Dual registrant regulatory roundup - October 2026

SEC Proposes Amendments to Expand Responsible Retailization of Private Markets

• On September 30, 2026, the SEC voted to propose two sets of rule amendments intended to expand retail investor access to private market strategies through regulated fund structures: the Investment Adviser Performance-Based Compensation Modernization proposal and the Interval Fund Modernization proposal. The SEC separately requested public comment on additional ways for individuals to qualify as accredited investors. 
• The performance-based compensation proposal would permit registered investment advisers to receive performance-based compensation from regulated funds (mutual funds, exchange-traded funds, closed-end funds, and business development companies) without regard to investor qualification, provided that, among other conditions, the compensation does not exceed 20% of the fund’s net capital gains over a specified period and the fund satisfies the fund governance standards of Investment Company Act Rule 0-1(a)(7). The proposal would also redefine “qualified client” under Rule 205-3 to include any person meeting the “accredited investor” definition in Regulation D, eliminating the separate net worth and assets-under-management tests.
• The interval fund proposal would modernize the interval fund framework, including by permitting repurchases to be scheduled at times that better match the liquidity profile of the fund’s portfolio, and would replace existing exemptive orders with a rules-based framework permitting regulated closed-end funds to issue multiple share classes.
• In its request for comment, the SEC is considering designating the following as qualifying credentials for accredited investor status under Rule 501(a)(10) of Regulation D: (1) passage of an accredited investor examination to be developed by FINRA; (2) a CPA license, the CFA charter, and the CFP certification, (3) and the FINRA Series 79, 86, and 87 licenses.

SEC Proposes to Rescind Investment Adviser Pay-to-Play Rule

• On September 3, 2026, the SEC proposed to rescind Rule 206(4)-5 under the Investment Advisers Act of 1940 (Pay-to-Play Rule). Comments are due by November 9, 2026.
• Rule 206(4)-5 currently prohibits an investment adviser from providing advisory services for compensation to a government client for two years after the adviser or any of its covered associates makes a contribution to certain elected officials or candidates. The proposal would rescind the rule in its entirety and remove and reserve the related political contribution recordkeeping requirement in Advisers Act Rule 204-2(a)(18). 
• The SEC explained that the rule has resulted in significant unintended consequences, including blanket political contribution prohibitions adopted by some advisers, and has been criticized as burdensome, complex, and creating a de facto strict liability standard. In the SEC’s view, other existing requirements – including the Advisers Act antifraud provisions, fiduciary duty, the compliance rule (Rule 206(4)-7), and the code of ethics rule (Rule 204A-1) – are likely sufficient to address pay-to-play practices.
• The proposal would not, by itself, eliminate parallel pay-to-play restrictions applicable to broker-dealers, including FINRA Rule 2030 and MSRB Rule G-37. The SEC requested comment on how the proposed rescission would affect dually-registered investment advisers and broker-dealers.
• More information on the SEC’s rescission of the Pay-to-Play Rule can be found here.

SEC Approves New FINRA Rule 3290 (Outside Activities Requirements)

• On September 15, 2026, the SEC issued an order approving FINRA’s proposed Rule 3290 (Outside Activities Requirements). New Rule 3290 consolidates FINRA Rules 3270 (Outside Business Activities of Registered Persons) and 3280 (Private Securities Transactions of an Associated Person) into a single rule designed to eliminate the noise created by reporting lower-risk activities and allow firms to focus compliance resources on higher-risk activities. 
• The rule makes three key changes. First, it narrows reportable activities from all outside business activities to “investment-related activities” – activities pertaining to securities, crypto assets, commodities, derivatives, currency, banking, real estate, and insurance. Registered persons must provide prior written notice of such activities, and associated persons must provide prior written notice of outside securities transactions, which the member must assess and, as applicable, approve, condition, or disapprove. Activities such as bartending or refereeing will no longer be reportable.
• Second, an associated person’s activity at an unaffiliated registered investment adviser will be treated as an outside activity rather than an outside securities transaction, requiring notice and assessment but not supervision or recordkeeping, although members may still condition or prohibit it. Third, the rule adds new exclusions, including for activity on behalf of the member or an affiliate (any entity that controls, is controlled by, or is under common control with the member) and for the purchase, sale, rental, or lease of a main home and up to two secondary homes. 
• The SEC’s order does not establish an effective date. FINRA will announce one in a future Regulatory Notice.

SEC Exam Staff Issue Risk Alert on Investment Adviser Annual Compliance Reviews

• On September 14, 2026, the SEC’s Division of Examinations published a Risk Alert summarizing staff observations from examinations of investment advisers’ annual reviews of their compliance policies and procedures under Advisers Act Rule 206(4)-7 (Compliance Rule).
• The Compliance Rule requires each registered adviser to review, no less frequently than annually, the adequacy of its policies and procedures and the effectiveness of their implementation, and Rule 204-2(a)(17)(ii) requires advisers to maintain records documenting those reviews. The staff identified deficiencies relating to: (1) the timeliness of annual reviews, including gaps in annual reviews, review periods longer than 12 months, and reliance on training or employee attestations in lieu of a review; (2) incomplete procedures for conducting reviews; (3) reviews that were not conducted consistent with the adviser’s written procedures; (4) failure to recognize that policies and procedures did not address or align with actual practices; (5) failure to maintain documentation generated during reviews; and (6) failure to take corrective action on issues identified in reviews.
• Examples of misalignment between policies and practices cited by the staff include fee billing practices that deviated from client disclosures (such as failing to prorate fees, apply breakpoints, or issue refunds), proxy voting policies inconsistent with actual practice, custody procedures that omitted steps relating to surprise examinations, marketing policies not updated for the Advisers Act Marketing Rule, and filing procedures not updated for Form CRS. 

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