SEC Proposes Amendments to Expand Responsible Retailization of Private Markets

The Securities and Exchange Commission today voted to propose rule amendments that would facilitate capital formation in the public and private markets by expanding retail investor choice and promoting innovation in regulated fund structures while preserving appropriate investor protections and safeguards.

The Commission is separately requesting public comment as it considers providing individual investors with additional ways to qualify as an accredited investor by holding in good standing certain professional certifications, designations, or credentials.

“Investor demand for private market investment opportunities is growing, and 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.

The Commission’s efforts in this regard — focused on expanding opportunities for investors’ post-tax, pre-retirement dollars — complement efforts undertaken pursuant to President Trump’s Executive Order on Democratizing Access to Alternative Assets for 401(k) Investors,” said SEC Chairman Paul S.

The use of performance-based compensation has long been a common and defining characteristic of investment strategies that are associated with private funds, such as hedge fund, private equity, and venture capital strategies.

Because performance‑based arrangements have traditionally been associated with private funds, access to these strategies, as a practical matter, has been limited to a narrow group of eligible investors.

By permitting similar incentives to, for example, advisers to regulated funds, such advisers may be more likely to offer private market strategies to regulated funds.

Expand the ability of registered investment advisers to receive performance-based compensation from certain categories of clients, including regulated funds, that is calculated on the basis of capital gains or capital appreciation.

Amend certain fund registration and reporting forms to require disclosure of performance-based compensation.

Modernize the interval fund framework, including by allowing the scheduling of repurchases at certain times that better match the liquidity profile of the portfolio.

Replace existing exemptive orders with an exemptive rules-based framework for regulated closed-end funds to issue multiple share classes.

Together, these proposed amendments would offer expanded retail access to diversified investment opportunities, while promoting transparency and aligning incentives across the advisory ecosystem.

The Commission separately seeks comment on the potential designation of the passage of an accredited investor exam to be developed by the Financial Industry Regulatory Authority (FINRA) as an additional method for investors to be accredited investors.

An exam would provide a non-financial pathway for investors to demonstrate their sophistication in the areas of securities, investing, and financial and business matters to appropriately evaluate the merits and risks of a prospective investment.

The Commission also seeks comment on the potential designation of holding, in good standing, certain licenses, certifications, or other credentials as additional ways for individuals to qualify as accredited investors.

Among the designations the Commission is considering:

A license as a U.

certified public accountant (CPA)

A charter as a Chartered Financial Analyst (CFA)

A certification as a Certified Financial Planner (CFP) in the United States

The FINRA Investment Banking Representative license (Series 79)

The FINRA Research Analyst license (Series 86 and Series 87)

The public comment periods will remain open for 60 days after the date of publication of the proposing releases and the notices in the Federal Register.

Last Reviewed or Updated: Sept.

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