On September 30, 2026, the Securities and Exchange Commission (the “SEC”) issued two proposing releases containing amendments that would materially affect how business development companies that have elected to be regulated under the Investment Company Act of 1940 (the “1940 Act,” and “BDCs,” respectively), interval funds and other registered funds are structured, as well as their compensation and distribution models.

The proposals would modernize the interval fund framework, permit certain registered closed-end funds (“CEFs”) and BDCs (collectively referred to herein as “regulated CEFs”) to offer multiple share classes without individual exemptive relief and amend Rule 205-3 under the Investment Advisers Act of 1940 (the “Advisers Act”) to expand the circumstances in which SEC-registered investment advisers may receive performance-based compensation, both from regulated funds (through a new “fund board channel”) and from accredited investors and funds whose investors are all accredited investors (through a new “accredited investor channel”).[1]

Taken together, the proposals would facilitate retail access to private markets by providing greater flexibility for funds and their investment advisers.  For sponsors of BDCs and other private asset CEFs, the proposals will have significant practical implications for portfolio construction, liquidity management and adviser compensation.  The proposals also would narrow the commercial gap between interval funds and tender offer funds, and may be of interest to lenders and other counterparties to regulated funds.

We discuss the most significant proposed changes in this Legal Update.

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