SEC Proposes Expanding Retail Access to Private Markets
(Bloomberg) — The Securities and Exchange Commission is proposing a series of moves to help expand retail investor access to private markets, so more individuals can access private equity, early-stage startups and other assets.
A proposal approved by the agency Wednesday would let registered investment advisers charge a fee up to 20% based on a fund’s performance. That measure, if finalized, would bring the fee structures more in line with the traditional arrangement used by some hedge funds to help incentivize managers who normally wouldn’t want to work with retail investors, the agency said.
“One of my priorities for the commission is to explore ways to facilitate the ability of individual investors to participate in private markets while at the same time protecting those investors from bad actors and fraud,” SEC Chairman Paul Atkins said during the meeting.
Another SEC proposal would increase the types of financial professional licenses individuals can obtain to qualify as “accredited investors,” including certified public accountants and chartered financial analysts. It’s the second time under President Donald Trump that the SEC has moved to expand the accredited investor definition after easing some restrictions during his first term.
That label helps determine who is eligible to invest in some riskier assets. Generally, the definition requires individuals to have a net worth of more than $1 million, excluding primary residence, or income over $200,000 for an individual or $300,000 for partners.
The SEC also unveiled a plan to give interval funds more flexibility around redemptions, which typically let investors redeem their shares at set periods and are less liquid that open-end mutual funds. SEC Division of Investment Management Director Brian Daly said interval funds have “tremendous utility” but the prescriptiveness of their existing structure is restricting their use.
The agency will take public comment on each of the proposals for 60 days.
The changes are part of the Trump administration’s broader push to break down the barriers to accessing private markets that have historically been off-limits to the average individual investor. Officials have already taken some steps to open up access this year, including a proposal that could make it easier for retirement savings plans to include private credit and private equity.
Proponents say the moves will allow mom-and-pop investors to access higher-yield products that have mostly only been offered to pension funds, high-net worth individuals and other accredited investors. But critics argue it would weaken guardrails for retail traders and expose them to high-risk investments that are not as transparent as traditional public markets.
Private credit funds have seen a rise in redemption requests this year, with asset managers capping investors’ ability to exit funds.
Wednesday’s vote also marks the last for Republican Commissioner Hester Peirce, who is leaving the agency for academia after an eight-year tenure. Her departure will leave the regulator with just two Republican members.
The White House hasn’t yet named anyone to fill the vacant positions on what is intended to be a bipartisan, five-member board.
