SEC Staff Announces Reversal of Policy Limiting Retail Access to Registered Funds of Funds

On August 15, 2025, the staff of the SEC’s Division of Investment Management (the “Staff”) published a new Accounting and Disclosure Information (“ADI”) regarding registered closed-end funds of private funds (“CE-FOPFs”).

The Staff will no longer provide comments requesting that a CE-FOPF registrant either limit its private fund investments to less than 15% of its assets or limit its offers to investors who qualify as “accredited investors” under Regulation D under the Securities Act and require minimum initial investments of at least $25,000. The ADI makes official a desire expressed by Chair Atkins in remarks in May for the Staff to reconsider its position in this regard.

The Staff noted that existing regulatory protections will otherwise remain in effect. For example:

• The CE-FOPF must be managed by a registered investment adviser, a board of directors exercises oversight of the CE-FOPF and the CE-FOPF makes certain periodic disclosures and bears liability for material omissions and misstatements.
• CE-FOPFs must continue to adhere to the Investment Company Act’s requirements and prohibitions, including a prohibition on conflicted transactions with affiliates.

These changes will not impact the need for CE-FOPFs to enter into side letters with the private funds in which they invest to address other aspects of the CE-FOPF’s compliance under the Investment Company Act and will not drive amendments to existing side letters between CE-FOPFs and the private funds in which they invest.

Significant obstacles to “retailization” of CE-FOPFs remain, most notably the illiquid nature of an investment in a CE-FOPF. Investment advisers and brokers subject to Regulation BI will need to consider this and other characteristics of CE-FOPFs and other suitability considerations when making investment recommendations to clients or retail customers, respectively.

The Staff has indicated they will continue to focus on disclosures provided in CE-FOPF registration statements, with an eye to promoting retail investor understanding.

CE-FOPFs that have already filed a registration statement and/or are currently operating should consider whether they would like to remove from their registration statements accredited investor and minimum investment limitations or their 15% cap on private fund investment and, if so, determine what filings and disclosure changes are appropriate to their particular circumstances.

Increased access to private investments for retail investors has become a theme of the Atkins-led SEC.