October 8, 2026

Clients, Friends, and Associates:

With the third quarter of 2026 behind us, we highlight below several noteworthy industry updates. As always, we aim to provide a brief but informative overview. If you have any questions on these items or related matters, please contact us.

CFM Items

CoinAlts Fund Symposium – October 14. We are proud to return as a Premier Sponsor of the CoinAlts Fund Symposium, alongside MG Stover, Harneys, and KPMG. The event takes place at the Hyatt Regency Hotel in San Francisco on October 14, 2026. Join us for expert panels, leading speakers, and insights into this rapidly evolving industry. For more information, visit https://coinalts.xyz/.

Our People. We are pleased to welcome two new additions to our team: partner Malhar Oza, who returned to the Investment Funds practice from Finality Capital Partners Management LLC, and Meza Plazantia, who joins the firm as a finance assistant. Please join us in welcoming Malhar and Meza!

****

SEC Matters

SEC’s 2026 Regulatory Agenda Targets Private Markets and Crypto. On July 7, 2026, the SEC released its 2026 rulemaking agenda, comprising 38 items (36 at the proposed rule stage) focused on capital formation, private market access, and crypto asset regulation. Key proposals include:

• Changes to the accredited investor definition and exempt offering pathways.
• Investment Advisers Act and Investment Company Act amendments permitting broader use of performance fees and allowing registered funds to offer retail investors exposure to private markets.
• Crypto custody rules for advisers and registered funds.
• A refreshed finders’ exemption for unregistered capital-raising intermediaries.
• Expanded Rule 144 safe harbor for resales of restricted securities.
• Changes to the pay-to-play rule’s two-year “cooling off” period restricting adviser compensation from public pension plans following certain political contributions.

This is one of the most forward-thinking SEC agendas for fund managers in recent memory, addressing longstanding ambiguities in an evolving industry. The details could shift materially before adoption, and we will monitor each proposed rule as it is released.

Form PF Compliance Delayed Again to July 2027. On August 31, 2026, the SEC and CFTC delayed the compliance date for the 2024 Form PF amendments for the fourth time, moving it from October 1, 2026, to July 1, 2027. The extension gives the agencies time to finalize a separate proposal that would raise the general Form PF filing threshold from $150 million to $1 billion in private fund assets under management and the large hedge fund adviser threshold from $1.5 billion to $10 billion. If not finalized, the 2024 amendments take effect as adopted on July 1, 2027. The agencies estimate the threshold increase would eliminate Form PF obligations for approximately 43% of current filers and move roughly two-thirds of current large hedge fund advisers into the lighter standard filing tier. Managers should continue reporting under existing Form PF rules while the proposal is under review.

SEC Clarifies When Swaps and Activist Investment Vehicles Trigger Disclosure. On July 9, 2026, the SEC’s Division of Corporation Finance issued interpretations addressing when a cash-settled swap creates beneficial ownership under Section 13(d), and when investors in an activist investment vehicle must be named in public filings:

• A cash-settled total return swap that references only underlying stock and conveys no voting or investment power does not, standing alone, create beneficial ownership or trigger a 13D filing. However, beneficial ownership may exist if the holder knew, or was reckless in not knowing, that the arrangement created a false impression of a purely economic position (for example, by directing the counterparty’s vote or prearranging acquisition of the hedge shares).
• When an entity is formed to acquire a specific issuer’s securities and pursue an activism campaign, and investors are informed of the entity’s target and purpose in advance, the entity’s Schedule 13D must disclose its investors’ identities under Item 3, regardless of contribution size. This narrow guidance does not extend to a general-purpose or diversified fund, even if that fund later takes an activist position.

