4 key takeaways from the Trump Administration’s first 70 days
Welcome to IMpact: Investment Management News. In this regular bulletin, DLA Piper lawyers share their insights on key developments that are impacting the investment management industry.
1. Carried interest favorable taxation may be in jeopardy
On February 6, 2025, President Donald Trump proposed ending favorable taxation for carried interest income. While it is unclear what, if any, reform will ultimately be proposed by Republicans in Congress, prior and current Democrat proposals have included converting all carried interest income to ordinary income. For more on this proposal, see our client alert.
2. Federal funding receives increased scrutiny
Since January 20, 2025, the federal government, led by the Department of Government Efficiency (DOGE), has been actively reviewing, suspending, and terminating certain contracts and grants that are not aligned with the Trump Administration’s policy goals. Congress has also taken action to identify instances of waste, fraud, and abuse in the federal government, including the establishment of the House subcommittee on Delivering on Government Efficiency, which has been tasked with coordinating with DOGE’s efforts. For clients whose businesses may be impacted by the suspension of federal grants under the Inflation Reduction Act or the Infrastructure Investment and Jobs Act, see our client alert.
3. Notable changes coming for CFIUS
President Trump issued a National Security Presidential Memorandum on February 21, 2025 with notable changes for the Committee on Foreign Investment in the United States (CFIUS). The Memorandum indicated continued close scrutiny on investment from China (as well Hong Kong, Macau, Cuba, Iran, North Korea, Russia, and Venezuela) and indicated that “PRC-affiliated persons” may be entirely banned from investing in certain technology, critical infrastructure, healthcare, agriculture, energy, raw materials, or other strategic sectors. The Memorandum also indicated plans to create a fast-track CFIUS process for "partners and allies of the United States," less burdensome mitigation agreements, and broadening CFIUS's jurisdiction to include greenfield investments.
Many of these changes require promulgating new CFIUS regulations (with notice and comment periods), and broadening CFIUS's jurisdiction will require congressional action.
In light of these changes, many private equity managers have established white-label funds, feeder funds, or access vehicles; funds of funds and secondaries firms have launched interval and closed-end registered funds; private credit managers have established business development companies to co-invest in certain loans or other assets alongside their other funds and accounts; and real estate managers have launched and acquired net asset value (NAV) real estate investment trusts (REITs) to access this market.
While this trend offers opportunity, investment managers are encouraged to consider challenges and regulatory constraints before engaging with the mass wealthy and retail markets.
4. SEC staff issues new Marketing Rule FAQs
The US Securities and Exchange Commission (SEC) staff has been reviewing actions by the prior Biden Administration and reevaluating the rulemaking process. On March 19, 2025, SEC staff issued revised guidance regarding the application of Rule 206(4)-1 under the Investment Advisers Act of 1940, as amended (Marketing Rule), providing flexibility for investment advisers when reporting extracted performance and certain portfolio characteristics on a gross basis. The Trump Administration nominated Paul Atkins, a former SEC commissioner, as chairman of the SEC. Atkins has previously shared his views on the SEC’s role, with a particular focus on enforcement related to actual harm to investors. Assuming he is confirmed, we should know more about the SEC’s direction in the coming weeks.
[View source.]
