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    Jul. 24, 2025

SEC Enforcement Action Raises Potential Materiality Threshold for Conflicts of Interest

On June 2, 2025, the SEC filed a complaint (Complaint) in the U.S. District Court for the District of New Mexico alleging breaches of fiduciary duties and conflicts of interest by an investment advisory firm and its founder. In contrast to past SEC enforcement efforts, the Complaint goes to great lengths to establish the materiality of the alleged conflicts of interest to the harmed investors. In that regard, the Complaint is consistent with the precedent of a recent ruling in the U.S. Court of Appeals for the First Circuit (First Circuit). The Complaint raises questions as to whether the agency will actually apply a materiality threshold when considering conflicts of interest violations under new SEC chair Paul S. Atkins, or has merely adjusted its approach – in one enforcement action – in a nod to the First Circuit ruling. This article summarizes the relevant legal issues in each case; considers the SEC’s stance on a materiality standard for conflicts of interest violations and its reiterated aversion to the use of “may” in disclosures; and presents commentary from legal experts. For coverage of other recent SEC enforcement matters, see “SEC Sanctions Investment Adviser and CCO for Compliance Failures That Allowed Misappropriations” (May 15, 2025); and “SEC Charges Fund Manager With MNPI Failures Related to Consultant” (Mar. 6, 2025).

U.K. FCA Emerging Managers Survey Urges Broad Changes to Curb Retail Market Abuses

Although alternative investment fund managers with under ₤1 billion ($1.34 billion) in assets under management (AUM) may not command the same name recognition and clout as the biggest players in the U.K. private funds market, they account for a very large and growing portion of it. According to the U.K. Financial Conduct Authority (FCA), the nearly 1,000 such firms that it oversees collectively have roughly ₤220 billion ($296 billion) AUM using a diverse range of investment strategies and business models. However, those emerging managers also present certain regulatory compliance and investor protection challenges. In the results of its three-phase survey (Survey), the FCA raised concerns about emerging managers’ approaches to high-risk investments, conflicts of interest, onboarding of retail customers and other issues. The FCA criticized widespread compliance failures and called for extensive changes to emerging managers’ market practices. This article summarizes the FCA’s findings and presents expert legal commentary and analysis on the Survey, including its place within the larger context of recent FCA rulemaking efforts and guidance. See “Planting a Seed or Securing an Anchor: Finding Success As an Emerging Manager” (Nov. 14, 2024); and “Challenging Fundraising Outlook for PE and VC Offers Unique Opportunities for Private Credit and Emerging Managers” (May 2, 2024).

Next Frontier in Singapore: MAS Proposal to Permit Retail Access to Private Funds

Access to private funds has historically been limited to sovereign wealth funds, pension plans and ultra-high net worth individuals. Private funds are increasingly drawing the attention, however, of a wider spectrum of investors seeking diversification and long-term returns. The democratization of access to private market investments has gathered pace globally, with regulatory frameworks in several jurisdictions evolving to accommodate the growing demand while balancing investors’ interests. Against that backdrop, the Monetary Authority of Singapore (MAS) issued a consultation paper in March 2025 proposing the creation of a new long-term investment funds framework. The proposal provides the first pathway for retail investors to gain access to private market investments, albeit within a calibrated regime. In a guest article, Reed Smith LLP partner Han Ming Ho details key features of MAS’ proposed framework; how it fits in the current international regulatory landscape; open issues and systemic concerns raised by market participants; and practical considerations for fund managers and institutional investors. See “Retailization Season Is Heating Up: A Private Fund Manager’s Guide to Structuring, Procedures and Fundraising” (Jun. 12, 2025); and “Inherent Obstacles and Promising Pathways to Retailization in the PE Industry” (May 29, 2025).

SEC Panel Weighs Benefits, Challenges and Practicalities of Increasing Retail Access to Private Markets

The SEC’s mission is to facilitate efficient markets, allow for the formation of capital and protect investors. It is important to consider the dichotomy, however, between capital formation in private markets and the protection of investors. By taking steps to improve access for retail investors to the private funds industry, the Commission must grapple with whether sufficient safeguards will exist to allow those investors to thrive. There is also concern that improving access to private markets will come at the expense of the public markets, including retail investor participation in passively managed index funds that were developed to safely offer diverse exposure to the capital markets. Those issues and more were addressed at an SEC conference on Emerging Trends in Asset Management, which featured a panel entitled “Retail Access to Private Markets” that was moderated by Yana Morris, chief content officer at ION Analytics, and featured William W. Clayton, professor at BYU Law School; James Hannigan, managing director at Apollo Global Management; Mark Robillard, vice president, alternative investments research at Fidelity Investments; and Ben Schiffrin, director of securities policy at Better Markets. This article summarizes key takeaways from the panelists’ debate about the merits of improving retail investors’ access to private markets. See “PE Industry in 2025: Trends in LPA Negotiations, Retailization Efforts and Compliance Practices (Part Two of Two)” (Jan. 23, 2025).

Grappling With a Key Person Event at a Private Fund (Part Two of Two)

Many private funds operate as heavily relationship-focused businesses in which the luring of new investors, the cultivation of investor relationships, and daily trading and investing all fall within the purview of a single individual or a small number of people. With such authority comes huge responsibility and the need to envision, with meticulous care, what steps will be followed in the event that a key person at a fund dies, suffers a debilitating or long-term illness, leaves or otherwise ceases to have close involvement in operations. Hence, many fund managers include key person provisions in their limited partnership agreements. Fund managers must not only carefully draft key person provisions that are comprehensive and sufficient but also ensure that they follow the terms of those provisions if a key person event should occur. This second article in a two-part series delves into the operational logistics of what happens when a key person event occurs. The first article explained what key person provisions are and in which documents they typically appear; the terms of such provisions, including which personnel they cover, what scenarios could trigger them and investor rights if they are triggered; why they are critical in the SEC’s eyes; and how they relate to succession planning. See “Withstanding the Coronavirus Pandemic: Key Person Clauses, Fundraising Disruptions and Deal Flow Issues (Part Two of Three)” (Mar. 31, 2020).

Proskauer Adds Two Partners to Private Funds Group

Proskauer has welcomed two partners to its private funds group. Amanda Butler‑Jones, who is in Washington, D.C., focuses primarily on representing buyers, including lead investors, and sellers in secondaries transactions. Duncan Woollard, a member of the firm’s private capital industry group in London, has particular expertise across PE, private credit and real assets. For insights from Proskauer, see “Key Issues and Trends in Financing Facilities for Secondaries Funds” (Dec. 12, 2024); and “Proskauer Private Credit Survey Finds Industry Cautiously Optimistic” (Mar. 21, 2024).

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