****

Digital Asset Matters

SEC Proposes Amendments and New Rules for the Custody of Crypto Assets. On October 1, 2026, the SEC proposed amendments to the Investment Advisers Act custody rule and new custody rules under the Investment Company Act. If adopted, the proposal would allow investment advisers to self-custody client crypto assets, including those of regulated funds, and would add state trust companies as a new category of permitted custodian for crypto assets, subject to specified conditions. Key elements include:

• Self-custody. An adviser could self-custody a crypto asset only if it first determines in writing that no qualified custodian is available to hold it and repeats that determination each quarter.
• Safeguarding. The adviser would also need to have, and document, the expertise and systems to safeguard each asset, review those systems every year, obtain internal control reports, send clients quarterly account statements, and agree with each client in writing to treat the self-custodied crypto asset as a “financial asset” under state law.
• State trust company custody. Before using a state trust company, advisers and funds would need a reasonable basis, both initially and every year after, for believing that the company is authorized by its state banking authority to custody crypto assets and maintains adequate safeguarding policies, and they would also need to review its audited financial statements and internal control reports and confirm that client assets are kept separate from the company’s own assets.
• Form ADV Disclosure. The proposal would also add new Form ADV disclosures about crypto self-custody and state trust company custodians.

Many of the proposal’s key elements are consistent with the positions CFM advanced in its meetings with the SEC and in the 2017 and 2018 recommendations the firm made to the SEC, when concerns about the custody of crypto assets were first emerging. These rules are only proposals at this stage. The comment period will remain open for 60 days following the publication of the SEC’s proposing release in the Federal Register.

SEC Issues Five-Year “Innovation Exemption” Granting Relief for Tokenized Stock Trading. On September 17, 2026, the SEC issued a conditional exemptive order (the “Innovation Exemption”), effective immediately, that creates a new “Tokenized Securities Venue.” A TSV may run permissioned automated market makers in tokenized National Market System stock (i.e., stocks listed on regulated major U.S. exchanges) without registering as a national securities exchange or as an alternative trading system, and firms that commit proprietary capital to its liquidity pools are relieved of the dealer registration requirement. The relief is built around automated market maker liquidity pools, so a platform that matches orders through a central limit order book would not qualify. Because the relief works on notice rather than approval, a venue meeting the conditions may begin trading 30 calendar days after publishing its notice, and must notify the SEC within one business day of publishing. For additional information, please view our related website post.

SEC Proposes “Regulation Crypto Assets,” a New Offering Framework for Crypto Investment Contracts. On August 18, 2026, the SEC proposed Regulation Crypto Assets, a framework for offerings of “covered investment contracts” (i.e., investment contracts involving a crypto asset that is not itself a security). The proposal creates two Securities Act exemptions: a start-up exemption for raises of up to $5 million over a rolling four-year period, with no required audited financial statements, periodic reporting, resale restrictions, or accredited investor limits; and a two-tier fundraising exemption for raises of up to $75 million per 12-month period, subject to financial statements (audited above certain thresholds) and ongoing reporting. Both exemptions require a U.S.-organized issuer with a majority of its principals and directors being U.S. citizens or residents, and whose assets and operations are predominantly domestic.

The exemptions would also preempt state securities law and create a safe harbor removing crypto assets from securities law treatment once the issuer completes or ceases the promised development work and post-certifies on Form TR. However, two features warrant monitoring: the U.S. organizational requirement, which could effectively exclude non-U.S. managers and projects structured through offshore foundations, and the state law preemption, without which issuers relying on these exemptions remain subject to state blue sky laws.

CME Sues CFTC Over Classification of Crypto Perpetual Futures. On June 18, 2026, CME Group sued the CFTC and its Chairman in the U.S. District Court for the District of Columbia, challenging the CFTC’s approval of KalshiEX’s bitcoin perpetual futures contract (BTCPERP) and a related policy statement permitting designated contract markets to list similar digital-asset perpetuals as futures. On September 2, 2026, the CFTC moved to dismiss, arguing that CME lacks standing.

CME argues that perpetual contracts, which provide continuing exposure without a maturity date, should be classified as swaps, seeking to vacate the Kalshi approval and the policy statement. If the case proceeds and CME prevails, the ruling could have several significant implications:

• Counterparties trading swaps above the registration threshold would need to register as swap dealers, incurring additional obligations.
• Margin and clearing would shift from standard clearinghouse futures margin to more expensive swap-style margin.
• Trade reporting would move from exchange-level reporting to swap data repository reporting.

