As scrutiny intensifies, private lending funds must verify investors diligently, document everything, and stay firmly aligned with their offering documents.

As the regulatory landscape for private lending funds grows more complex, 2026 will demand a higher level of operational discipline than in previous years. Regulators continue to increase scrutiny of filings, investor verification practices, and operational controls. Investors expect transparency, and enforcement agencies are more likely than ever to challenge funds that deviate from disclosed strategies or fail to meet long-standing regulatory standards.

To protect both your fund’s operations and investor confidence, you must treat compliance as a continuous, integrated process. Let’s delve into the core requirements, operational best practices, and REIT obligations that should guide your fund.

Regulation D Filings Compliance

Most private lending funds continue to rely on exemptions under Rule 506(b) or Rule 506(c) of Regulation D under the Securities Act of 1933. Although these exemptions have not materially changed, the expectations around how to comply with them have. Regulators now apply greater scrutiny not only to what you file but also to whether your internal processes demonstrate a consistent commitment to compliance.

Form D Filing Requirements. You must file a Form D with the Securities and Exchange Commission (SEC) within 15 days after the first sale of securities. This filing, although brief, is not merely administrative. In recent years, the SEC has increasingly issued deficiency notices for late filings or failures to amend filings for material changes. You must also renew Form D annually for as long as your offering remains open. If your fund and REIT both raise capital, each is considered a separate issuer and each must file its own Form D.

State Blue Sky Notice Filings. Each state where your investors reside has its own expectations, many of which require initial notice filings, annual renewals, and amendments upon material changes. Some even require copies of your offering documents. Civil penalties for late filings or noncompliance can be significant. Accurate records of investor residency, proactive calendaring of deadlines, and meticulous documentation are essential.

Accredited Investor Verification

Accredited investor status remains a central element of Regulation D, and the distinction between Rule 506(b) and Rule 506(c) is critical for operational and legal risk management.

Under Rule 506(b), investors may self-certify their accredited status, but you must have a pre-existing, substantive relationship with each investor. Evidence of communication, evaluation of financial sophistication, and substantive dialogue beyond marketing materials is critical. Non-accredited investors are limited to 35, and this number is for the life of the fund. As a result, if a non-accredited investor redeems out of your fund, their slot cannot be reused for another non-accredited investor.

Rule 506(c) permits general solicitation only if you take reasonable steps to verify accredited investor status, and investor verification can be satisfied through third-party reviews, such as tax returns, CPA letters, or online verification platforms.

In June 2025, the SEC staff issued a no-action letter stating that if the following conditions are met, a fund manager may be deemed to have fulfilled the requirement of taking “reasonable steps” to verify that a prospective investor qualifies as an accredited investor under Rule 506(c):

Minimum Investment Thresholds. Fund managers may now treat certain minimum investment amounts as a reasonable method of verification. This means an investment into the fund of at least $200,000 for natural persons or $1,000,000 for legal entities.

Written Representations. Investors must represent in writing that (1) they are accredited and (2) they did not finance their investment through a third party.

No Actual Knowledge. The fund manager must have no actual knowledge suggesting that an investor is unaccredited or financed the investment improperly.

Operating Inside Your Offering Documents

A common compliance pitfall for fund managers is operating outside the four corners of their offering documents. Your private placement memorandum (PPM) sets the parameters for how investor capital may be used. If you start funding loans, acquiring assets, or pursuing strategies that fall outside of what the PPM contemplates, regulators may view this as securities fraud under Rule 10b-5 (17 C.F.R. § 240.10b-5).

This is more than a technicality. Offering documents are the foundation of your relationship with investors, and deviating from them undermines both compliance and trust. If your investment strategy evolves, as it often does in dynamic markets or as funds scale, the appropriate steps are to amend your offering documents, provide updated disclosures, and communicate changes clearly to your investors.

Broker-Dealer Regulations, Fundraising Compensation

One area that private lending managers frequently overlook is the application of broker-dealer regulations. Several common capital raising scenarios can inadvertently trigger securities licensing requirements under federal and state securities laws. Examples include paying finder’s or referral fees, operating multiple funds simultaneously, or allowing third parties to negotiate with investors on your behalf. Each of these activities has the potential to require a licensed broker-dealer under Section 15(a) of the Securities Exchange Act of 1934 and related rules.

Regulations governing compensation for fundraising are particularly strict. Only licensed individuals may receive transaction-based fees tied to securities sales. Flat fees for referrals or finders are narrowly permitted under limited conditions, typically when the fee is paid irrespective of whether the introduced investor ultimately invests in the fund.

