In brief
From March to April 2026, US regulators took several policy, enforcement, and interpretive actions affecting the alternative asset management industry, including private funds, and retail investment products.
The US Department of Labor (DOL) proposed regulations under the Employee Retirement Income Security Act of 1974, as amended (ERISA), that would clarify the fiduciary duty of prudence and establish a process-based safe harbor designed to facilitate fiduciary selection of designated investment alternatives (including those with alternative asset exposure), emphasizing process-based decision making over outcomes and seeking to mitigate litigation risk.
At the same time, both the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) signaled shifts in their respective enforcement philosophies. The CFTC outlined a move toward a more targeted enforcement framework focused on serious misconduct such as insider trading (including in prediction markets), market manipulation, retail fraud, and anti-money laundering (AML)/know-your client (KYC) violations, while also previewing enhanced incentives for self-reporting and cooperation. Similarly, the SEC continued to emphasize a shift away from “regulation by enforcement,” re-centering enforcement on investor protection and Congressional intent and prioritizing investor harm, fraud, and fiduciary breaches while reducing emphasis on technical violations.
On the regulatory front, the SEC and CFTC jointly proposed significant amendments to Form PF that would substantially reduce reporting burdens for many private fund advisers by increasing reporting thresholds and streamlining disclosure requirements.
The SEC also issued key no-action letters that it would not recommend enforcement action based on representations supporting expanded structuring and operational flexibility for asset managers, including guidance on seed share arrangements for retail-adjacent funds and broader access to co-investment exemptive relief for registered funds.
These developments reflect a broader regulatory trend toward facilitating product innovation and capital formation while maintaining a more focused, risk-based approach to enforcement and oversight.
In more detail
- DOL Proposes New ERISA Safe Harbor for Selecting Investment Options (March 31, 2026). The DOL proposed a new regulation under ERISA that would establish a process-based safe harbor intended to reduce litigation risk for plan fiduciaries selecting designated investment options for defined-contribution plans, including alternatives. The proposal would deem a fiduciary’s decision prudent if based on a thorough, objective, analytical, and well-documented review process, reinforcing that prudence should be determined based on the fiduciary’s process rather than on investment outcomes. The proposal would identify key evaluation factors—such as performance over longer time horizons, fees, liquidity, valuation, benchmarking, and investment complexity—and confirm that fiduciaries may consider a broad range of investment types, including private equity, private credit, real estate, annuities, and certain digital asset strategies, on a strategy neutral basis. The proposal would implement section 3(c) of Executive Order 14330, which seeks to expand access to alternative assets in retirement plans. What this means: While the proposal would not impose new requirements on asset managers directly, it signals a more accommodating regulatory posture toward alternative investments in retirement plans and is intended, in part, to mitigate perceived litigation risks that may discourage fiduciaries from offering such investments. Comments are due on or before June 1, 2026.
- CFTC Enforcement Director Outlines New Enforcement Priorities, Prediction Market Insider Trading Focus, and Enhanced Cooperation Framework. In remarks delivered at NYU Law School on March 31, 2026, CFTC Director of Enforcement David I. Miller outlined a refocused enforcement program centered on serious misconduct, emphasizing that the “era of regulation by enforcement is over.” Under Chairman Selig’s leadership, the Division of Enforcement will prioritize five core areas: insider trading (including prediction markets), market manipulation—especially in energy markets, market abuse and disruptive trading, retail fraud (including Ponzi schemes), and willful violations of AML and KYC requirements. Director Miller stressed that enforcement will be targeted, swift, and fair, with continued coordination with exchanges, the SEC, US Department of Justice (DOJ), and other regulators, and an expectation that exchanges will act as the first line of defense through effective surveillance and compliance.