Separately, futures receive favorable tax treatment under IRC Section 1256 that swaps do not, which could affect the taxation of gains and losses from these instruments.

SEC Staff Confirms Blockchain Digital Attestations Can Satisfy Rule 506(c) Verification for Tokenized Offerings. On July 21, 2026, SEC staff confirmed that an issuer conducting a Rule 506(c) offering of a tokenized security may satisfy the accredited investor verification requirement through a digital attestation built into the token itself. This extends a related 2025 no-action letter, which permitted reliance on a high minimum investment amount and a written investor representation in lieu of tax or banking documentation. That representation, covering accredited investor status and confirming no third-party financing, may now be captured programmatically through the token protocol at subscription rather than by separate signed documentation. The underlying requirements are unchanged: issuers must maintain adequate verification records, meet minimum investment amount thresholds, and have no actual knowledge that an investor’s representation is false.

****

Tax Matters

Limited-Partner SECA Exception Reaches Three Circuits in Soroban, Denham, and Sirius Solutions. On August 12, 2026, the Fifth Circuit withdrew its January 2026 opinion in Sirius Solutions, L.L.L.P. v. Commissioner and issued a revised opinion holding that a “limited partner” under IRC Section 1402(a)(13) is one who plays “no significant role in managing or running a business.” The court rejected the Tax Court’s “passive investor” standard from Soroban Capital Partners LP v. Commissioner, replacing a bright-line status test with a fact-specific inquiry. The case has been remanded. On September 17, 2026, the Second Circuit affirmed the Tax Court in Soroban, holding that the limited partners at issue did not qualify for the Section 1402(a)(13) exception because they exercised managerial control over the partnership’s business. A similar challenge is pending in the First Circuit, raising the prospect of eventual Supreme Court review. For asset managers organized as limited partnerships, the exception now turns on a partner’s level of active engagement in the business, a standard the Fifth Circuit left undefined. Asset managers and their counsel should evaluate current partnership structures and the roles played by limited partners. Asset managers organized as other entity types (e.g., LLCs) are likely unaffected. For additional information on this topic, please view our client alert memo.

Tax Court Holds Crypto Staking Rewards Are Taxable on Receipt in Paschall v. Commissioner. On June 4, 2026, in Paschall v. Commissioner (T.C. Memo. 2026-46), the U.S. Tax Court held that cryptocurrency staking rewards are taxable income when received. The taxpayer staked Cardano tokens through the eToro platform on a proof-of-stake blockchain and argued that rewards should not be taxed until sold or otherwise disposed of. The court rejected this position, holding the rewards includible in gross income under IRC Section 61. Taxpayers should track and report the fair market value of staking rewards at receipt and consult their tax advisors on whether amended returns or revised estimated tax payments are warranted.

****

Other Matters

SEC Approves FINRA Rule 5123 Exemption for Family Offices and $5M+ Entity Investors. On July 24, 2026, the SEC approved amendments to FINRA Rule 5123, which requires members to file private placement memoranda, term sheets, and other offering documents with FINRA within 15 calendar days of first sale, subject to an exemption for certain accredited investor sales. The amendments extend that exemption to family offices with assets under management in excess of $5 million, and entities owning investments in excess of $5 million, reducing member compliance costs and streamlining the offering process. Members relying on the exemption should confirm that each investor qualifies and was not formed for the specific purpose of acquiring the securities offered.

New CIMA AML/CFT/CPF Rules Effective September 18, 2026. On July 20, 2026, the Cayman Islands Monetary Authority (“CIMA”) published two finalized rules for all CIMA-regulated financial service providers: the AML/CFT/CPF Compliance Rule, requiring a documented compliance program covering designated compliance officers, risk assessments, and customer due diligence; and the Financial Sanctions Rule, requiring sanctions screening, asset freezing, and reporting to the Financial Reporting Authority. Both rules took effect on September 18, 2026. Fund managers operating within or from the Cayman Islands should conduct a gap analysis with Cayman Islands legal counsel and update their programs.