Paying an unlicensed individual to solicit investors, negotiate terms, or otherwise facilitate investments exposes your fund to significant legal risk. Potential consequences include SEC or state enforcement actions, civil penalties, investor rescission claims, and even the return of invested capital. Both federal and state regulators maintain a zero-tolerance approach to unlicensed broker-dealer activity, and enforcement has intensified in recent years, particularly in connection with exempt securities offerings.

For these reasons, it is essential to consult with a securities attorney before paying any form of commission, referral fee, or finder’s fee related to investor introductions. Establishing clear, compliant procedures not only mitigates regulatory risk but also protects your fund and your investors from legal exposure.

Marketing, Advertising, and Communications

Even a structurally sound fund can face regulatory risk if marketing and investor communications are mishandled. Fund managers must ensure that all materials comply with federal and state securities laws and adhere to investor protection standards. Keep in mind that funds relying on Rule 506(b) are prohibited from engaging in general solicitation or public marketing. Only funds structured under Rule 506(c) are permitted to advertise publicly and solicit investors broadly. Essential compliance requirements include:

Securities Disclosures and Disclaimers. Marketing materials must provide investors with accurate, complete, and transparent information about the fund’s objectives, strategies, and risks. Appropriate disclosures and disclaimers are essential to inform investors of potential losses, liquidity constraints, and other material considerations.

Accuracy and Honesty. All materials should avoid misleading statements, exaggerated claims, or guarantees of returns. Representations of investment strategies, terms, and potential outcomes must be truthful and supported by data. Avoid using terms such as “guarantee,” “guaranteed returns,” or “risk-free.” When citing metrics or performance from third-party sources, proper attribution and verification are required to ensure accuracy and credibility.

Offering Investment Advice. Unless you hold the appropriate SEC registration or FINRA licensing, your marketing materials must not suggest that you are providing general investment advice. Misrepresenting your credentials or authority can expose you to civil liability, regulatory enforcement actions, and investor litigation.

Non-compliant marketing can result in state enforcement actions, SEC investigations, civil liability, investor rescission claims, and reputational damage. As a best practice, all communications (whether marketing brochures, emails, presentations, or websites) should be reviewed by legal counsel and updated regularly to ensure ongoing compliance.

REIT Compliance in 2026

REIT dividends still qualify for the 20% deduction under IRC §199A(b)(1)(B). REIT structures remain a compelling option for high-income investors seeking tax efficiency. That benefit, however, is contingent upon strict compliance with REIT qualification tests.

To maintain REIT status, you must satisfy these four core REIT tests:

75% Asset Test. At least 75% of total assets must consist of real estate, mortgages, or cash and cash equivalents.

75% Income Test. At least 75% of gross income must come from rents, mortgage interest, or other real estate-related sources.

95% Income Test. At least 95% of gross income must come from passive sources, including the 75% real estate income plus dividends and interest.

90% Distribution Requirement. At least 90% of taxable income (excluding net capital gains) must be distributed to shareholders each year.

Failure to meet these requirements is serious. In some cases, the IRS may allow a REIT to cure an inadvertent failure by paying a penalty tax, provided the lapse was not due to willful neglect. But intentional or significant violations can cause the REIT to lose its status altogether, exposing it to corporate-level taxation, potentially retroactive to the start of the year in which the failure occurred.

REIT qualification depends not only on income and asset tests but also on strict ownership and governance requirements:

100-Shareholder Test. A REIT must be owned by at least 100 shareholders for at least 335 days of the taxable year.

5/50 Rule. No more than 50% of the REIT’s shares may be owned, directly or constructively, by five or fewer individuals during the last half of the taxable year.

Meeting these thresholds can be challenging for smaller or closely held REITs. Many REITs address this by bringing in so-called “penguin investors,” or small-dollar, passive shareholders recruited specifically to satisfy the shareholder count and diversification tests. These investors generally do not dilute fund control or materially affect economics.

Compliance: A Core Strategic Function

In 2026, compliance is inseparable from business success. By verifying investors diligently, maintaining accurate filings, updating offering documents, monitoring REIT activity, and controlling marketing practices, you not only reduce regulatory risk but also strengthen investor trust and position your fund for sustainable growth.

Done correctly, compliance becomes a competitive advantage, enabling your fund to raise capital efficiently, preserve REIT benefits, and deliver reliable after-tax returns to investors. In an increasingly scrutinized environment, proactive compliance is no longer optional; it is essential.