Last month, the Office of Information and Regulatory Affairs published its semi-annual "Unified Agenda of Regulatory and Deregulatory Actions" of various federal agencies, including that of the SEC (the "Spring 2025 Reg Flex Agenda"). A Ropes & Gray alert summarizing the agenda for rulemakings affecting the SEC's Division of Investment Management ("IM Division") as well as broader crypto-related rulemakings is available here.
This post highlights rulemakings of particular relevance to "retail alts" products on the Spring 2025 Reg Flex Agenda, anticipates what substantive changes may be under consideration with those rulemakings, and concludes with additional potential rulemakings relevant to retail alts products that, at least for now, do not appear on the agenda but may be added by the Chairman Atkins-led SEC in the near future (1).
Key Spring 2025 Reg Flex Agenda Items for Retail Alts Products
The following discusses key items on the Spring 2025 Reg Flex Agenda for retail alts products, and why they may be particularly relevant to retail alts products (2):
- Amendments to the Custody RulesThe Commission is poised to again propose updates to the Investment Advisers Act custody rule – which it proposed as a new "safeguarding rule" under Chair Gensler – but, additionally, it intends to propose amendments to at least some of the various custody rules under the Investment Company Act of 1940 (the "1940 Act")(3). Most of these rules have not been updated in decades, notwithstanding the multitude of technological and other business developments in the interim.
While the Spring 2025 Reg Flex Agenda expressly states that the rulemaking will "address [] crypto assets," it seems possible, perhaps likely, that there would be further guidance in the custody proposals applicable to how to appropriately custody alternative assets in which retail alts funds may invest (e.g., real estate, art, privately negotiated loan documents). The inherent physical characteristics of many alternative assets make it impractical and/or prohibitively costly for them to be maintained by "qualified custodian" pursuant to Section 17(f) of the 1940 Act. It would be a welcome development if the rulemaking seeks to address this square-peg-in-a-round-hole problem.
- Amendments to Form N-PORTThe Spring 2025 Reg Flex Agenda indicates that amendments to Form N-PORT will be proposed to "address identified burdens." This inclusion on the agenda follows then-Acting Chairman Mark Uyeda's comments in March that he had directed the Staff to reconsider the 2024 amendments to Form N-PORT to "help [the Commission] consider if we struck the right balance," noting that commenters had raised concerns about the more-frequent public disclosure of registered fund holdings under the 2024 changes (4).
Additional concerns have been raised by some market commentators regarding the shortened timeframe for Form N-PORT filings under the new amendments (from 60 days after the end of a fiscal quarter to 30 days after the end of each month). With that background – and that the 2024 amendments are currently subject to litigation (5) – it seems possible that much or all of the 2024 amendments to Form N-PORT would be proposed to be rescinded.
While these developments would affect all registered funds, a rulemaking rescinding the Form N-PORT amendments would provide particular benefits to managers of retail alts products that are sensitive to public portfolio holdings disclosure and would prefer to keep their investments non-public on more than a monthly basis with just a 30-day delay.
For alternative managers in particular, the concern goes beyond simple timing or administrative burden. Many of these managers rely on carefully sourced, less-liquid private investments—real estate, private credit, venture capital, or bespoke structured products—that are a key part of their competitive edge. Frequent and accelerated public reporting of such positions risks exposing proprietary investment strategies to competitors, undercutting the value of an alternative manager's sourcing networks, and potentially chilling participation in opportunities where confidentiality is critical.
- Crypto AssetsThis item indicates there is anticipated rulemaking intended to "help clarify the regulatory framework for crypto assets and provide greater certainty to the market." If adopted, this rulemaking – which may be done in conjunction with rulemaking or guidance from the Commodity Futures Trading Commission and/or be bolstered by a new law that could pass through Congress and be signed into law, such as the CLARITY Act – would provide more clarity for when digital assets constitute "securities" within the meaning of the federal securities laws, including the 1940 Act.
This may provide funds investing in or looking to invest in these products more clarity in terms of when and whether such funds need to register under the 1940 Act (the contours of which to date are yet mostly untested). The clarity may also provide more certainty for various crypto-related investment strategies, some of which may best fit into retail alts structures.
