The private funds radar is our regular roundup of developments from around the world for private fund stakeholders.
US
New anti-money laundering obligations for private fund sponsors
A new rule issued by the Financial Crimes Enforcement Network (FinCEN) will bring investment advisers – including private fund sponsors – within the scope of the US anti-money laundering and counter-terrorist financing (AML/CFT) regime.
The new rule, which applies from 1 January 2026, has an extra-territorial element: it will apply to the activities of non-US sponsors (including those who file with the SEC as exempt reporting advisers) if:
- those activities take place within the US; or
- they provide management or advisory services to a US person or to a non-US private fund that has at least one investor that is a US person.
The rule will require sponsors, amongst other things, to (i) implement a risk-based and reasonably designed AML/CFT policy; (ii) file suspicious activity reports with FinCEN; and (iii) comply with recordkeeping obligations.
UK and European sponsors who raise capital from US investors and who are already required to comply with UK/EEA AML/CFT rules will therefore need to undertake a gap analysis to understand how the two regimes will interact and the extent to which their current processes may need to be updated to comply with the new US requirements. We will be more than happy to help sponsors navigate this ahead of the 1 January 2026 deadline.
SEC charges private fund sponsor for misleading investors about fund redemptions
A US private fund sponsor has agreed to settle with the SEC over multiple charges, including a charge that it had misled fund investors about its redemption practices.
The sponsor managed a fund that primarily invested in crypto assets. Under the fund's limited partnership agreement, investors had the ability to redeem at the end of each calendar month, on 30 days' notice (or such shorter notice period as agreed by the sponsor).
The sponsor had an informal practice of permitting redemptions on less than 30 days' notice so long as investors gave at least five business days' notice before the month end. However, the sponsor did not disclose this practice to all investors; only certain investors were aware. Further, in some cases, the sponsor approved redemptions on less than five business days' notice; but, again, the sponsor disclosed this only to a smaller group of investors.
As a result, the SEC found that the sponsor was misleading investors by adopting redemption practices and policies for certain investors that differed to those which had been disclosed to others.
As sponsors increasingly look at fund structures that offer investors full or partial liquidity, this case serves as a useful reminder of the importance of providing all investors with clear disclosures around redemption/liquidity practices, even where differential treatment may be permitted under a fund's constitutional documents.
This case was mentioned in a recent Pitchbook article (SEC turns to litigation to address rulemaking failures), which noted that, since the SEC's private fund adviser rule was overturned by a US federal appeals court (discussed in a previous Radar), the SEC is now trying to "effect change through enforcement actions and litigation instead".
Sponsors with a US footprint or nexus should be mindful of this change in approach by the SEC and should expect ever more investigation and scrutiny of their practices.
UK
NAV facilities: similarities and differences between private equity and private credit
In September's Radar, we mentioned the new ILPA guidance on NAV financing.
As NAV facilities become a more prevalent feature of the private capital landscape, we published an article on our dedicated Private Capital Solutions website that examines the common ground and potential differences between NAV financings for private equity fund borrowers and those for private credit fund borrowers.
Private funds and the Energy Savings Opportunity Scheme
The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment and energy-savings identification scheme for large organisations in the UK.
The application of ESOS to a private fund and its portfolio companies can be complicated and will depend on whether the fund and portfolio companies are considered to be within the same corporate group, or whether they are treated as disaggregated entities.
Sponsors should think about refreshing the analysis of their corporate groups for ESOS purposes, to avoid non-compliance with ESOS and potential enforcement action by the Environment Agency. For more information, please see our short note: "ESOS – an update for funds".
British Growth Partnership established to invest in VC funds
At the government's International Investment Summit on 14 October 2024, the Chancellor and Secretary of State for Business and Trade announced the establishment of a new investment vehicle to be called the British Growth Partnership (BGP).
BGP will be established by the British Business Bank (BBB) "to crowd-in UK pension fund and other institutional investment into venture capital funds and innovative businesses, supported by a cornerstone government investment".
Full details are not yet available, but the accompanying BBB press release notes that BGP's investments will be made on a "fully commercial basis, independent of government". Sponsors of VC funds that seek investment from BGP can therefore expect BGP to participate pari passu with other investors, with no special economic terms or voting rights. BGP aims to be up and running and making investments by the second half of 2025.
EEA
Non-EEA AIFMs no longer able to pre-market in Norway
The AIFMD pre-marketing regime, introduced by the Cross-Border Distribution of Funds (CBDF) directive, and in force across EU member states since August 2021, finally came into force in Norway on 1 October 2024.
Many private fund sponsors will by now be familiar with the rules, which effectively provide a pre-marketing passport for full-scope EEA AIFMs (there is no equivalent regime for non-EEA AIFMs, who instead must undertake a country-by-country analysis to assess whether they are permitted to pre-market at all and, if so, the conditions with which they must comply).
Unfortunately for non-EEA AIFMs, Norway has implemented the pre-marketing rules in a restrictive manner, applying the rules only to EEA AIFMs. This means that non-EEA AIFMs are no longer permitted to pre-market in Norway (under the previous Norwegian approach, non-EEA AIFMs were able to pre-market).
Sponsors with UK or other non-EEA AIFMs should therefore review their marketing protocols for contacting Norwegian investors, to ensure they are compliant with the new regime.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.