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    Mar. 19, 2026

Fifth Circuit Delivers Landmark Victory for Fund Managers in Self‑Employment Tax Dispute

A decision issued by the U.S. Court of Appeals for the Fifth Circuit rejects the IRS’ “passive investor” test and holds that limited partner status under Section 1402(a)(13) of the Internal Revenue Code turns on limited liability under state law, not on a partner’s level of involvement in the partnership’s business. Two cases in the First and Second Circuits will determine whether the ruling gains national traction or sets the stage for U.S. Supreme Court review. In a guest article, Skadden attorneys Kat Saunders Gregor, Elizabeth J. Smith and Theodore B. Galvan summarize the Fifth Circuit’s decision, forecast future potential legal developments in this area and highlight the key takeaways for investment management firms. See “Trends in IRS Audit Efforts and Tips on Surviving an IRS Examination” (Apr. 3, 2025).

Converting a Private Fund Into a Regulatory Fund: Investor Relations, Track Record and Board of Directors Issues (Part Two of Two)

Advisers are increasingly electing to convert their private funds, operating under the Investment Advisers Act of 1940, into registered funds that are subject to the Investment Company Act of 1940 (Investment Company Act) in order to gain access to broader distribution channels – namely, retail investors. A fund conversion is no simple proposition, however, as advisers must address concerns, and gain approval of, existing investors of the legacy fund. Further, advisers need to familiarize themselves, and take actions to comply, with stringent Investment Company Act requirements, including putting a fund-level board of directors in place. This second article in a two-part series explores best practices for handling certain challenges of fund conversions, including obtaining investor approvals, ensuring compliant portability of track record, putting a fund-level board of directors in place and retaining qualified third-party service providers. The first article examined the common rationales that compel advisers to convert their private funds into registered funds, and considered various factors that can influence the timeline for effectuating a conversion. See our three-part series: “Institutional LPs’ Growing Concerns Over Retailization of the Private Funds Industry” (Jan. 8, 2026); “Specific Concerns About How Retailization Could Impact Institutional Investors’ Interests” (Jan. 22, 2026); and “Protective Measures Institutional Investors Can Adopt to Mitigate Risks of Retailization” (Feb. 5, 2026).

Using RWI to Facilitate Distributions and Mitigate Risks in Continuation Vehicles and Other Tail‑End Funds

Representations and warranties insurance (RWI) and other insurance products can be used by tail-end funds – e.g., continuation vehicles – to mitigate downside risk, facilitate earlier distributions and enhance overall fund outcomes, explained Morgan Lewis partner John D. Cleaver in a program on using insurance in secondaries and other tail-end fund scenarios. During the program, Cleaver, along with Christopher Le Neve Foster and Ben Prebble, managing directors at Howden Private Capital LLC, discussed key features of the secondaries market; the benefits of RWI; how RWI is used in both GP‑led and LP‑led secondaries; RWI policy selection, underwriting, terms and pricing; and insuring against unknown claims after winding up a fund. This article synthesizes the key takeaways from the program. See our two-part series on adapting RWI to secondaries: “Mechanics of the Insurance Policies and Obstacles Posed by Secondaries” (Apr. 13, 2021); and “Evolution of the Insurance Coverage to Apply to GP‑Led Restructurings” (Apr. 20, 2021).

Navigating Persistent Challenges and Ambiguities of the Marketing Rule

Rule 206(4)‑1 (Marketing Rule or Rule) under the Investment Advisers Act of 1940 was adopted in December 2020 and took effect in November 2022. More than three years later, many advisers continue to face challenges in complying with the Rule. To date, most SEC guidance on the Rule has been in the form of frequently asked questions (FAQs) issued by the SEC’s Division of Investment Management (Division), which focus on presentation of performance, and most enforcement actions have involved hypothetical performance. The latest developments as to the Marketing Rule were covered in a program featuring Dechert partners Michael W. McGrath, Lindsay R. Grossman and Robert S.H. Shapiro; CFA Institute director Ken Robinson; and Scott Jameson, senior counsel in the Division’s Chief Counsel’s Office. This article examines key takeaways from the program, including the ongoing challenges raised by footnote 590 of the Rule’s adopting release; the impact of the Division staff’s FAQs that were released on January 15, 2026; issues around presentation of case studies and hypothetical performance; and FINRA’s proposal to loosen its prohibition on projecting returns. See “Marketing Rule Risk Alert Focuses on Testimonials, Endorsements and Third‑Party Ratings” (Mar. 5, 2026); and “Performance Reporting Templates, Standards and Initiatives for PE and Real Estate Funds” (Feb. 5, 2026).

FCA Reports on Off‑Channel Communications

“Robust record keeping and monitoring of communications is essential for firms to detect and investigate misconduct. It also serves as an important safeguard for firms in client disputes and litigation,” said the U.K. Financial Conduct Authority (FCA) in its report (Report) on regulated firms’ policies and practices for monitoring and preserving electronic communications. The FCA studied 11 regulated firms’ approaches to electronic communications that take place “outside of monitored, recorded channels a firm has permitted” (off-channel communications). All firms had improved their approaches to off-channel communications to some degree, according to the Report. On the other hand, most firms continued to observe violations of their internal policies by staff at all levels of seniority. This article parses those and other findings from the study, which fund managers can use to assess their own handling of off-channel communications. Sharing the results of the study “allows firms to learn from others and reflect on their own approach,” noted the FCA. For coverage of previous SEC sweeps, see “Latest SEC Sweep of Off‑Channel Communications Both Befuddles and Turns Up the Heat on Investment Advisers” (Mar. 21, 2024); and “Enforcement Actions Resulting From SEC Sweep Keep Off‑Channel Communications in the Spotlight” (Oct. 5, 2023).

Paul Hastings Welcomes Fund Finance Partners to New Charlotte Office

Holly Loftis, Danyeale Leagh Chung, Olivia Stewart and Brian Kettmer have joined Paul Hastings as partners in the firm’s newly opened Charlotte office. Their arrival marks the recent expansion of the firm’s global fund finance practice. See “Current Landscape and Trends in Fund Financing Terms and the Rise of Non‑Bank Lenders” (Apr. 3, 2025); and “Key Issues and Trends in Financing Facilities for Secondaries Funds” (Dec. 12, 2024).

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Trailblazing Women – Contributions, Achievements and Observations of Outstanding Leaders

To mark International Women’s Day, Law Report Group editors, along with our colleagues across ION Analytics’ products, interviewed outstanding women in the industries and jurisdictions we cover. In this article, Jill Abitbol, Robin Barton, Rorie Norton and Megan Zwiebel profile notable women in the data privacy, cybersecurity, AI, private funds and anti-corruption law fields, including (i) Paula Howell Anderson, (ii) Gwendolyn Lee Hassan, (iii) Audrey Koh, (iv) Stacy Feuer, (v) Heather Egan, (vi) Jeewon Serrato, (vii) Stephanie Breslow, (viii) Anne Choe, (ix) Heather Wyckoff, (x) Angie Batterson, (xi) Jacqueline Eaves, and (xii) C. Dabney O’Riordan.

Enjoy reading their inspiring remarks here.