A central theme of the remarks was that insider trading laws fully apply to prediction markets. Director Miller rejected claims that such markets are exempt, explaining that the Commodity Exchange Act’s (CEA) anti-fraud provisions—modeled on SEC Rule 10b-5—prohibit trading on misappropriated material non-public information, including government or employer-confidential information. What this means: As Director Miller warned, the CFTC is expected to aggressively pursue insider trading, manipulation, and other abuse in event contracts. He also previewed a forthcoming Staff Advisory on Cooperation that would materially revise the CFTC’s approach by offering a clearer path to declinations for parties that promptly self-report, fully cooperate, and remediate, adopting an all-or-nothing framework for cooperation credit, and emphasizing restitution, disgorgement, and remediation. - SEC Announces Fiscal Year 2025 Enforcement Results and Enforcement Policy Reset (April 7, 2026). The SEC released its fiscal year 2025 enforcement results, which announced 456 enforcement actions and USD 17.9 billion in ordered monetary relief and emphasized a reset in enforcement philosophy. The SEC stated it is moving away from “regulation by enforcement” and an emphasis on case volume, toward prioritizing actions that directly address fraud, market manipulation, disclosure failures, and breaches of fiduciary duty, consistent with Congressional intent and investor protection. For investment advisers, the announcement signals continued scrutiny of conflicts of interest, disclosure practices, and fiduciary obligations, alongside a renewed focus on charging individual wrongdoers. The SEC also highlighted a reduced reliance on technical book‑and‑record cases absent direct investor harm, increased credit for self‑reporting, cooperation, and remediation, and ongoing attention to misconduct involving emerging technologies, including crypto assets and AI. What this means: While no new rules were announced, the enforcement results provide useful insight into the SEC’s current enforcement priorities and key risk areas for asset managers.
- SEC Division of Investment Management: No-Action Letter Addressing Private Capital Fund Structure. The SEC staff confirmed that non-traded business development companies (BDCs) and registered closed-end funds may issue sponsor-affiliated “seed shares” with a minimum return component and conditional repurchase feature—without violating capital structure rules under the Investment Company Act of 1940, as amended (1940 Act)—so long as the seed shares (i) carry no liquidation preference, (ii) are repurchased solely from a specified portion of proceeds from subsequent cash subscriptions, and (iii) are structured to avoid creating an “involuntary liquidation preference” or leverage-like risk, thereby providing a practical, regulator-endorsed path for sponsors to seed and launch new retail-adjacent private credit and income funds, subject to important limitations, including cash-only subscriptions, restrictions on affiliated transactions until repurchase, and a defined wind-down if the seed shares are not taken out within a specified period. What this Means: For asset managers, the relief provides a clearer path to seed and launch BDCs and non-traded closed-end funds using affiliated capital without triggering concerns under Section 18 of the 1940 Act, while underscoring that such structures must be narrowly tailored and carefully calibrated to avoid being viewed as creating senior security or leverage-like risk.
- SEC and CFTC Propose Significant Reductions to Form PF Reporting. (See more). On April 20, 2026, the SEC and CFTC jointly proposed amendments to Form PF that would substantially reduce private fund reporting obligations. The proposal would raise the Form PF filing threshold from USD 150 million to USD 1 billion in private fund assets under management (AUM), which would eliminate reporting for many smaller advisers, and increase the “large hedge fund adviser” threshold from USD 1.5 billion to USD 10 billion in hedge fund AUM. The agencies also propose to eliminate or streamline numerous Form PF reporting requirements, while preserving data collection for systemic risk monitoring. The agencies are also seeking comments on potential changes to better capture private credit activity. What this Means: If adopted, the amendments would require advisers to reassess whether they remain subject to Form PF and, if so, which reporting requirements apply. Comments are due on or before June 23, 2026. (See more).
- SEC Division of Investment Management: No-Action Letter Addresses Open-End Fund Participation in Co-Investment Transactions. The SEC staff issued a no-action letter stating that it would not recommend enforcement action if registered open-end funds (including mutual funds and other open-end vehicles) rely on existing co-investment exemptive orders that previously applied only to BDCs and closed-end funds. The letter also permits the required “Required Majority” (disinterested director) approval to be satisfied by a committee of at least three independent directors, rather than the full board. What this Means: Asset managers may expand co-investment participation (including open-end funds) and streamline deal approvals by using board committees instead of full “Required Majority” votes, reducing execution friction while maintaining core investor protections.