Since August 2025, regulators have been focused on how to increase retail investors’ indirect exposure to private issuers, as part of the implementation of Executive Order 14330, which directed federal agencies to consider how to facilitate greater access to alternative investments, including through retirement accounts. [1] Securities and Exchange Commission (the “SEC”) Chairman Paul S. Atkins has similarly identified the “responsible retailization” of private markets as an SEC priority, emphasizing the potential for regulated investment vehicles to broaden retail access while maintaining appropriate investor protections. [2] In September 2026, the SEC proposed several rule changes. The SEC views these proposals as the first step in a “three legged” process built on access, transparency and incentives that would give retail investors greater access to private-market investment opportunities, including investments in companies before they go public.
In the first set of proposed rule changes, the SEC would alter the rules applicable to performance-based fees, which would relax distribution limitations that prevent some investors from gaining exposure to private funds that pay performance-based fees. The SEC has also proposed to update the definition of “qualified client” to include accredited investors, add credentials-based tests and remove the assets under management test. A discussion of these proposed changes can be found here.
This memorandum discusses the second major proposal, which would codify existing relief and update the interval fund structure, with specific modifications to liquidity management and repurchase offer timing that could make these funds more desirable to a wider range of investors. The SEC also proposed to codify closed-end fund relief and permit multiple share classes, which would allow fund sponsors to deliver these investment opportunities through different distribution channels.
These proposals reflect the SEC’s efforts to provide retail investors with greater access to non-public investments, enabling a broader percentage of investors to participate meaningfully in the significant growth period that occurs prior to a company going public.
Overview
On September 30, 2026, the SEC proposed amendments to modernize the interval fund framework under Rule 23c-3 under the Investment Company Act of 1940, as amended (the “1940 Act”), expand the ability of registered closed-end management investment companies and business development companies (“BDCs,” and together with registered closed-end management investment companies, “regulated closed-end funds”) to issue multiple share classes, and enhance related disclosure and reporting (the “Proposal”).[3]
The Proposal arrives as interval funds have become an increasingly important channel for private-market exposure. SEC data shows that interval funds have more than doubled since 2020. As of December 2025, credit strategies represented approximately 55% of interval fund net assets. Interval funds occupy a middle ground between daily-redeemable open-end funds and less-liquid private or tender offer fund structures; they may hold meaningful allocations to less-liquid assets while providing shareholders with predictable but limited opportunities to exit at net asset value (“NAV”).
The Proposal has three principal components: (1) modernization of Rule 23c-3’s repurchase mechanics and liquidity requirements; (2) expansion of Rules 18f-3 and 17d-3 under the 1940 Act to permit eligible regulated closed-end funds to use multiple share classes and related distribution arrangements without individual exemptive orders; and (3) form amendments to improve class-level, fee and expense disclosure. Most existing exemptive orders permitting monthly repurchases and multiple-class structures would be rescinded after a one-year compliance period.
If adopted, the Proposal would provide sponsors with greater flexibility in designing interval funds and other regulated closed-end fund products while reducing reliance on individualized exemptive relief. The Proposal would also shift certain aspects of the current framework from prescriptive requirements toward fund-specific policies, procedures, compliance controls and board oversight. The discussion below summarizes the principal proposed changes and their practical implications.
I. Current Regulatory Framework
A. Interval Funds and Rule 23c-3
Rule 23c-3 permits a registered closed-end fund that operates as an interval fund to make periodic repurchase offers at NAV pursuant to a fundamental policy. Currently, an interval fund must adopt a fundamental policy to make repurchase offers every three, six or twelve months of between 5% and 25% of the fund’s assets. Rule 23c-3 specifies the timing for shareholder notices, repurchase requests, pricing and payment, and portfolio liquidity requirements. From the shareholder notification through repurchase pricing date, an interval fund generally must maintain liquid assets in the maximum amount of the repurchase offer. For this purpose, liquid assets are fund assets that can be sold or disposed of in the ordinary course of business, at approximately the value at which the fund has valued the investments.
Many interval funds currently rely on exemptive orders permitting monthly repurchase programs and operational flexibilities beyond what Rule 23c-3 permits. The Proposal would codify much of this exemptive relief while also modernizing the rule’s liquidity and repurchase framework.
