TO BE DISCUSSED AT THE SEPT. 18, 2025 MEETING OF THE
summary
The SEC Investor Advisory Committee recommends recalibrating the regulatory framework to facilitate retail investor access to private markets, primarily through registered funds.
paragraph
The Committee proposes updating the Investment Company Act of 1940 to allow registered funds to better incorporate private market assets. To protect retail investors, they suggest shifting accredited investor status toward sophistication rather than just wealth and implementing investment caps for non-sophisticated individuals. Key recommendations include enhancing valuation transparency, improving liquidity disclosures, and strengthening enforcement of existing filing requirements.
narrative
The SEC Investor Advisory Committee (IAC) is recommending a recalibration of the regulatory framework to accommodate the rapid growth of private markets, which manage over $28 trillion in assets. The Committee suggests that the optimal path for retail access is through registered funds, necessitating updates to the Investment Company Act of 1940. If direct access is expanded, the IAC proposes guardrails such as shifting accredited investor criteria toward sophistication and imposing prudential investment limits. Additional protections include enhanced transparency for valuations, improved liquidity disclosures, and stricter enforcement of current filing requirements. Ultimately, the goal is to facilitate capital formation while maintaining the SEC's mission of investor protection and market efficiency.
Classified non-corporate(confidence 100%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →
Statutes
15 U.S.C. § 78l(g)17 CFR 230.501(a)17 CFR 230.251(d)17 CFR 227.100(a)17 C.F.R. § 230.503section 3(a) of the Securities Exchange ActSection 4(a)(2) of the Securities ActSection 4(a)(2) of the Securities ActRule 2a-5Rule 17d-1Rule 23c-3Rule 18f-3
Parties
IacSec Investor Advisory CommitteeU.S. Private CompaniesU.S. Private Funds
Keywords
privateinvestorsprivate marketinvestorretailassetsmarketmarket assetsretail investorsfundsaccess privateaccessseccommissioninvestor access
Extracted insights
Dollar amounts 23
- $28000.00B $28 trillion ≥$1B
- $623.00B $623 billion ≥$1B
- $55.20B $55.2 billion ≥$1B
- $2.60B $2.6 billion ≥$1B
- $1.60B $1.6B ≥$1B
- $1.20B $1.2 billion ≥$1B
- $1.00B $1billion ≥$1B
- $700.00M $700 million $100M–$1B
- $1000K $999,999 $100K–$1M
- $920K $920,000 $100K–$1M
- $615K $615,000 $100K–$1M
- $300K $300,000 $100K–$1M
Entities 4
- organization Iac
- organization Sec Investor Advisory Committee
- organization U.S. Private Companies
- organization U.S. Private Funds
Triples 5
- U.S. Private Funds Managing Over $28 Trillion In Assets
- U.S. Private Companies Directly Raising $623 Billion In 2024
- Committee Recommends Changes To Staff Interpretations And/Or Rules
- Committee Believes Expansion Should Be Accompanied By Certain Basic Investor Protection Guardrails
- Committee Recommends Various Improvements To The Registered Fund Regulatory Framework
Text layers
Extracted body text (91,416c)
TO BE DISCUSSED AT THE SEPT. 18, 2025 MEETING OF THE
SEC INVESTOR ADVISORY COMMITTEE
DRAFT: SEPT. 18, 2025
Recommendations of the Investor as Owner and Market Structure Subcommittees of the
SEC Investor Advisory Committee:
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
EXECUTIVE SUMMARY
The private capital markets have grown at a rapid pace in recent years. Given their current size
and the investment opportunities they contain, the question of facilitating retail investor access has
been raised with increased frequency by investors, market participants, legislators and policymakers.
The SEC Investor Advisory Committee (“IAC” or “Committee”) finds that this development
necessitates a recalibration of the existing regulatory framework, which was designed for a world in
which the public markets encompassed the vast majority of all investment opportunities. Importantly,
the Committee believes that this recalibration should not undermine any of the three pillars of the
SEC’s mission: protecting investors, maintaining fair, orderly, and efficient markets, and facilitating
capital formation.
In the Committee’s view, the optimal way for retail investors to access private market assets is
through registered funds, which allow retail investors to invest in broadly diversified funds that contain
private market assets, often alongside public market assets. The investor protections embedded in the
registered funds framework include Commission review, audited financials, professional fund
management, diversification, various levels of liquidity, and the protections of the Investment
Company Act. The Committee therefore recommends changes to Staff Interpretations and/or rules
under the Investment Company Act of 1940 to allow registered funds to better facilitate investing in
private market assets.
The Committee does not take a position on the desirability of expanding retail investors’ access
to private market assets in direct ways, but, if the SEC were to determine that such an expansion is
warranted, the Committee firmly believes that it should be accompanied by certain basic investor
protection guardrails. These include an expanded focus on investor sophistication (rather than income
or wealth) when determining accredited investor status; prudential limits on the amount that can be
invested by retail investors who do not meet sophistication or wealth criteria; the enhancement of
certain filing requirements and strict enforcement of certain already-existing requirements; and
improved disclosure and transparency to facilitate investor decision-making.
The Committee also recommends various improvements to the registered fund regulatory
framework as part of any expansion that enables retail investors to more easily invest in private market
assets. These improvements include: providing clarity and transparency on valuations throughout the
lifecycle of a fund; enhancing liquidity disclosures and making them more prominent; and providing
for certain additional investor protections that specifically address the increased participation of retail
investors.
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
2
I. INTRODUCTION
The private markets have grown at a rapid pace in recent years, with U.S. private funds
managing over $28 trillion in assets and U.S. private companies directly raising $623 billion in
2024.
1
Notably, most retail investors do not have direct access to these private assets. Indirect
access is available but occurs in limited ways through registered funds or through separately
managed accounts that, in turn, invest in private companies or private funds.
Given the size of the private markets and the investment opportunities they contain, the
question of facilitating retail investor access has been raised with increased frequency by investors,
market participants, legislators and policymakers. There is widespread agreement that changing
the status quo entails a host of difficult policy questions. Accordingly, the Investor Advisory
Committee (“IAC” or “Committee”) has held multiple panels and issued multiple
recommendations pertaining to these matters,
2
in line with its statutory mission to advise the U.S.
