On October 9, 2026, the SEC published notice of an application by Clearlake Private Markets Fund and related applicants seeking permission for certain affiliated co-investments. The proceeding offers a useful lens for understanding how fund structure, conflicts, and transaction planning intersect.

What the SEC released

Investment Company Act Release No. 36359, File No. 812-16070, concerns a request to allow certain business development companies, or BDCs, and closed-end management investment companies to invest in portfolio companies together and alongside affiliated investment entities.

The named applicants include Clearlake Private Markets Fund, Clearlake Capital RIC Management, LLC, Pathway Capital Management, L.P., and affiliated entities identified in the application.

The October 9 release is a notice of a pending application. It does not itself grant the requested relief or establish a generally available exemption. The requested authorization would depend on an SEC order and its terms.

Why investing alongside an affiliate raises legal questions

The commercial logic of co-investment is straightforward: multiple vehicles participate in the same opportunity. The regulatory analysis asks whether their relationships and arrangements create prohibited joint participation.

Section 17(d) of the Investment Company Act addresses joint transactions involving registered investment companies and specified affiliates. Its investor-protection purpose includes preventing participation on a basis different from, or less advantageous than, that of another participant.

Rule 17d-1 generally requires SEC authorization for covered joint arrangements, subject to its exceptions. In considering an application, the SEC evaluates consistency with the Act and the relative treatment of the investment company. The rule’s definition reaches written or oral arrangements and certain practices or understandings; documentation alone does not determine whether a joint arrangement exists.

For BDCs, Section 57(a)(4) addresses specified affiliated joint transactions. Section 57(i) applies the relevant Section 17 framework pending implementing rules under Section 57. These provisions explain why the notice invokes both registered-fund and BDC authorities.

For a sponsor, the practical question is therefore broader than whether two entities sign separate purchase agreements. Counsel needs to assess the participants’ relationships, how the opportunity is negotiated, and the legal basis for joint participation.

The proposed safeguards

The August 13 amended application proposes these protections, among others:

• Investment terms: Same security class, price, specified rights, and substantially the same other terms, with a settlement difference of up to ten business days.

• Governance: A regulated fund lacking specified nomination or observer rights would have an opportunity to veto the selected representative.

• Existing holdings: Specified board approval before investing where an affiliate already holds an interest, subject to a proportional-investment exception.

• Expenses and fees: Proportional sharing of transaction expenses and covered transaction fees, with exceptions and remuneration restrictions.

• Allocations: Policies designed to allocate opportunities fairly and equitably to regulated funds.

• Exits: Opportunities for regulated funds to participate proportionally in affiliate dispositions, plus approval requirements and exceptions for fund dispositions.

• Oversight: Board review, quarterly and annual reporting, material-compliance notifications, and recordkeeping.

• Duration: Relief would expire if a rule authorizing the described co-investments becomes effective.

These are proposed conditions, not a substitute for reviewing any eventual order.

A practical example: one financing, several investor interests

Consider a hypothetical growth company raising capital from a regulated fund and an affiliated private investment vehicle.

The company may see a coordinated investor group. The legal teams should examine the transaction from each vehicle’s perspective.

Does one participant already own securities in the company? Will both receive comparable rights? Is one investor funding sooner? Who bears diligence expenses if the financing fails? Can one participant sell while the other remains invested?

These questions identify issues to resolve before the documents are final. They do not establish that a particular transaction is prohibited or that Clearlake’s requested relief would cover it.

Our practical assessment: the best time to resolve co-investment requirements is while the financing is being structured. Discovering an approval requirement near closing can put pressure on the funding schedule and the negotiated terms.

What fund sponsors and advisers should review

For managers considering affiliated participation, we recommend organizing the review around four questions.

1. Who is participating, and how are they connected?

Prepare a relationship chart identifying the investment vehicles, advisers, relevant ownership and control relationships, and existing portfolio-company interests. Use it to focus the affiliation analysis.

2. What authority supports this transaction?

Identify the applicable restriction, exception, or available relief. If an existing order is the proposed basis, confirm that both the entities and transaction fit its scope. Another sponsor’s notice should not be treated as authorization for your structure.

3. Can the operating team execute the required process?

Translate the applicable requirements into responsibilities: who identifies opportunities, proposes allocations, checks terms, seeks approvals, reviews expenses, and maintains records? A legal framework is most useful when the investment and compliance teams can follow it consistently.

4. What happens after closing?

Plan for follow-on financing, changes in holdings, portfolio-company governance, and exits. Ask who must receive notice, when approvals are needed, and how the supporting analysis will be documented.

These are Launch Legal’s planning recommendations. The applicable obligations depend on the fund structure, governing law, transaction facts, and any relief being relied upon.

What founders and portfolio companies should ask

A company receiving capital from affiliated vehicles can support an efficient closing by understanding the investors’ process early.

The aim is to make the closing plan reflect the investors’ actual legal and operational requirements. Clear answers help founders distinguish a proposed investment from funding that is ready to close.

The deadline to watch

The notice sets November 3, 2026, at 5:30 p.m. Eastern Time as the deadline for the SEC to receive hearing requests. It states that an order granting relief will issue unless the Commission orders a hearing.

Requests must identify the file number, explain the requester’s interest and contested issues, and include proof of service on the applicants. The notice provides submission and service instructions.

This is a hearing-request deadline in an application proceeding, rather than a general rulemaking comment period.

Building a financing structure that can work in practice

For businesses and investment managers, the value of this proceeding lies in the connection between access to capital and the process that supports it.

A coordinated investment strategy needs clear authority, workable allocation procedures, aligned documentation, and a plan for later decisions. Addressing those elements early helps the parties build a financing structure they can carry through closing and manage over time.

Learn More

This blog post is for informational purposes only and is not legal advice. Please consult with a Launch Legal attorney regarding your specific situation.