On August 15, 2025, the SEC’s Disclosure Review and Accounting Office issued an Accounting Disclosure Information memorandum (“ADI”) clarifying its stance on registered closed-end funds investing in private funds. The SEC will no longer issue comments requiring these funds to restrict shareholders to accredited investors or limit private fund investments to 15% of total assets. 

This shift acknowledges the evolution of the regulatory landscape since 2002. Funds currently exceeding the 15% threshold and eliminating investor qualifications should file amendments under Rule 486(a) or 486(b) or prospectus supplements under Rule 424. Funds must assess whether changes constitute a “material” change, requiring Commission review under Rule 486(a). Eliminating the 15% cap requires a post-effective amendment under Rule 486(a). 

Implications of ADI 2025-16 

• Expands investment scope for closed-end funds. 

• Impacts suitability and due diligence obligations. 

• Alters disclosure and compliance considerations for investment advisers. 

• Creates new product distribution opportunities, increasing the need for careful communication. 

For an in-depth review of this and a complete analysis of all regulatory updates in the third quarter of 2025, please download our Regulatory Update.