Securities and Exchange Commission (“SEC” or “Commission”) on regulatory priorities,
initiatives to protect investors, and initiatives to promote investor confidence and the integrity of
the securities marketplace.
3
As an initial matter, the Committee finds that the rise of private markets necessitates a
recalibration of the existing regulatory framework, which was designed for a world in which the
public markets encompassed the vast majority of all investment opportunities. Importantly, the
Committee believes that this recalibration should not undermine any of the three pillars of the
1
The Commission’s Office of the Advocate for Small Business Capital Formation produces an annual report
that provides key private market data, including estimates of the accredited investor pool. See, e.g., 2024 Annual
Report at 14-15, https://www.sec.gov/files/2024-oasb-annual-report-print.pdf. Data on capital raised by private
companies excludes pooled funds, which raise capital under applicable exemptions and, in turn, invest it in private
companies.
2
Previous IAC Recommendations discussing retail investor access to the private market include:
Recommendation of the Investor Advisory Committee Regarding SEC Rulemaking to Lift the Ban on General
Solicitation and Advertising in Rule 506 Offerings: Efficiently Balancing Investor Protection, Capital Formation, and
Market Integrity (Oct. 12, 2012), https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-general-
solicitation-advertising-recommendations.pdf; Recommendation of the Investment Advisory Committee: Accredited
Investor Definition (October 9, 2014), https://www.sec.gov/spotlight/investor-advisory-committee-2012/investment-
advisor-accredited-definition.pdf. The IAC has discussed retail investor access in the context of the private markets in
the following panel discussions (recordings available for each by accessing webcast archives linked to each meeting
as marked): Discussion Regarding Capital Formation, Smaller Companies, and the Declining Number of Initial Public
Offerings (June 22, 2017); Overview of Certain Provisions of the Financial CHOICE Act of 2017 Relating to the SEC
(June 22, 2017); Discussion Regarding the SEC’s Concept Release on Harmonization of Securities Offering
Exemptions (Nov. 7, 2019); Panel Discussion Regarding Minority Community Investor Inclusion (Sept. 24, 2020);
Panel Discussion Examining the Growth of Private Markets relative to the Public Markets: Drivers and Implications
(Mar. 2, 2023); Panel Discussion of Private Funds/Markets and Outbound Investments in Countries of Concern (June
22, 2023); Panel Discussion Regarding Exempt Offerings under Regulation D Rule 506 (Sept. 21, 2023); Panel
Discussion Regarding Accredited Investors (Sept. 21, 2023); and Panel Discussion regarding Mainstreaming of
Alternative Assets to Retail Investors (Dec. 10, 2024).
3
Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 911, 124 Stat. 1376,
1883 (2010).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
3
SEC’s mission: “protecting investors, maintaining fair, orderly, and efficient markets, and
facilitating capital formation.”
4
In the Committee’s view, the optimal way for retail investors to access private market assets
is through registered funds, which allow retail investors to invest in broadly diversified funds that
contain private market assets, often alongside public market assets. Registered funds include
closed-end investment companies, interval funds, tender offer funds, exchange traded funds, and
mutual funds; over $35 trillion is currently managed by registered funds.
5
These funds offer a
practical and more transparent vehicle for expanding retail access to private assets than one of the
main alternatives—unregistered or exempt offerings—because registered funds were developed
specifically for retail use and offer numerous protections that are not found in non-public offerings.
Those protections include Commission review, audited financials, professional fund management,
diversification, various levels of liquidity, and the protections of the Investment Company Act.
Improving the regulatory framework that enables retail investor access to registered funds is the
primary focus of Part II. Recommended improvements include: providing clarity and transparency
on valuations throughout the lifecycle of a fund; enhancing liquidity disclosures and making them
more prominent; and providing for certain additional investor protections that specifically address
the increased participation of retail investors.
In addition, the Committee has discussed at length the advantages and disadvantages of
expanding retail investors’ access to private market assets in direct ways, through, for example,
changes to the definition of “accredited investor” under Regulation D or guaranteeing some form
of limited “basic access” to private markets. We do not take a position on the desirability of these
and other proposals. We appreciate, of course, that legislative or executive actions may require the
SEC to pursue certain policies that expand direct access, or that the SEC itself may determine,
through notice and comment rulemaking, that such an expansion of direct access is warranted. The
IAC believes firmly that if there were to be an expansion of direct access to private market assets,
this expansion should be accompanied by certain basic investor protection guardrails. These
include an expanded focus on investor sophistication (rather than income or wealth) when
determining accredited investor status; prudential limits on the amount that can be invested by
retail investors who do not meet sophistication or wealth criteria; the enhancement of certain filing
requirements and strict enforcement of certain already-existing requirements; and improved
disclosure and transparency to facilitate investor decision-making. These potential guardrails are
the focus of Part III.
These Recommendations are the result of work done by all four IAC Subcommittees,
which in turn drew on the extensive evidence presented at past IAC panels.
6
The Committee
carefully weighed the differing perspectives of different market participants. On the one hand,
4
U.S. Securities & Exchange Commission, Mission (Jan. 23, 2025), https://www.sec.gov/about/mission.
5
See supra note 1, at 15 (comparing asset holdings in private versus registered funds in the United States).
6
See supra note 2 (listing prior IAC panels).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
4
those that support expanding retail access to private market assets believe that this could allocate
more capital to small businesses and give more Americans the ability to invest in a dynamic part
of the U.S. capital markets.
7
On the other hand, state regulators, some investor advocates, and
others have highlighted risks to both investor protection and the health of the public markets that
stem from proposals for expanding retail access to private market assets.
8
Notably, the Committee
found that panelists from both perspectives acknowledged that information asymmetries,
illiquidity, valuation, reduced regulatory oversight, fraud, and loss are all risks that will need to be
managed if the Commission expands retail investor access to the private market, directly or
indirectly.
