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    Jan. 29, 2026

What Can Hedge Fund Managers Expect From the SEC in 2026?

In 2025, hedge fund managers were faced with a new federal administration and new SEC Chair Paul S. Atkins. The effects of those changes in leadership are still being felt and may accelerate in 2026. To that end, the Hedge Fund Law Report spoke with Simpson Thacher partners Adam S. Aderton and Anne C. Choe about the key legal and compliance developments in 2025, what hedge fund managers may expect from the SEC in 2026 and what CCOs should focus on to prepare for the new year. This article presents their thoughts on those topics. For additional commentary from Aderton, see “SEC Penalizes Fund Administrator for Missing Red Flags” (Jul. 18, 2024); and “Recent SEC ESG Rulemaking, Examination and Enforcement Activity” (Mar. 30, 2023).

SEC Chair Calls for Broader Use of Wells Process

On October 7, 2025, SEC Chair Paul S. Atkins gave a keynote address (Address) at the 25th Annual A.A. Sommer, Jr. Lecture on Corporate, Securities and Financial Law, in which he stressed the importance of the Wells process, whereby the SEC shows potential targets of enforcement cases what it believes to be evidence of violations and allows those parties to make a case against enforcement action. In Atkins’ view, the Wells process offers a crucial guarantee of due process and a bulwark against regulation by enforcement, yet it is underutilized. In keeping with the broad laissez-faire and pro-innovation philosophy that has marked his tenure as SEC chair so far, he called for wider use of the Wells process and for extending the window of time in which the defense can present evidence. This article summarizes the Address, the limits on use of the Wells process that Atkins aims to rectify and key takeaways for private fund managers, with expert commentary from former SEC attorneys. See our three-part series on the Wells process: “Origin and Key Elements” (Jun. 13, 2019); “SEC Enforcement Staff Views of the Process” (Jun. 20, 2019); and “The Pre-Wells Process Versus the Post-Wells Process” (Jun. 27, 2019).

SEC No-Action Letter Allows Use of State Trust Companies for Custody of Crypto Assets

On September 30, 2025, the Office of the Chief Counsel of the SEC’s Division of Investment Management (Division) released a no-action letter (Letter) stating that – subject to strict conditions – it will not recommend enforcement actions against registered investment advisers and regulated funds that treat a state trust company as a bank for purposes of holding and maintaining crypto assets and related cash and cash equivalents. The Division issued the Letter in response to a request for no-action relief from lawyers at Simpson Thacher & Bartlett LLP, who argued that state trust companies are sufficiently well-regulated and operationally analogous to banks to be treated similarly for the purpose of holding crypto assets and that uncertainty about the legality of placing such assets with them needs to be dispelled. This article summarizes the Letter and the principal arguments for and against it, with commentary from legal experts. See our two-part coverage of an SEC Crypto Roundtable: “Digital Asset Custody Challenges” (Jun. 5, 2025); and “Potential Digital Asset Custody Models” (Jun. 19, 2025).

Emerging Technology Risks for Private Fund Managers

Crypto, artificial intelligence and other technologies are attracting considerable public interest and taking priority positions on legislators’ and regulators’ agendas. Although emerging technologies present opportunities for private funds, it can be difficult to navigate the risks while the regulatory environment is still evolving. To discuss some of the pertinent issues that private funds face, the Practising Law Institute (PLI) brought together a panel, entitled “Emerging Technology Risks for Private Funds.” The program was moderated by Davis Polk partner Robert Cohen, and featured White & Case partner Ladan Steward, Skadden partner Daniel Michael and Debevoise & Plimpton partner Charu Chandrasekhar. For coverage of another PLI program, see “To Work Effectively, CCOs Need Authority, Autonomy and Information” (May 22, 2025).

Court Enters $27.6‑Million Judgment for SEC in Fund Offering and Valuation Fraud Action

The U.S. District Court for the Western District of Wisconsin has entered a final judgment against two individuals, as well as the private fund and management companies they control, awarding the SEC nearly $27.6 million in financial remedies in connection with an alleged long-running offering and valuation fraud. The defendants allegedly engaged in undisclosed self-dealing and related party transactions and made material misrepresentations and/or omissions regarding how a private fund was operated, how it valued assets and the value of those assets. This article discusses the action and its resolution. See “SEC Enters Final Judgments Against Premium Point and Individual Defendants in Valuation Fraud Matter” (Sep. 14, 2023).

Former CCO Joins Paul Hastings in New York

Serge Todorovich has joined Paul Hastings as a partner in the investment funds and private capital practice, based in the New York office. Drawing on his experience as senior in-house counsel and CCO, Todorovich advises private fund managers and investors on fund formation and operations; compliance and regulatory matters; and strategic transactions, with a particular focus on credit and hedge fund platforms. 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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