B. Multiple Share Classes
Section 18 of the 1940 Act generally limits a regulated closed-end fund’s ability to issue multiple classes with differing distribution arrangements, expense structures or voting rights. Since 2007, the SEC has issued approximately 230 exemptive orders permitting unlisted, continuously offered regulated closed-end funds, including interval funds, to operate multiple-class structures subject to conditions modeled on Rule 18f-3 and related open-end fund requirements.[4] The Proposal would amend Rule 18f-3 to make similar relief available by rule and would amend Rule 17d-3 to address related distribution arrangements with affiliates and principal underwriters.
II. Proposed Interval Fund Modernization Framework
The table below summarizes the current framework and principal proposed changes to Rule 23c-3. The most significant changes are discussed in greater detail below.
As discussed in Sections II.A through II.C below, the Proposal would modernize the interval fund framework by providing greater flexibility in the timing and administration of repurchase offers, revising the treatment of pricing, oversubscriptions and fees, and replacing the current liquid-asset requirement with a principles-based liquidity standard.
A. Greater Flexibility in Repurchase Programs
Longer initial ramp-up period. A new interval fund could delay its first repurchase offer for up to two years after the later of (i) the effective date of its registration statement or (ii) the shareholder vote first adopting its periodic repurchase policy. The SEC noted that interval funds often invest in less-liquid asset classes that require time to deploy capital, and this flexibility could reduce liquidity pressures during the fund’s initial build-out. Existing interval funds would not automatically receive a new ramp-up period solely because they change their repurchase interval.
For sponsors of new products, this change would materially affect portfolio construction and launch planning. A longer ramp-up period reduces pressure to maintain liquidity during the initial investment period due to the pending repurchase offer. Funds using a longer ramp-up period would need enhanced disclosure to investors about the timing of the first repurchase offer and the impact on fund liquidity.
Monthly Repurchase Programs and Other Timing Changes. Existing relief permitting one-month repurchase programs would be codified into Rule 23c-3. Interval funds could conduct periodic repurchase offers at one-, three-, six- or twelve-month intervals, eliminating the need for individualized exemptive relief. The existing 5% minimum and 25% maximum repurchase amounts would apply to monthly offers. The SEC specifically requested comment on whether the 5% minimum should be reduced for monthly programs, including whether a 2% minimum would be appropriate.[5] An existing interval fund changing its periodic interval would be changing a fundamental policy, which would require shareholder approval.
Regulated closed-end funds could conduct discretionary repurchase offers once every twelve months rather than once every two years. The Proposal would establish a uniform 14-to-42-day notice period. Funds could provide notice of the next periodic offer as soon as one business day after payment for the preceding offer has been completed. These elements would reduce operational complexities in administering repurchase offers while still satisfying investors’ need for time to consider whether to participate and the potential risks of timing in the repurchase offer structure.
Interval funds currently relying on exemptive relief for monthly repurchases will need to compare the conditions of their existing orders against the final rule requirements as part of their transition planning.
B. Pricing, Oversubscriptions and Fees
An interval fund’s repurchase offer pricing date would still need to occur no later than 14 days after the repurchase request deadline. However, the Proposal would eliminate the requirement that a fund’s fundamental repurchase policy specify the maximum number of days that can elapse between the request deadline and the pricing date. As a result, an interval fund could modify that timing without shareholder approval, so long as the pricing date remains within the rule’s 14-day limit and is disclosed in the repurchase offer notice. Existing interval funds generally would need shareholder approval to amend their current fundamental policies to remove this timing provision.
Many interval funds have oversubscribed offers. A fund could continue to repurchase up to an additional 2% of outstanding common shares above the stated repurchase offer amount. If the fund accepts less than all shares tendered (because more shares are tendered beyond the limit of the offer), the fund would be required to repurchase shares on a pro rata basis, subject to existing exceptions.
Repurchase fees would be treated as redemption fees under the Proposal. Interval funds generally allocate expenses of the repurchase to shareholders. The Proposal would have repurchases fees and expenses treated as redemption fees and expenses, as with open-end funds, and they would be subject to a 2% cap. The Proposal further would permit deferred sales loads and similar distribution-related charges to be deducted from repurchase proceeds, subject to the requirements applicable to comparable charges imposed by open-end funds, and clarify that this framework would also apply to exchange offers (in addition to redemptions paid in cash). These changes provide interval funds with greater flexibility to use differing fee and sales-load structures, similar to how open-end funds are tailored for different types of investors and distribution channels.