We return to our starting point: market changes along multiple dimensions require the
recalibration of the existing regulatory framework. It is our hope that these Recommendations will
serve as useful guidance for the Commission. We also encourage the Commission to engage with
consumer stakeholders and market participants and to proactively solicit comments from the public
at large as it considers its next steps in this area.
II. TARGETED REFORMS TO REGISTERED FUND REGULATION
Since the 1990s, a greater share of American companies has remained private or been taken
private as the number of public companies has contracted, with the latter dropping from over 8,000
in 1996 to only 3,700 in 2024.
9
Of the remaining public companies, concerns have been raised
about a number of prominent indexes being increasingly correlated to some of the most popular
but volatile companies. For example, major indexes such as the S&P 500 and the Nasdaq 100
commonly hold concentrated positions in the “Magnificent Seven,” which include the shares of
Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla.
10
For this and other reasons,
7
See, e.g., December 10, 2024 IAC Panel Remarks of Professor Neal Newman (Texas A&M School of Law);
Melody Wang (Director at BlackRock); Rajib Chandra (Partner at Simpson Thacher & Bartlett LLP); September 21,
2023 IAC Panel remarks of Kenisha Nicholson (Commission Office of Small Business Policy), Marguerite Pressley
Davis (CEO of Finance Savvy), Pat Gouhin (CEO of Angel Capital Association), and Professor Usha Rodrigues
(University of Georgia School of Law); March 2, 2023 IAC Panel remarks of Professor Steven Neil Kaplan (University
of Chicago Polsky Center for Entrepreneurship and Innvoation); November 19, 2019 IAC Panel remarks of Sara
Hanks (CEO of CrowdCheck, Inc.) and Catherine Mott (CEO of BlueTree Capital Group).
8
See, e.g., December 10, 2024 IAC Panel Remarks of Phil Bak (CEO of Armada ETFs), Craig McCann
(Principal at SLCG Economic Consulting), and Professor Benjamin Edwards (University of Nevada (Las Vegas)
School of Law); September 21, 2023 IAC Panel remarks of Craig McCann, PhD (Principal of SLCG Economic
Consulting); Amanda Senn (Director of Alabama Securities Commission); Alexandra Thornton (Senior Director at
The Center for American Progress); Michael Canning (CEO of LXR Group); March 2, 2023 IAC Panel remarks of
Elisabeth de Fontenay (Duke University), Tyler Gellasch (Executive Director of Healthy Markets Association), and
Faith Anderson (Washington Department of Financial Institutions); November 19, 2019 IAC Panel remarks of Tyler
Gellasch (Executive Director of Healthy Markets Association), Professor Renee Jones (Boston College Law School),
and Andrea Seidt (Ohio Securities Commissioner).
9
Remarks of Professor Neal Newman during IAC Panel Discussion regarding Mainstreaming of Alternative
Assets to Retail Investors (Dec 10, 2024) (presentation available at sec.gov/files/newman-sec-advisory-panel-
presentation-riape.pdf).
10
Stephanie Hill, A Closer Look at Magnificent Seven Stocks, MELLON INVESTMENTS CORP. (Feb. 2024).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
5
there have been calls to expand retail access to private market assets.
11
One strategy for
accomplishing that expansion would be for the Commission to amend its “accredited investor”
definition. That definition acts as a pivotal gateway to the private markets because it determines
who is and is not eligible to invest in Regulation D private offerings, by far the most common form
of private offering.
12
The IAC has considered issues regarding expanded retail access to private
assets at roundtables and in prior recommendations. However, the most recent amendments to the
“accredited investor” definition did not materially revise the foundational components of the
definition, most notably the financial thresholds underpinning the definitional wealth tests.
The way that most retail investors access private assets today is indirect, through an
investment in a registered fund that includes some private assets. Registered funds are potentially
a safer and more prudent way for retail investors to access these assets because these products have
the benefit of Commission registration and regulation, diversification and professional
management. These benefits are crucial safeguards for retail investors given the complex, opaque,
and illiquid nature of private assets. Yet, some registered funds are limited in how much they can
allocate to private assets and must contend with other restrictions that discourage fund managers
from including more private assets in their retail offerings. By revising those requirements, the
Commission could expand retail access to the private market through safer, registered vehicles.
While relaxing restrictions on registered funds investing in private markets may address
some of the pent-up retail demand for those assets, like other strategies that seek to increase retail
exposure to alternative investments, the changes do not come without risk. Fundraising from
institutional investors has slowed significantly in the alternatives marketplace
13
and some of the
largest institutional investors have been looking to sell their stakes for the first time in the
secondary market.
14
Existing institutional investors in a number of private funds have seen their
distributions drop to historically low levels,
15
leading some investors to sell stakes in these funds
into a secondary market.
16
Some funds have attempted to sell some of those hard-to-sell assets into
continuation funds where funds from an existing fund are sold into a new fund managed by the
11
Jennifer Banzaca, Apex: Retail Investors See Private Markets As a ‘Safer’ Haven, PRIVATE FUNDS CFO (May
6, 2025).
12
Craig McCann et al., Regulation D Offerings: Issuers, Investors, and Intermediaries, SLCG ECONOMIC
CONSULTING (Feb 9, 2024).
13
Karl Angelo Vidal & Neel Hiteshbhai Bharucha, Global Private Equity Fundraising Sinks for 3rd Straight
Year, S&P GLOBAL MARKET INTELLIGENCE (Jan. 16, 2025). There is concern that some assets being funneled into
retail vehicles may be hard-to -sell assets that funds geared to institutional funds are unwilling to retain or are interested
in selling. Moody’s Ratings, Private Market Retail to Fuel Opportunity But Intensify Liquidity, Asset Quality Risks,
Moodys.com (Jun 10, 2025). Of course, the safeguards proposed in this Recommendation will do little to protect retail
investors if they are essentially investing in hard-to -sell assets that have been rejected by institutional investors.
14
Allison McNeely et al., Yale’s Private Equity Sale Spurs Reckoning Over Endowment Model At Elite
Schools, BLOOMBERG NEWS (Jun. 6, 2025).