Items Left Off the Spring 2025 Reg Flex Agenda – For Now, At Least
It is additionally likely that the IM Division's rulemaking agenda will expand beyond what is included in the Spring 2025 Reg Flex Agenda in the coming months, perhaps as soon as the Fall 2025 Reg Flex Agenda is published. If so, it is possible that the industry could see any of the following potential rulemakings that may be of particular relevance to retail alts products (6) be added to the agenda:
- An amendment to 1940 Act Rule 23c-3 to have more flexibility for an interval fund's periodic repurchases (size and/or frequency);
- A codification of multi-class exemptive relief for closed-end funds;
- A new rule allowing interval funds and tender offer funds to operate as series funds (as is the case for many open-ended trusts);
- An adoption of a new "co-invest" rule codifying and potentially expanding the exemptive relief the IM Division has provided to registrants (e.g., expanding the available relief to open-end fund products);
- A new rule or Commission-level guidance amending current IM Division views on what constitutes a class of senior securities so as to allow closed-end funds to engage in various financing arrangements without violating Section 18(c) of the 1940 Act, which permits closed-end funds to issue only a single class of senior security representing indebtedness; and
- An amendment to 1940 Act Rule 12d1-4 (the "fund of funds" rule) to allow for greater investment by at least certain products (e.g., target-date retirement funds) to invest in middle-tier funds that themselves invest in private funds and CLOs (including, potentially, private funds and CLOs affiliated with the top-level acquiring fund) in excess of the current "10% bucket" limitation.
We note that on September 18, the SEC's Investor Advisory Committee (IAC) met and adopted recommendations relating to increased access of retail investors to private market assets, including most relevantly endorsing some version of potential rulemakings, relating to the first four bullets listed above. A Ropes & Gray Alert summarizing the relevant IAC recommendations is available here.
If you would like to discuss these issues further, please contact either of the co-authors of this post or your usual Ropes & Gray attorney contacts.
For more information regarding Ropes & Gray's capabilities and thought leadership relating to retail alts products, please click here.
Appendix
1. There are various areas where the SEC could provide novel and useful regulatory change using its exemptive authority and/or on which the IM Division staff ("Staff") could provide guidance (e.g., Staff FAQs or no-action letters) rather than necessitating a rulemaking. This includes, for example, expanding available co-investment relief for registered funds, expanding permissible asset classes for semi-transparent ETFs, removing the annual shareholder meeting requirement for listed closed-end funds, and permitting further flexibility for closed-end fund investments in private funds (e.g., allowing funds of affiliated private funds). While this post focuses on rulemaking, any of those potential regulatory changes would also be of great import to retail alts products and the investment management industry more broadly.
2. According to the page for each of the following potential rulemakings, as of the time of publication of the Spring 2025 Reg Flex Agenda, each relevant proposal is anticipated to be promulgated by April 2026. It is typical for the SEC to use dates in the published agenda as aspirational in terms of when rules will be proposed or adopted rather than what timing is necessarily likely, and it is possible if not likely that at least some of the rulemakings discussed herein will not by proposed by Spring 2026.
3. See 1940 Act Rules 17f-1 through 17f-7.
4. See Commissioner Mark Uyeda, Remarks to the Investment Company Institute's Investment Management Conference.
5. See Registered Funds Association v. SEC, No. 24-60550 (5th Cir.).
6. For the purposes of this post, we do not list here rulemakings not included on the Spring 2025 Reg Flex Agenda that may benefit 1940 Act-registered funds more generally but do not have particular salience for retail alts products. Such proposals would include, for example, establishing electronic delivery of information as a default for all fund shareholder reporting, changes to or repeal of the 2023 1940 Act Rule 35d-1 ("names rule") amendments, modernizing in-person voting requirements for fund directors, and updating and streamlining the proxy vote process for registered funds specifically or issuers more generally.
Additionally, there are many various actions that could be taken by Staff or Commission action that could benefit retail alts products that would not require rulemaking. This includes, for example, removal of the annual shareholder meeting requirement for exchange-listed closed end funds (which could be effectuated by IM Division rulemaking but also could be accomplished by changing applicable exchange rules).
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.