C. A Principles-Based Approach to Liquidity
One of the most consequential proposed changes is the treatment of liquidity. Currently, interval funds must maintain qualifying liquid assets equal to the maximum repurchase amount during the entirety of the repurchase offer period. The Proposal would replace this with an obligation that a fund manage its portfolio liquidity so that it can satisfy pending repurchase requests without selling or otherwise disposing of portfolio investments at prices that deviate significantly from the values assigned to those investments.
The SEC believes the existing liquidity requirement could force funds to continuously maintain excessive liquidity, create cash drag and prevent funds from investing in less-liquid or potentially higher-yielding investments. Under the Proposal, a fund could consider multiple sources of liquidity, including cash and short-term investments, investor inflows, scheduled portfolio cash flows, targeted asset sales and committed credit facilities, when considering how to maintain liquidity to satisfy pending repurchase requests. Although the Proposal would provide greater flexibility in how funds manage their liquidity, funds would remain responsible for timely payment on accepted tenders and for complying with the proposed standard. Funds would also need to reconsider shareholder disclosures about liquidity practices including liquidity risks during the pendency of a repurchase offer.
The Proposal would therefore replace the current prescriptive liquid-asset requirement with a more flexible, principles-based standard that places greater emphasis on fund-specific liquidity management practices. Funds relying on the proposed framework would be required to maintain Rule 38a-1 policies and procedures reasonably designed to ensure compliance with liquidity requirements, including appropriate monitoring, documentation and escalation processes relating to anticipated repurchase obligations and available liquidity sources. Although the Proposal would eliminate the specific board-action requirement currently contained in Rule 23c-3(b)(10), boards would retain their existing oversight role under the fund’s compliance program.[6]
III. Multiple Share Classes for Regulated Closed-End Funds
Regulated closed-end funds, including interval funds and BDCs, have historically represented a more limited segment of the regulated fund industry, although advisers have relatively recently obtained exemptive relief providing greater flexibility in structuring these funds and adapting them to modern investment practices. The Proposal would codify existing exemptive relief to permit regulated closed-end funds to have multiple share classes, governed by Rules 18f-3 (governing capital structures) and to pay distribution expenses to affiliates under Rule 17d-3 (which exempts from the affiliated transaction prohibition certain distribution-related payments made by a fund to an affiliate of the fund or its adviser). A regulated closed-end fund would have to comply with the existing Rule 18f-3 framework, which requires a written multi-class plan, approved by the board (including a majority of the fund’s independent directors), which describes the capital structure, class-specific arrangements, expense allocations and expense methodologies. Class-specific expenses would be allocated to the relevant class, while fund-wide expenses would be allocated on the basis of relative net assets or another reasonable and equitable basis. Changes to a multi-class plan would require board approval, based on the finding that the change is in the best interests of each class and the fund as a whole.
A. Additional Conditions for Closed-End Funds
To rely on amended Rule 18f-3, a regulated closed-end fund would be required to satisfy the following conditions in addition to the rule’s generally applicable multiple-class requirements:
- Continuous offering. The proposed relief is designed for products that use multiple classes to access different ongoing distribution channels, not for a traditional closed-end fund that raises capital only in an initial offering.
- Offers away from NAV. If common shares are offered at a price other than current NAV, the same offer must be made to all common share classes.
- Distribution and service fees. Any asset-based distribution or service fee must be imposed under a written plan that complies with Rule 12b-1 as if the fund were an open-end fund.[7] The Rule 12b-1 plan could be incorporated into the Rule 18f-3 plan, but would remain subject to the approval, reporting, continuation and recordkeeping requirements associated with Rule 12b-1.
- No secondary-market class. The fund’s common stock may not be listed, offered or traded on a secondary market. Funds seeking such structures would continue to pursue individualized relief.
- Equal repurchase treatment. Any repurchase offer must be made equally to all common share classes, including as to form and time of payment.
- Exchange offers. Any exchange offer involving a common share class must comply with Rule 11a-3 as if the fund were open-end. For an interval fund, shares exchanged for shares of another company would count toward the Rule 23c-3 repurchase offer amount.
The Proposal would not make compliance with FINRA Rules 2341 or 2310 an express condition of Rule 18f-3 reliance. The SEC noted that the FINRA rules regulate the conduct of FINRA members rather than the funds themselves. Applicable broker-dealers would remain subject to those rules by their terms.