15
Abdulla Zaid et al., MSCI, Private Capital in Focus: Depressed Distributions: No End in Sight, S&P GLOBAL
MARKET INTELLIGENCE (May 22, 2025).
16
Dylan Thomas & Shambhavi Gupta, Private Equity Secondaries Fundraising Struggles to Keep Pace With
Demand, S&P GLOBAL MARKET INTELLIGENCE (Jun. 26, 2025).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
6
same adviser.
17
However, industry estimates show that 85% to 92% of institutional investors are
opting to sell rather than move into the continuation fund.
18
Some market participants have
suggested that an increase in retail participation in the private markets through registered funds,
could accelerate the growth of secondaries.
19
In addition, some market observers are questioning
whether and how the higher returns touted on the institutional side of the private market will
translate over to the retail side, given the additional fees imposed on retail shares.
20
Other market
observers also question how registered retail funds will be able to navigate illiquidity challenges
as private asset allocations increase.
21
Since the IAC held its “Mainstreaming of Alternative Assets to Retail Investors” panel in
December 2024, applications for a number of registered funds such as Exchange Traded Funds
and interval funds have been filed with the Commission.
22
These products offer retail investors
opportunities to invest into alternative assets without being an accredited investor and with
minimum investments of $1,000 versus the $2,500 to $10,000 in most other such funds.
23
These developments further suggest that the Commission should consider additional
safeguards given the potential adverse implications for retail investors who may have a significant
percentage of their savings and retirement assets tied up in such products but may need to access
those funds due to planned or sudden life events.
24
There is a difference between investors losing
money due to an affirmative choice to take excessive risk and a loss due to a failure to understand
the features and mechanics of funds invested in illiquid private market assets.
25
Unfortunately,
most retail investors do not engage with traditional disclosures,
26
a reality that underpins the IAC’s
17
Antoine Gara & Ivan Levingston, Private Equity Firms Flip Assets to Themselves in Record Numbers,
FINANCIAL TIMES (Jul. 23, 2025).
18
Alexandra Heal & Antoine Gara, Private Equity Backers Refuse to Roll Over Investments As Returns
Dwindle, FINANCIAL TIMES (Jul. 27, 2025). (“Between 85 and 92 per cent of investors have this year chosen to sell
rather than remain invested when private equity groups transfer a portfolio company to a so-called continuation vehicle
rather than exiting through a traditional sale or initial public offering – up from 75-80 per cent last year, according to
investment bank Houlihan Lokey.”),
19
Jeffrey Diehl et al., 2025 Global Investor Survey: Navigating Private Markets, ADAMS STREET PARTNERS
(Mar. 21, 2025), (“A concerted push to attract more retail capital – supported by the rise of evergreen vehicles, such
as funds registered under the Investment Company Act of 1940 – could accelerate the growth of secondaries.”).
20
Jason Zweig, The Fees on These Funds Will Leave You High and Dry, WALL STREET JOURNAL (Jul. 26,
2024).
21
Carrie McCabe, Retail Investors Into Private Equity Watch The Hidden Costs, FORBES (May 16, 2025) (“As
Cliff Asness at AQR has argued, the true economic value of private holdings almost certainly declines too – even if
reported marks lag behind.”).
22
Such funds include but are not limited to Blackstone’s Private Multi-Asset Credit and Income Fund
(prospectus available at BMACX | Blackstone Private Multi-Asset Credit and Income Fund) and Capital Group KKR
Core Plus and Multi-Sector Plus (prospectus available at Prospectus Express - Prospectus).
23
See id.; see also Niket Nishant, KKR and Capital Group Launch Funds Targeting Mix of Private, Public
Credit, REUTERS (Apr. 29, 2025).
24
David Isenberg, With Funds Increasing Retail Private Access, New Disclosure Standards May Follow,
FINANCIAL TIMES IGNITES (Jun. 6, 2025).
25
Matt Wirz, Moody’s Sounds Alarm on Private Funds for Individuals, WALL STREET JOURNAL (Jun 10, 2025).
26
Recommendation of the SEC Investor Advisory Committee on Disclosure Effectiveness (May 21, 2020),
https://www.sec.gov/spotlight/investor-advisory-committee-2012/disclosure-effectiveness.pdf.
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
7
recommendations to the Commission. It is essential, therefore, that registered funds investing in
private market assets establish robust investor protections and disclosures from the outset,
recognizing the diverse set of retail investors with varying levels of financial sophistication.
Summary of Part II Recommendations:
1. Provide clarity and transparency on valuations throughout the lifecycle of a fund;
2. Consider changes to Staff Interpretations and/or rules under the Investment Company Act
of 1940 to allow registered funds to better facilitate investing in private market assets;
3. Enhance and make liquidity disclosures more prominent;
4. Provide for additional investor protections specifically addressing greater participation of
retail investors;
5. Open a request for comment process to solicit additional views and perspectives on these
and other critical issues.
1. Provide clarity and transparency on valuations throughout the lifecycle of a fund
The IAC recommends that the Commission require funds to disclose additional information
to retail investors to better understand how the values of portfolio assets that do not actively trade
are determined. Such additional information should include:
• Disclosing when fund sponsors reject or replace third party appraisals, and
• Requiring fund directors, who have a fiduciary duty to protect shareholder interests
and manage potential conflicts of interest,
27
to require funds they oversee to
disclose more details as to how valuations are determined, ensuring consistency
across various investment vehicles.
The inherent lack of daily market prices for many private market assets raises the need for
the Commission to establish standards for an impartial party to determine the valuation of the
underlying assets, especially as fees are charged to investors typically based on the value of assets,
which would be even higher if the fund is using leverage.
28
Those standards become especially
important as some Exchange Traded Funds (ETFs) have been offering retail investors daily
liquidity to invest in private market assets which in turn necessitates having to estimate the value
of all of the ETFs underlying assets daily while those assets themselves may trade infrequently.
