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    Mar. 12, 2026

Soroban’s Functional Analysis Test Hits Sirius Roadblock

On January 16, 2026, the Court of Appeals for the Fifth Circuit (Fifth Circuit) issued a pivotal ruling in Sirius Solutions, L.L.L.P. v. Commissioner (Sirius Solutions), reversing a prior decision of the Tax Court and delivering certain private fund managers a welcome outcome on an issue impacting their limited partners. In a 2‑1 decision, the Fifth Circuit held that, for purposes of the exception to self-employment tax under Section 1402(a)(13) of the U.S. Internal Revenue Code of 1986 (Code), “a limited partner is a partner in a state-law limited partnership that is afforded limited liability.” Accordingly, the Fifth Circuit rejected the Tax Court’s position, first articulated in its 2023 decision in Soroban Capital Partners v. Commissioner, that the self-employment tax exception is reserved for “passive investors” determined using a “functional analysis” test. This guest article by McDermott Will & Schulte attorneys David S. Griffel, David S. Wermuth and Lauren E. Exnicios examines the Sirius Solutions decision, discusses relevant cases pending in other circuit courts and presents the key considerations for private fund managers in light of these cases. For the history of Section 1402(a)(13), see “IRS Wins Round One Over Meaning of ‘Limited Partner’ for Self-Employment Income Purposes” (Feb. 15, 2024).

CFTC No‑Action Letter Restores Commodity Pool Operator Exemption for Many Asset Managers (Part One of Two)

On December 19, 2025, in response to a request from an industry organization, the Market Participants Division of the CFTC issued No‑Action Letter 25‑50 (Letter), which agrees to restore the rescinded qualified eligible person registration exemption previously available under CFTC Regulation 4.13(a)(4) for commodity pool operators and commodity trading advisors. The exemption, originally established in 2003, was rescinded in 2012 as part of the Dodd-Frank Act’s reforms. Its recission meant that market participants had to comply with extensive, overlapping and sometimes conflicting CFTC and SEC regulations. This article, the first in a two-part series, explains the background of and rationale for the CFTC’s no-action position and summarizes the Letter. The second article will consider which types of asset managers are the likeliest beneficiaries of the relief; address reporting and disclosure requirements of those that opt to deregister to take advantage of the new relief; and weigh the pros and cons of taking action now in the absence of formal rulemaking. See “Acting SEC and CFTC Chairs Emphasize Getting ‘Back to the Basics’” (May 8, 2025); and “What’s Next for the SEC and CFTC? A Look at the Latest Reg Flex Agendas” (Aug. 15, 2024).

2026 Securities Enforcement Forum Panel Discusses Current Enforcement Climate

At the 2026 Securities Enforcement Forum New York, a panel of present and former securities regulators, enforcers and compliance professionals took the pulse of the enforcement climate affecting financial services firms. They discussed current SEC enforcement activity, how firms can reduce the risk of a referral to the SEC Division of Enforcement, the ongoing anti-fraud efforts of the U.S. Attorney’s Office for the Southern District of New York (SDNY), regulatory focus on broker-dealers, ongoing SEC focus on insider trading, the SDNY’s new self-reporting guidance and regulatory concerns over retailization of private funds. This article synthesizes their insights. See “Former Senior SEC Staff Discuss Effective Compliance Programs and Exam and Enforcement Climate” (Dec. 18, 2025).

U.K. FCA Proposes Rules to Support Fund Tokenization and Direct Dealing

On October 14, 2025, the U.K.’s Financial Conduct Authority (FCA) issued a consultation paper proposing new rules for fund tokenization and direct-to-fund dealing (Consultation Paper). The FCA aims to provide firms with more clarity and confidence to adopt tokenization in fund management, as well as confirm its rules are suitable for the future. The proposed rules reflect the FCA’s desire to be ambitious and flexible in supporting innovations, taking a “technology positive” approach that ensures the U.K. is competitive on an international level. The FCA’s proposals address four key areas: accelerating tokenization of authorized funds, direct dealing in authorized funds, advancing fund tokenization and supporting future tokenization models. The proposed rules would apply to Undertakings for Collective Investment in Transferable Securities management companies, U.K. alternative investment fund managers of authorized funds and depositaries of authorized funds. This article summarizes the key takeaways from the Consultation Paper. For coverage of other FCA initiatives, see “U.K. Regulators Propose Changes to AIFM Rules to Ease Compliance Burden on Fund Managers” (Sep. 25, 2025); and “FCA ‘Dear CEO’ Letter Highlights Focus on Private Markets and Resilience” (Apr. 10, 2025).

Understanding GP Financing Facilities

General partner (GP) financing involves financing at the fund sponsor level, as opposed to fund-level subscription lines of credit or net asset value facilities, explained Proskauer partner Philip A. Kaminski at a Practicising Law Institute (PLI) program on fund finance. The GP finance market has evolved significantly over the past decade. “Lenders have realized that GP cashflows can be modeled and underwritten like any other asset,” he observed. They are building lending strategies tied to those fee streams. The PLI program covered the fundamentals of GP financing, including deal structures and terms; lender due diligence; default triggers and remedies; and how GP financing differs from other fund finance options. Matthew K. Kerfoot, partner at Proskauer, monitored the discussion, which also featured Adam Dobson, partner at Ropes & Gray; and Jocelyn A. Hirsch, P.C., partner at Kirkland & Ellis. This article synthesizes their insights. See our two-part series on trends in use of subscription credit facilities: “Advantages for PE Investors and Sponsors Have Led to Adoption by Some Hedge Funds and Credit Funds” (Jan. 24, 2019); and “Structuring Considerations Negotiated With Lenders and Important LPA and Side Letter Provisions” (Feb. 7, 2019).

Paul Hastings Adds Former In‑House Counsel to Chicago Office

Paul Hastings announced that Joshua Cohen has joined the firm as a partner in the investment funds and private capital practice in the Chicago office. Cohen brings more than 20 years’ experience advising clients in the structuring, formation and maintenance of open- and closed-end private investment funds, including hedge funds, private equity funds, credit funds, hybrid funds, fund of funds vehicles, liquid alternative mutual funds and scalable platforms for fund sponsors. For insights from other Paul Hastings partners, see “Insiders Tsao, Soltes and Kahn Share Insights on Investigations” (Sep. 14, 2023); and “Messaging Apps Come Under Increasing Regulatory Scrutiny” (Aug. 31, 2023).

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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.