The pace and intricacies of regulatory change in the investment industry are, at times, nothing short of overwhelming. Yet, organizations in this space need to have a clear understanding of evolving regulations, their timing and overall impact.
This past quarter brought several developments with potential implications for investment company valuation, financial reporting and regulatory compliance. Below is Cohen & Co’s quarterly recap of these developments and their potential, practical impacts.
The FASB issued ASU 2026-03 on September 9, 2026, changing how investment companies (Topic 946 entities) account for equity securities subject to contractual sale restrictions.
Under existing GAAP, a contractual restriction on the sale of an equity security is generally considered an attribute of the holder rather than the security, and is therefore excluded from the fair value measurement. As a result, an investment company generally measures a restricted equity security using the same quoted price as an otherwise identical unrestricted security.
The ASU is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. Upon adoption, investment companies will:
>> Our Take: The ASU represents a meaningful change for investment companies holding equity securities subject to contractual sale restrictions, changing the outcome under ASU 2022-03 by allowing qualifying restrictions to affect fair value. Rather than valuing an affected restricted position at the same price as an otherwise identical unrestricted security, funds will now need to incorporate the economics of the restriction into fair value using market participant assumptions. This may affect holdings, such as post-IPO, de-SPAC or private placement positions when the contractual restriction qualifies for the new guidance.
The change places greater emphasis on the valuation process. Discounts should reflect market participant assumptions and the specific characteristics of the restriction rather than the application of a standardized haircut. Funds should, therefore, consider the methodology, inputs, supporting market evidence and governance surrounding these adjustments.
Funds with significant restricted positions should begin identifying securities that could be affected, evaluating potential NAV impacts and considering the appropriate timing of adoption. Because the transition adjustment is recognized in the period of adoption, funds should understand the potential financial reporting and NAV impact in advance and consider whether early adoption is appropriate.
The SEC and CFTC have again extended the compliance date for February 2024 Form PF amendments from October 1, 2026, to July 1, 2027. The extension provides the agencies with additional time to consider changes proposed in April, which would revise or eliminate certain requirements adopted in 2024. As discussed in our July 2026 Investment Industry Wire, those proposed changes remain under consideration. If the proposal is not finalized, advisers will have until July 1, 2027, to comply with the 2024 requirements as adopted.
>> Our Take: The extension provides welcome additional implementation time, but it does not eliminate the 2024 requirements. Private fund advisers should maintain their implementation plans while monitoring the pending proposal, and prioritize near-term efforts on data, systems and reporting requirements unlikely to be affected by further rulemaking.
On October 1, 2026, the SEC released a proposal to modernize the custody requirements applicable to investment advisers and registered funds. While crypto assets and tokenized investments are a significant focus, the proposal also would modify several longstanding custody requirements.
Provisions of note include:
Comments are due December 7, 2026.
>> Our Take: The proposal would provide a more defined custody framework for crypto assets, but its implications extend beyond digital assets. For private funds, the proposed changes to the annual audit provision and codification of existing financial statement delivery periods for certain fund-of-funds structures are particularly noteworthy. Registered funds and BDCs should also consider how proposed changes to broker-dealer and digital asset custody may affect their existing custody arrangements. Because the proposal is not yet effective, current custody requirements remain in place while the SEC considers comments and any changes to a final rule.
Read “SEC Crypto Custody Proposal: What It Could Mean for Investment Advisers and Funds”
Contact Bryan Friedmann or a member of your service team to discuss this topic further.
In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.