Cayman Islands Requires a Cayman-Based Principal Point of Contact by January 2027. Under the Cayman Islands’ implementation of the OECD’s updated Common Reporting Standard (“CRS”), all Cayman Islands Financial Institutions must appoint a Principal Point of Contact (“PPOC”) with a physical address in the Cayman Islands and notify the Tax Information Authority by January 31, 2027. A mailing or correspondence address alone will not suffice. This is one of several new obligations under CRS 2.0. While not a new development, this requirement to assign a PPOC should be top-of-mind for affected managers. We encourage fund managers to review their broader CRS readiness with Cayman Islands legal counsel.

****

Compliance Calendar

As you plan your regulatory compliance timeline for the coming months, please keep the following dates in mind:

October 13, 2026

• Form 13H Filing for Changes. Filing is for the calendar quarter that ended September 30, 2026, and should be submitted within 10 days of quarter end.  

November 16, 2026

• Form 13F Quarterly Filing. Filing is for the calendar quarter that ended September 30, 2026, and should be submitted within 45 days of quarter end.  
• Form 13G Quarterly Filing. Filing is for the calendar quarter that ended September 30, 2026, and should be submitted within 45 days of quarter end in which a material change has occurred.
• CTA Form PR. Filing is for the calendar quarter that ended September 30, 2026, and should be submitted within 45 days of quarter end in which any material changes occurred.

November 30, 2026

• Form PF for Large Hedge Fund Advisers. Filing is for the calendar quarter that ended September 30, 2026, and should be submitted within 60 days of quarter end. 
• Form PF (Section 6) for Private Equity Fund Advisers. Filing is for the calendar quarter that ended September 30, 2026, and should be submitted within 60 days of quarter end in which a reporting event has occurred.

December 8, 2026

• Annual IARD Renewal Payments Due for Preliminary Statement Issued in E-bill for Registration/Notice Filings. Payment can be made through FINRA Firm Gateway. 

Periodic

• Fund Managers should perform “Bad Actor” certifications annually.
• Form D and Blue Sky Filings should be current.
• Super Account Administrators (“SAA”) should complete the identity verification process through FINRA Firm Gateway and ID.me.
• CPO/CTA Annual Questionnaires must be submitted annually, and promptly upon material information changes, through the NFA Annual Questionnaire system.

Consult our complete Compliance Calendar for all 2026 critical dates as you plan your regulatory compliance timeline for the year.

Please contact us with any questions or assistance regarding compliance, registration, or planning issues on any of the above topics.

Sincerely,

Karl Cole-Frieman, Bart Mallon, John T. Araneo, Brett Bunnell, Garret Filler, Scott Kitchens, Kevin Leiske, Frank J. Martin, Malhar Oza, Lilly Palmer, Daniel M. Payne, David Rothschild, Bill Samuels, Tony Wise, and Alex Yastremski

Cole-Frieman & Mallon LLP (CFM) is a leading, Chambers Global-ranked investment management law firm known for providing top-tier, innovative, and collaborative legal solutions for complex financial services matters. Headquartered in San Francisco, CFM serves start-up investment managers, multibillion-dollar funds, and everything in between. The firm provides a full suite of legal services to private funds and their managers across a diverse range of asset classes, including fund formation, regulatory compliance, counterparty documentation (digital and traditional prime brokerage, ISDA, repo, and vendor agreements), employment and compensation matters, and routine business matters.  CFM is particularly well known for its pioneering work with digital asset funds and their managers. The firm’s Corporate, Tax, and Intellectual Property (IP) practice groups advise founders, management teams, and investors during all stages of a business’s lifecycle including fundraising, M&A, governance, IP, employment, tax, and regulatory compliance for service and product launches. CFM also publishes the prominent Hedge Fund Law Blog. For more information, please add us on LinkedIn, follow us on X, and visit us at colefrieman.com.