29
Among several Business Development Companies (BDCs), which are largely owned by retail
investors and are primarily invested in private credit corporate loans, there have been notable
27
INVESTMENT COMPANY INSTITUTE, UNDERSTANDING THE ROLE OF MUTUAL FUND DIRECTORS (Jun. 7, 2002).
28
Jason Zweig, The Fees on These Funds Will Leave You High and Dry, WALL STREET JOURNAL (Jul 26, 2024).
29
One such example is State Street’s SSGA IG Public & Private Credit ETF (PRIV), the prospectus for which
can be found at https://www.ssga.com/us/en/intermediary/etfs/spdr-ssga-ig -public-private-credit-etf-priv. See also
Jason Zweig, The Fees on These Funds Will Leave You High and Dry, WALL STREET JOURNAL (Jul. 25, 2024).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
8
valuation discrepancies across different BDCs holding stakes in the same loans.
30
As one popular
retail fund states in its prospectus:
NAV calculations are not governed by governmental or independent securities,
financial or accounting rules and standards... We calculate and publish NAV
solely for purposes of establishing the price at which we sell and repurchase shares
of our common stock, and you should not view our NAV as a measure of our
historical or future financial condition or performance.
31
In other instances, fund advisers may engage in practices that immediately inflate the NAV
(“NAV squeezing”) with no immediate increase in the value of the underlying assets. One such
fund, whose adviser purchased private equity fund stakes in the secondaries market at a discount,
immediately marked up the value in its own NAV, ignoring the competitive market price the fund
adviser itself just set.
32
Given the growing use of private investments in fund portfolios the Commission should
emphasize the valuation responsibilities currently delegated to fund directors under Rule 2a-5
under the Investment Company Act of 1940 with a view to providing greater investor protection.
This focus is especially critical considering the wide range of investor sophistication and
engagement levels, which may complicate the handling of potential valuation discrepancies.
33
It should be emphasized that fund directors are responsible for:
• Requiring the fund adviser to establish a methodology for valuations;
• Testing the appropriateness and accuracy of valuations and challenging them if
necessary; and
• Overseeing the fund adviser’s use of third-party valuations.
The IAC recommends the Commission require fund advisers report on a periodic basis to
fund directors any rejections or replacements of any third-party valuations.
34
Fund advisers should
also disclose to investors the circumstances or conditions that would lead them to override third-
party valuations. Such a process is especially important for retail facing funds as many make
investment decisions on the valuations presented to them and with little recourse to assessing the
assumptions and inputs behind them.
30
Silas Brown et al., How Private Credit Market Boom Is Hiding Valuation Problems, BLOOMBERG NEWS (Feb.
28, 2024).
31
Phil Bak, The Big Bad BREIT Post, BAKSTA C K (Jun. 18, 2024).
32
Jason Zweig, The Future Ain’t What It Used to Be for These Funds, WALL STREET JOURNAL (Jun 6, 2025).
33
Some contractual language to address discrepancies in valuation can be seen in Net Asset Value credit
facilities but exclusively involve institutional investors. See Mayer Brown, NAV Facilities: Appraisal and Valuation
Challenge Rights, MAY E R BROWN INSIGHTS (Aug. 13, 2024).
34
Gibson Dunn & Crutcher LLP, Private Fund Advisers and Universities Should Assess Valuation Protocols
and Disclosures in Case the SEC Comes Knocking, GIBSONDUNN.COM, (Jul 9, 2025).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
9
Given that it is likely that a number of registered funds, including those offering daily
liquidity, will own a number of illiquid assets that are also held in institutional portfolios, we also
recommend the Commission offer clarity as to what levels of discrepancies are acceptable in the
normal course of business between the valuations used in publicly traded funds and those held in
private portfolios managed by the same fund adviser, especially during volatile markets where
such discrepancies between the funds may become noticeably greater.
The IAC recommends that the Commission’s Examinations Division make reviewing
valuations of funds with significant investments in liquid assets a focus area. The Commission’s
Division of Examinations should also examine performance figures used in marketing materials
as retail investors will often make investment decisions based on those numbers.
35
2. Consider changes to Staff Interpretations and/or rules under the Investment Company Act of
1940 to allow registered funds to better facilitate investing in private market assets
The Commission should facilitate expanding retail investors’ ability to gain exposure to
private market assets through registered funds (e.g. closed-end funds, interval funds and tender
offer funds) without sacrificing the protections of the Investment Company Act. We believe the
Commission should consider the following interpretive or rule changes under the Investment
Company Act:
a. Allow more flexibility to invest in private funds. Closed-end funds are highly suitable
for providing retail investors access to less liquid investments. However, until recently
the Staff has prohibited a closed-end fund from investing more than 15% of net assets
in privately offered funds, unless the fund’s shares are available only to accredited
investors who make minimum initial investments of at least $25,000. We support the
recent change in Staff position as recommended by Chair Atkins who urged that this
long-time Staff position be reconsidered.
36
Decisions to make investments in private
funds should be determined by a fund’s Board of Directors and a fund’s investment
adviser. This change would provide investors the opportunity to obtain exposure to
investments otherwise available to affluent investors.
Over time, fund advisers and directors should be able to land on the optimal percentage
of closed-end funds invested in private market assets. The European Commission in its
updated rules for European Long-Term Investment Funds (ELTIFs) lowered the
35
Bill Myers, Marketing Rule Key to Valuations Enforcement, REGULATORY COMPLIANCE WAT C H (Apr. 21,
2023).
36
See, e.g., Paul Atkins, SEC Chairman, Prepared Remarks Before SEC Speaks (May 19, 2025) (“I intend to
have the Commission address this situation and reconsider this 23-year old practice concerning investments by closed-
end funds in private funds.”); see also Views of SEC Division of Investment Management, ADI 2025-16 - Registered
Closed-End Funds of Private Funds ( August 15, 2025).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
10
minimum investment in eligible illiquid assets to 55% of the fund’s capital
37
from an
original 70% of capital in 2015 to better allow fund advisers to better manage their
liquidity and redemption requests.
