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    Jul. 9, 2026

Supreme Court Clarifies Scope of Private Rights of Action Under the Investment Company Act

On June 11, 2026, the U.S. Supreme Court issued a ruling that has broad implications for PE sponsors and the risk profiles of the funds they manage. The case addressed the issue of whether Section 47(b) of the Investment Company Act of 1940 (Investment Company Act) – which provides that contracts that violate the Investment Company Act are not enforceable and can be rescinded – includes an implied private right of action. The Court agreed to hear the case to resolve a circuit split between the U.S. Courts of Appeal for the Second, Third and Ninth Circuits, respectively. Ultimately, the Court held that Section 47(b) does not create an implied private right of action. The ruling is particularly notable for the private funds industry as it eliminates the risk of fund investors seizing on an implied private right of action under Section 47(b) to bring litigation to rescind their existing contracts with fund managers. In a guest article, Jenner & Block partners Charles D. Riely, Todd C. Toral and Martin C. Glass summarize the Court’s decision and detail some of its implications for private fund managers. See “Contractual Provisions That Matter in Litigation Between a Fund Manager and an Investor” (Oct. 2, 2014).

ILPA Guidance Promotes Caps, Transparency and Cost Sharing Mechanisms for PE Organizational Expenses

According to the Institutional Limited Partners Association (ILPA), one of the most serious misalignments between GPs and LPs involves runaway PE fund formation expenses. With legal fees routinely exceeding $1,500 per hour, ILPA asserts that GPs of large funds with well-established track records are not transparent with their LPs about legal budgets. In general, GPs lack incentives to ensure efficiency as to expenses that fall largely or entirely on LPs. To counter the growing misalignment, ILPA has released guidance (Guidance) that makes a case for capping fund formation organizational expenses; adopting a cost-sharing framework for any excess amounts; and improving discipline and transparency around legal fees incurred in fund formation. Although many LPs would welcome the greater probity and efficiency around expenses, legal experts interviewed by the Private Equity Law Report assert that the Guidance does not capture the nuances of, or the real drivers behind, rising PE organizational expenses. This article contextualizes the industry dynamics prompting ILPA’s efforts; summarizes the operative suggestions in the Guidance; highlights certain drivers and factors behind rising expenses that the Guidance overlooks (e.g., investor-driven side letter negotiations); considers the necessity of the proposal; and assesses the likelihood of its adoption by the industry. See “ILPA Study Gauges Evolving LP Sentiments Toward PE Allocations and LPA Negotiations” (May 28, 2026).

Structural Variations and Key Features of Rated Note Feeders and Collateralized Fund Obligations

Private fund managers have an ever-increasing set of options for raising capital and financing their existing fund portfolios. Rated note feeders and collateralized fund obligations (CFOs) are structured finance vehicles that enable sponsors to raise capital by issuing investment-grade rated debt, which can be particularly appealing for insurance companies. The market for rated note feeders and CFOs has evolved, however, which has supported a parallel outgrowth in the variety of structures, terms and features of these vehicles over time. A BARBRI program featuring Fried Frank attorneys Adam D. Summers, Ariel Zell and J.S. Park examined the origin, growth and market terms for rated note feeders and CFOs. Among other topics, the panelists touched on legal structures of rated noted feeders, CFOs and variations thereof; using sponsor holding companies for subordinated notes; the difference between stapled and unstapled offerings; the mechanics of distribution waterfalls and loan to value tests for protecting junior lenders; the utility of liquidity facilities for improving cashflow modeling; and issues with subscription facilities for underlying private funds. See our two-part series: “How PE Collateralized Fund Obligations Operate and Why Insurance Companies Increasingly Structure and Purchase Them” (Mar. 1, 2022); and “NAIC Regulations Shape the Current Adoption and Future Growth of PE Collateralized Fund Obligations by Insurance Companies” (Mar. 8, 2022).

SEC Registration Issues for Non‑U.S. Fund Managers

A fundamental concern for a non‑U.S. manager seeking to enter the U.S. market is whether the manager must register with the SEC as an investment adviser or an exempt reporting adviser. Once those non‑U.S. managers have accessed the U.S. market, they then need to brace for immediate scrutiny from the SEC’s Division of Examinations in its exams of never-before examined advisers (NBE exams). Proper preparation for an NBE exam can help a manager emerge relatively unscathed – with a “no further action” letter or minor deficiency letter – and avoid escalation to a more serious matter. Those issues and others were addressed in an ACA Group webinar on how non‑U.S. fund managers can navigate SEC registration requirements, which featured senior principal consultant Abi Loughnane, managing director Robert Baker and director Michael Beeson. The panelists discussed the private fund and foreign private adviser exemptions to registration under the Investment Advisers Act of 1940; common registration-related pitfalls; what to expect in – and how to prepare for – an initial SEC examination; and the range of potential exam outcomes. This article synthesizes their insights. See “Notable SEC Examination Methods and Substantive Focus Areas for Exempt Reporting Advisers and Tips for Avoiding Violations” (Jul. 28, 2020).

Contracting With Vendors to Mitigate Third‑Party AI Risk

When companies and law firms purchase an artificial intelligence (AI) tool from a vendor, they need to consider the risks and controls they can put in place to mitigate those risks. They will have no control over associated risks unless their contracts with those vendors provide such rights. This article synthesizes insights shared during a BARBRI program on risks from use of third-party AI tools and considerations for approaching contracting with vendors. It also offers practical advice from the speakers, including Simon Boehme, COO of BillingNav; Chris Draper, CEO and co-founder of morriganAI; and William Galkin, a partner and founder of Galkin Law, LLC, on six key AI vendor contract clauses to help companies transform an AI governance program from just policy statements into enforceable operational safeguards. See our two-part series on AI in private funds: “Emerging AI Technology and Valuable Legal- and Compliance‑Related Applications” (Nov. 16, 2023); and “Challenges, Best Practices for Implementation and the Road Ahead” (Nov. 30, 2023).

Akin Strengthens Its Investment Management Expertise in Los Angeles

Richard L. Shamos has joined Akin as a partner in its investment management practice and funds group in Los Angeles. He advises sponsors on the structuring of closed-end and open-end fund products across a variety of asset classes, including private credit, fixed income, PE and growth funds. For insights from Akin, see our two-part series “Tips for Creating an EOY Compliance Checklist”: Part One (Oct. 31, 2024); and “Part Two” (Nov. 14, 2024); as well as “Advancing Diversity, Equity and Inclusion in the Alternative Investment Industry” (Sep. 19, 2024).

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