Asset Management Attorneys Explore Recent SEC Compliance Guidance for Rule 506(c) and ETF Share Class Relief in The Investment Lawyer

In March 2025, the Securities and Exchange Commission (SEC) issued an interpretive letter introducing an objective framework for satisfying the verification requirement of Rule 506(c). This new guidance is designed to reduce compliance uncertainty and operations complexity by providing a clearer and less intrusive path to verification, potentially paving the way for broader use of Rule 506(c).

Separately, the SEC is currently considering exemptive relief that would permit registered open-end mutual funds to offer a class of exchange-traded funds (ETFs).

In a recent article for The Investment Lawyer, asset management partner George Raine and associate Chris Labosky examined how the SEC’s new guidance has the potential to ease constraints faced by 1940 Act-only and non-US public funds. The attorneys deconstructed existing regulations over these two types of funds, concluding that the March 2025 Letter should help sponsors to privately placed funds access broader pools of accredited investors and encourage greater participation by US investors in high-quality non-US public funds.

In a separate article for The Investment Lawyer, asset management partners Brian McCabe and Jessica Reece, counsel Ed Baer, and associate Chris Labosky discussed the SEC’s consideration of share class relief for open-end mutual funds. The attorneys outlined how permitting these funds to offer a class of ETFs could promote cost savings through economies of scale, enable more efficient portfolio management, reduce shareholder transaction costs, and provide significant tax benefits, among other advantages.