38
While the European approach under ELTIF differs
significantly, those recent changes underscore how larger allocations to private assets
exacerbate liquidity challenges for fund advisers.
b. Provide flexibility for co-investments under Section 17(d) and Rule 17d-1 under the
Investment Company Act. Section 17(d) and Rule 17d-1 thereunder are designed to
prevent overreaching in connection with joint transactions involving a fund and its
affiliated persons. The SEC has issued numerous exemption orders permitting a closed-
end fund and one or more other funds and their affiliates to enter into co-investment
transactions, subject to certain conditions. The SEC should consider codifying and
simplifying co-investment relief including for funds other than closed-end funds. This
would facilitate greater ability for funds to co-invest in private investment opportunities
providing benefits to retail investors.
c. Provide greater repurchase opportunities for investors. Rule 23c-3 under the
Investment Company Act provides for quarterly repurchases of securities by interval
funds. The SEC has granted exemptive orders permitting interval funds to conduct
monthly repurchases subject to certain conditions. Amending Rule 23c-3 to permit
monthly repurchases would eliminate the costs and need for funds to apply for
individual exemptive orders.
d. Allow closed-end funds to offer multiple classes of shares. Open-end funds are
permitted under Rule 18f-3 to issue two or more classes of shares representing interests
in the same portfolio. The SEC routinely grants exemptive orders to continuously offer
closed-end funds to offer multiple classes of shares. Codifying this relief in a rule would
eliminate the costs and need for these funds to obtain individual exemptive orders.
e. Allow interval funds and tender offer funds to operate as series funds. Open-end funds
have the flexibility to operate as “series investment companies”. This allows a cluster
of individual investment companies to be organized under a single set of organizational
governing documents. Each series offers a separate portfolio of securities with separate
investment objectives, policies and risks. Interval funds and tender offer funds should
be permitted to operate as series investment companies which would allow these funds
to save the time and expense associated with organizing separate registrants.
37
Arthur Cox LLP, E LT I F – The Next Generation, ARTHURCOX.COM (Jan. 17, 2025).
38
See, e.g., AFG & Morgan Lewis, Practical Guide to ELTIF 2.0 (Jan. 2025) (“The reduction in this minimum
amount invested in illiquid assets should enable managers of ELTIFs to better manage the liquidity of ELTIFs and in
particular, to honour redemption requests for open-ended or semi-open ended ELTIFs in strategies that do not generally
involve liquidity tools.”).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
11
3. Enhance and make liquidity disclosures more prominent
The IAC also recommends the Commission provide investors with a clear understanding
of the major differences of retail funds invested in alternative assets where they may be subject to
longer redemption timelines and lockups. Such considerations are especially important since retail
investors may need to redeem money to meet both normal and emergency expenses and do not
have the same access to inexpensive, alternative financing that institutional investors do.
39
• Simplify risk disclosures for retail investors with an immediate view to understanding
the basic features of the fund in a clear and concise manner. The most important
features of the fund primarily invested in alternative assets should be very clearly and
succinctly presented, including: (1) redemption interval; (2) what percentage can be
redeemed in a given interval; (3) the potential for lockup; (4) exceptional circumstances
that qualify for off-interval or additional distributions; (5) any previous lockups of the
fund; and (6) valuation uncertainty.
• Use layered disclosure formats such as summary dashboards or visual risk indicators
40
to make key risks more digestible.
41
• Require standardized language across fund documents to reduce confusion and
improve comparability.
42
4. Provide for additional investor protections specifically addressing greater participation of
retail investors
The Commission should strongly consider additional investor protections for retail focused
funds invested in alternative assets given many of the safeguards in place are primarily for
institutional investors and do not take into account an influx of this different set of investors. More
specifically, the Commission should:
• Work with the Financial Industry Regulatory Authority (FINRA) and state securities
regulators to provide guidelines on when investments in private market assets are in an
investor’s best interest;
39
See, e.g., Charles Hayes, Harvard and Yale’s Endowment Sales: A Liquidity Crisis or Strategic Move?,
AINVEST (Apr. 30, 2025) (“With 83% of its $55.2 billion endowment allocated to private equity and hedge funds –
the school risks being trapped in a ‘liquidity crunch’ ... To bridge the gap, Harvard issued $1.2 billion in municipal
bonds in early 2025.”)
40
For example, in leveraged ETFs a simple long term performance visual shows a clear divergence between a
2x leveraged ETF versus the underlying stock shows clearly a hidden cost of “volatility drag.” Brian Jacobs. Leveraged
ETFs: The Hidden Costs of Volatility Drag, Aptus Capital Advisors (Feb. 10, 2025).
41
Carl Ayers, Second in a Series: Disclosure Examples for New Ad Rule, REGULATORY COMPLIANCE WAT C H
(Jul. 21, 2022).
42
To be sure, standardization should not result in generic, boilerplate language that does not convey useful
information to investors.
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
12
• Ensure proper disclosure of potential conflicts arising from sales compensation,
servicing fees, and revenue sharing agreements;
• Continue to rigorously enforce rules and regulations governing deceptive marketing
and false claims to investors; and
• Prohibit clearly conflicted transactions without the approval of a fund’s directors.
The IAC recommends the Commission work with FINRA and state securities regulators to
monitor broker-dealers and investment advisers for their compliance with Regulation Best
Interest
43
and the Investment Advisers Act of 1940
44
when they offer and sell funds invested in
alternative assets to their clients.
Financial incentive conflicts arising from sales compensation, servicing fees, and revenue-
sharing arrangements that are common features of alternative products need to be properly
disclosed and mitigated.
45
The Commission should study the impact that these financial incentives
have on retail investors, in contrast to the experience of institutional investors who have
historically avoided them or been able to negotiate preferrable terms.
The Commission should also explicitly limit fund advisers from engaging in conflicted
transactions without the approval of its fund directors. Examples of such conflicted transactions
include (1) fund advisers/sponsors charging multiple layers of fees to the fund, and (2) fund
advisers/sponsors failing to negotiate contracts and service arrangements with their portfolio
companies on an arms-length basis.