B. Affiliated Distribution Arrangements
The Proposal would extend Rule 17d-3, which currently provides relief for certain open-end fund distribution arrangements that otherwise could implicate Section 17(d) and Rule 17d-1, to regulated closed-end funds offering multiple classes of shares. An affiliated person, principal underwriter or affiliated person of either could enter into a written agreement under which the fund makes distribution-related payments, provided the agreement complies with Rule 12b-1 and does not permit joint sharing of distribution costs with another affiliated registered management investment company or BDC. Together, the amendments to Rules 18f-3 and 17d-3 would eliminate the need for substantially similar individualized multi-class and affiliated-transaction relief for eligible funds.
IV. Disclosure, Reporting and Transition
Form N-2 and other forms would be revised to require disclosure of the multiple-class structures and provide investors with more detailed class-level fee and expense information. The SEC proposes a one-year transition framework under which funds may elect early compliance with the amended rules and, following the compliance date, most existing exemptive orders relating to monthly repurchase programs and multiple-class structures would be rescinded. The SEC has indicated that certain relief for specified exchange-traded and tokenized class structures would remain because those structures fall outside the proposed rules.
V. Practical Considerations for Fund Sponsors and Boards
Fund sponsors and boards should begin assessing how the Proposal could affect existing products, planned launches, compliance programs and disclosure and reporting systems.
- Product design and launch planning. Sponsors should evaluate whether a longer ramp-up period, monthly repurchases or annual discretionary offers are appropriate in light of the strategy’s anticipated cash-generation profile. While a two-year initial period before the first repurchase offer could enhance more deliberate portfolio construction, it also makes clear disclosure of the initial illiquidity period particularly important.
- Fundamental policies and shareholder votes. Existing funds should inventory the elements of their fundamental repurchase policies. Moving to a monthly interval or removing the pricing-date timing provision generally would require shareholder approval, while other operational changes within the rule’s limits may not.
- Liquidity procedures and stress testing. Funds expecting to rely on the principles-based standard should identify specific liquidity sources, assumptions, monitoring metrics and escalation triggers. Policies and procedures should address the possibility that subscriptions increase or decline, portfolio cash flows are delayed, credit facilities are unavailable or expensive, or repurchase requests stay elevated across successive periods. Compliance programs under Rule 38a-1 may need to be updated to reflect these considerations.
- Valuation coordination. Liquidity planning should be coordinated with the fund’s valuation process. If a fund expects to sell a hard-to-value asset or borrow against it, the assumptions used for liquidity, NAV calculation and fair value should be consistent and supported, particularly during stressed markets.[8]
- Board reporting and approvals. Boards should consider how repurchase amounts will be approved for monthly programs and whether approvals may be structured for multiple intervals. They should also consider a fund’s borrowing capacity, asset sales, valuation developments, compliance exceptions and the effect on remaining shareholders. For funds that have consistently oversubscribed repurchase offers, boards may require more information on how monthly intervals will impact the fund. Recurring oversubscriptions may also raise questions regarding repurchase sizing, liquidity planning and shareholder expectations.
- Review of exemptive orders and distribution arrangements. Sponsors relying on existing orders should prepare a condition-by-condition comparison with the final rule. Multi-class funds should review Rule 18f-3 plans and Rule 12b-1 plans with respect to deferred sales loads, exchange privileges, and class expense allocation, and consider what changes, if any, are required for intermediary agreements and fund disclosures.
- Disclosure and reporting readiness. Form N-2 filers should map current prospectus and shareholder report disclosure to the proposed class-level presentation and $10,000 expense examples.
- Comment opportunities. The SEC has requested comment on a large number of elements of the proposed rule changes, including the 5% minimum for monthly offers, the 14-day minimum notice period, the scope and administration of the principles-based liquidity standard, board approval mechanics, rescission of existing orders and whether innovative listed or tokenized multi-class structures warrant broader rule-based treatment. The SEC also requested comments on operational details of the Proposal. Comments are due December 4, 2026.
We are available to assist clients in evaluating the Proposal, reviewing existing exemptive orders and fundamental policies, and assessing potential changes to liquidity procedures, board materials, registration statements and shareholder reports. We would be pleased to assist clients in preparing comment letters addressing the Proposal, including its potential benefits to investors, impact on closed-end fund regulation and operations, practical implications, and areas that may warrant further consideration or modification. Please contact your primary contact in S&K’s Investment Management Group with any questions.
