑42, granting long‑awaited relief to harmonize the definition of “US person” and “guarantee” across CFTC’s cross‑border swap regulatory framework. For more than a decade, market participants have been required to navigate three inconsistent definitions under the 2013 Cross‑Border Final Guidance, the 2016 Cross‑Border Uncleared Margin Rule, and the 2020 Cross‑Border Rule — each producing different regulatory consequences for clearing, reporting, margin, and swap‑dealer registration.
The no‑action letter permits firms, subject to conditions, to apply the 2020 Cross‑Border Rule’s narrower, SEC‑aligned definition across all swap requirements and, critically, to continue relying on pre-existing counterparty representations even beyond 2027. The relief is intended to reduce operational complexity, eliminate duplicative counterparty‑classification burdens, and promote cross‑agency harmonization by allowing market participants to use a single, unified framework for determining regulatory obligations, including disregarding the outdated “conduit affiliate” concept for certain requirements; it also supersedes earlier staff letters referencing obsolete definitions. Although interim and effective until the CFTC completes formal rulemaking, the relief provides meaningful clarity and operational efficiency for global swap market participants seeking a stable and consistent cross‑border compliance regime. Until the CFTC adopt final rules to harmonize its cross‑border definitions, the CFTC will not pursue enforcement solely for classifying a counterparty based on the definitions of “US person” and “guarantee” in the 2020 Cross‑Border Rule”.1
SEC Grants No‑Action Relief for DTC’s Pilot Tokenization Program: The SEC’s Division of Trading and Markets issued no‑action relief allowing The DTC to proceed with a pilot version of its Depository Trust and Clearing Corporation (DTCC) Tokenization Services, a program enabling participants to record their security entitlements on Distributed Ledger Technology (DLT) rather than solely through DTC’s traditional centralized ledger. The pilot — referred to as the Preliminary Base Version — permits participants to tokenize and detokenize eligible securities, transfer tokenized entitlements between registered blockchain wallets, and explore DLT‑based operational efficiencies while maintaining the legal structure of securities held under Article 8 of the Uniform Commercial Code (UCC). The SEC agreed not to recommend enforcement under Regulation Systems Compliance and Integrity (SCI), Section 19(b)/Rule 19b‑4 of the Exchange Act, and the Covered Clearing Agency Standards, acknowledging that full compliance with these frameworks would be impracticable for a limited, experimental service.
The no‑action relief is conditioned on numerous controls designed to limit systemic risk, including restrictions on eligible securities, prohibition on assigning collateral or settlement value to tokenized entitlements, a digital omnibus account to prevent double‑spending, use of compliance‑aware token standards, and mandatory use of registered wallets that have passed Office of Foreign Assets Control (OFAC) screening. DTC must also maintain robust technology standards, provide quarterly reporting, and ensure that the new systems remain isolated from core SCI systems except for two limited instructions. The relief automatically expires three years after the pilot’s launch, at which time DTC must notify the SEC. This controlled framework allows market participants to test DLT‑based securities infrastructure while giving the SEC visibility into the operational, legal, and technological implications of tokenization at scale.2
House Passes Bipartisan INVEST Act to Make Raising Capital Easier for Businesses and Investors: The House of Representatives has passed the bipartisan INVEST Act of 2025, a broad capital‑formation package aimed at modernizing US securities regulation, reducing barriers for smaller issuers, and expanding access to investment opportunities. The Act raises key regulatory thresholds, expands qualifying venture capital fund parameters, clarifies that certain sponsored‑event presentations are not general solicitation, and establishes Offices of Small Business within major SEC divisions to better integrate small‑issuer considerations into rulemaking. It also updates the accredited‑investor framework to recognize education, experience, and licensure, creating an exam‑based alternative to purely wealth‑based tests, while expanding retail access to private markets through changes affecting closed‑end funds and retirement plans. In the public markets, the legislation streamlines Initial Public Offering (IPO) pathways by reducing disclosure requirements, expanding testing‑the‑waters and confidential submissions, and lowering the Well-Known Seasoned Issuer (WKSI) public‑float threshold to USD 400 million, with the overall package — alongside the DEAL, ICAN, and Investing in All of America Acts — designed to invigorate public‑market growth as it moves to the Senate. For asset managers, the INVEST Act could broaden investor access and ease fundraising and disclosure burdens if enacted.
CFTC Issues No‑Action Relief Allowing SEC‑Registered Advisers to Avoid CPO/CTA Registration for QEP‑Only Funds: The CFTC’s Market Participants Division (MPD) has issued No‑Action Letter 25‑50, providing targeted relief for SEC‑registered investment advisers that operate private commodity pools offered solely to Qualified Eligible Persons (QEPs). Under the letter, the MPD will not recommend enforcement if eligible advisers fail to register, or withdraw registration, as commodity pool operators (CPOs) or commodity trading advisors (CTAs), provided specified conditions are met — a response to concerns raised by the Managed Funds Association regarding duplicative SEC–CFTC oversight of institutional‑only private fund managers. To rely on the relief, advisers must be SEC‑registered, offer interests through private placements to investors reasonably believed to be QEPs, file Form PF, and comply with limited CFTC disclosure and notice requirements, with filings submitted directly to the MPD. Notably, advisers withdrawing registration are not required to provide redemption rights under CFTC Regulation 4.13(e), avoiding liquidity disruptions inconsistent with private fund structures. The MPD characterized the relief as interim, pending potential rulemaking to reinstate a permanent QEP‑based exemption, but emphasized that it meaningfully reduces regulatory overlap and compliance burdens while aligning CFTC requirements more closely with existing SEC oversight. Eligible private fund clients can streamline their regulatory footprint by avoiding duplicative CFTC registration and compliance – without triggering investor redemption rights — while continuing to operate under familiar SEC oversight.
New Law Extends US Insider Reporting Rules to Foreign Private Issuer Directors and Officers: A newly enacted provision of the FY 2026 National Defense Authorization Act — including the Holding Foreign Insiders Accountable Act (HFIAA) — significantly expands US securities reporting obligations by bringing directors and officers of foreign private issuers (FPIs) within the scope of Section 16(a) of the Securities Exchange Act of 1934. Effective March 18, 2026, these insiders must file Forms 3, 4, and 5 to publicly report their equity holdings and transactions, eliminating the long‑standing exemption previously available to FPIs under Rule 3a12‑3(b) and marking a material shift in regulatory expectations for cross‑border issuers listed in the United States. The HFIAA does not, however, extend short‑swing profit liability under Section 16(b) or the short‑sale prohibitions of Section 16(c) to FPIs, and 10% stockholders of FPIs remain outside the amended reporting regime. With the effective date approaching, FPIs should identify individuals subject to Section 16(a), ensure those insiders are prepared to obtain Electronic Data Gathering, Analysis, and Retrieval (EDGAR) filing credentials under the SEC’s updated EDGAR Next framework, and review internal controls, insider‑trading policies, power‑of‑attorney arrangements, and reporting workflows to support timely filings, particularly given the two‑business‑day deadline for Form 4, especially in light of heightened SEC enforcement focus on late beneficial‑ownership reporting.
1 Please see: https://www.cftc.gov/csl/25-42/download
2 Please see: https://www.sec.gov/files/tm/no-action/dtc-nal-121125.pdf