46
Additionally, advisers should not engage in deceptive advertising of funds primarily
invested in illiquid assets and market them as more liquid or less risky than they are in reality.
47
The SEC’s Division of Examinations has previously issued Risk Alerts due to private fund advisers
failing to act consistently with disclosures and use misleading disclosures surrounding
performance
48
and the Division of Examinations should issue further Risk Alerts if the Staff see
43
Financial Industry Regulatory Authority (FINRA), SEC Regulation Best Interest (Reg BI) (2025).
44
Jacko Law Group PLC, Fiduciary Duties of Investment Advisers and the recent SEC Treatment of Hedge
Clauses (Mar. 30, 2022) (“An adviser’s fiduciary duties cannot be waived and are enforceable through section 206 of
the Advisers Act.”).
45
See, e.g., Brander Richmond, Alternative Investments: Promises and Pitfalls, FULCRUM CAPITAL LLC (Jun.
27, 2025) (“Many financial advisors receive higher compensation for selling alternative investments compared to
traditional assets, shifting their focus from client outcomes to revenue generation.”).
46
Remarks of Rajib Chanda (Simpson Thacher & Bartlett LLP) during IAC Panel Discussion Regarding
Mainstreaming of Alternative Assets to Retail Investors (Dec. 10, 2024) (presentation available at sec-panel-stb-slides-
chanda.pdf).
47
The SEC has previously brought enforcement action against investment advisers to retail investors for
violations of the Marketing Rule under the Investment Advisers Act. See Commission Press Release, SEC Charges
Five Investment Advisers for Marketing Rule Violations (Apr 12, 2024).
48
SEC Division of Examinations Risk Alert, Observations from Examinations of Private Fund Advisers (Jan.
27, 2022).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
13
recurring issues and prioritize examinations of private funds being sold primarily to retail
investors.
49
5. Open a Request for Comment process to solicit additional views and ideas and other critical
issues
While the IAC has extensively discussed and thought through many of these
recommendations, given the importance, challenges, and consequential impact of opening private
market assets to retail investors, the Committee also recommends that the Commission open a
Request for Comment process to obtain input on various matters. These include, inter alia, (1)
additional methods investment managers can use to effectively facilitate private market
investments to retail investors; (2) other impediments retail investors may have in safely accessing
private market investments; (3) the approaches other jurisdictions have taken to facilitate retail
investments in private markets; (4) how to expand retail investor access to private markets while
maintaining an appropriate level of investor protection; and (5) systemic risks of the growth in the
private markets.
50
III. DIRECT ACCESS: APPROACHES AND GUARDRAILS
We note once again that the Committee has discussed at length the advantages and
disadvantages of expanding retail investors’ access to private market assets in direct ways. These
include, for example, changes to the definition of “accredited investor” under Regulation D or
guaranteeing some form of limited “basic access” to private markets directly. We do not take a
position on the desirability of these and other proposals. We also appreciate that legislative or
executive actions may require the SEC to pursue certain policies that expand direct access, or that
the SEC itself may determine, through notice and comment rulemaking, that such an expansion of
direct access is warranted.
With those possibilities in mind, the IAC finds that if there were to be an expansion of
direct access to private market assets, this expansion ought to be accompanied by certain basic
investor protection guardrails. These include: (1) an expanded focus on investor sophistication
(rather than income or wealth) when determining accredited investor status; (2) prudential limits
on the amount that can be invested by retail investors who do not meet sophistication or wealth
criteria (as discussed in Part III.A below); (3) strict enforcement of certain already-existing
requirements; and (4) enhancements to certain filing requirements to facilitate investor decision-
making (as discussed in Part III.B below).
49
SEC Division of Examinations, FY2025 Division of Examinations Examination Priorities (Oct 16, 2024).
50
For one discussion of such systemic risks, see Moody’s Ratings, Private Market Retail to Fuel Opportunity
But Intensify Liquidity, Asset Quality Risks, Moodys.com (Jun 10, 2025).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
14
A. The Accredited Investor Definition
One strategy that is frequently featured in private market access proposals is to expand the
definition of “accredited investor,” which serves to determine who is and is not eligible to invest
in a Regulation D offering, which is by far the most popular form of private offering.
51
Notably,
the accredited investor definition has long been viewed as problematic by both proponents and
opponents of expanding direct retail investor access.
52
The panels held by the IAC over the years
suggest that the definition is outdated and that it is simultaneously overinclusive and
underinclusive. The IAC therefore puts forward the following considerations for improvement.
Under the existing framework, most investors that qualify as “accredited” do so based on
income (individual annual income exceeding $200,000 or joint annual income exceeding $300,000
in the past two years) or wealth (net worth exceeding $1 million and excluding one’s primary
residence).
53
Except in limited circumstances, investors who do not qualify as accredited do not
have direct access to the private markets. Once an investor is qualified as accredited, however,
there is no definitional limit to how much that investor can invest in the market. Assuming the
investor is not qualified to be an accredited investor under a different test, this technically means
that an investor with net worth of $999,999 – just short of the wealth threshold – can directly invest
$0 in the private market, but an investor worth just $1.01 more could directly invest their entire
net worth.
In 2014, the IAC discussed the challenges associated with the SEC’s reliance on wealth
and income tests and recommended that the SEC move toward alternate approaches that would
qualify an individual based on financial sophistication.
54
Recognizing how difficult it might be for
the SEC to shift away from a set of criteria that are deeply entrenched in regulatory policy and
market practice and taking into account concerns that alternative proposals might unnecessarily
shrink the pool of eligible investors, the IAC also recommended that the SEC consider an
alternative: limiting the share of an investor’s total assets that can be invested in private offerings.
55
In 2020, the SEC added passing one of three securities licensing exams to its list of professional
credentials that qualify an individual as an accredited investor under Rule 501(a)(10).
56
While this
represented a positive step in relying on financial sophistication rather than income or wealth, it is
51
See U.S. Sec. & Exch. Comm’n, Review of the “Accredited Investor” Definition under the Dodd-Frank Act
(Dec. 14, 2023) at 9 (hereinafter “Commission’s 2023 Review of the “Accredited Investor” Definition”).
52
Supra notes 7 and 8 (comparing competing stakeholder views).
53
Rule 501(a), 17 CFR 230.501(a).
54
Recommendation of the Investment Advisory Committee: Accredited Investor Definition (Oct. 9, 2014).
55
Id.
56
These include FINRA’s General Securities Representative (Series 7), NASAA’s Investment Adviser
Representative (Series 65), and FINRA’s Private Securities Offering Representative (Series 82). See U.S. Sec. & Exch.
Comm’n, Order Designating Certain Professional Licenses as Qualifying Natural Persons for Accredited Investor
Status Pursuant to Rule 501(a)(10) under the Securities Act of 1933, Release No. 33–10823 (Aug. 26, 2020) [85 FR
64234 (Oct. 9, 2020)]; see also Commission’s 2023 Review of the “Accredited Investor” Definition, supra note 51, at
10, 49-50.
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
15
not clear whether the 2020 additions materially increased the number of accredited investors
because many may have already qualified as accredited based on the income or wealth test.
The IAC finds that any initiative to expand direct access to retail investors should seek to
address the overinclusive and underinclusive nature of the existing definition. Specifically, the
current definition places no limits on sales to unsophisticated investors who have a limited time
horizon and limited capacity for loss (e.g., older investors who qualify based on retirement assets
they cannot afford to lose). At the same time, the current definition prohibits sales to sophisticated
investors who do not meet the income or wealth criteria, even if they have longer time horizons
and a willingness to assume the requisite risk of loss (e.g., younger professionals and entrepreneurs
who are eager to explore the markets and may have decades to save and recover from any potential
losses).
Recommended Guardrail #1: Emphasize investor sophistication (rather than income or wealth)
as part of any potential expansion of direct access
Rule 501(a)(10) of Regulation D gives the SEC the power to publish by order, after notice
and public comment, a list of credentials or designations that it believes demonstrate “sufficient
knowledge and experience in financial and business matters to evaluate the merits and risks of a
prospective investment.” As noted, the SEC relied on this authority in 2020 to qualify investors
who pass the Series 7, 63, and 82 securities licensing exams, irrespective of income or net worth.
The IAC reviewed private market access proposals seeking to add additional credentials to
the Rule 501(a)(10) list: we found that some appear to be appropriate, but, importantly, that others
were not. We based our determination on criteria such as requiring rigorous competency
examinations, setting minimum education and professional practice requirements, and imposing
continuing education requirements, similar to the securities licensing exams that the Commission
has already accepted. Indeed, most of the credentials listed below serve as a regulatory substitute
for one or more state securities licensure exams in many jurisdictions.
57
The IAC believes that the following credentials could be appropriate additions to the
existing list: (1) Chartered Financial Analysts, (2) Certified Financial Planners, (3) Certified Public
Accountants, (4) Chartered Financial Consultants, (5) Personal Financial Specialists, (6) Certified
Investment Management Analysts; and (7) Certified Private Wealth Advisors.
58
57
For a helpful discussion of these credentials and other financial professional designations, please review
FINRA’s database of professional designations, available at Professional Designations | FINRA.org, and the following
investor bulletin jointly produced by FINRA, the Commission’s Office of Investor Education and Advocacy, and the
North American Securities Administrators Association: Investor Bulletin: Making Sense of Financial Professional
Designations | FINRA.org (June 20, 2025).
58
This is consistent with two legislative proposals introduced in the House this year: (1) H.R.3394 - Fair
Investment Opportunities for Professional Experts Act, which passed the House on June 23, 2025, and (2) H.R. 3348
- Accredited Investor Definition Review Act, which was introduced on May 20, 2025. H.R. 3394 directs the
Commission to undertake rulemaking that would allow any natural person to become accredited based on
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
16
The IAC also supports, in principle, the notion of creating an accredited investor test,
provided that it (i) adequately probes the examinee’s ability to understand the unique features and
risks of making private market investments, including the importance of diversification;
59
and (ii)
is developed by the Commission in consultation with other federal and state regulators as well as
industry and investor stakeholder groups.
60
The Commission could delegate administration of the
test to FINRA, given FINRA’s extensive experience administering competency examinations, or a
body that commonly support retail investors. An accredited investor test, coupled with
Commission approval of the designations above, is, in the Committee’s view, a reasonable way to
remove the private market barrier for sophisticated investors who understand and are willing to
take on the risk of private market investment.
61
Recommended Guardrail #2: Place prudential limits on the amount that can be invested by retail
investors who do not meet sophistication or wealth criteria and index the existing income and
wealth thresholds for inflation on going-forward basis
As noted above, one of the chief criticisms of the existing accredited investor definition is
the perception that it unfairly divides the U.S. population into segments that either get unlimited
“demonstrable education or job experience to qualify such person as having professional knowledge of a subject
related to a particular investment, and whose education or job experience is verified by a self-regulatory organization
(as defined in section 3(a) of the Securities Exchange Act of 1934).” H.R. 3347 directs the Commission to update Rule
501(a)(10) to include the list of certifications, designations, and credentials that were approved by Commission order
in 2020 as described above; add other designations that are “substantially similar in measuring financial sophistication,
knowledge, and experience in financial matters;” and periodically review and adjust the Commission’s list at least
once every five years moving forward.
59
The SEC’s own website speaks about the “magic of diversification,” which is described as “[t]he practice of
spreading money among different investments to reduce risk is known as diversification. By picking the right group
of investments, you may be able to limit your losses and reduce the fluctuations of investment returns without
sacrificing too much potential gain.” See U.S. Sec. & Exch. Comm’n, Beginners’ Guide to Asset Allocation,
Diversification, and Rebalancing (Aug. 27, 2009).
60
This is consistent with the approach advanced in H.R.3339 - Equal Opportunity for All Investors Act of 2025,
which passed the House on July 21, 2025. H.R. 3339 directs the Commission to undertake rulemaking that creates an
accredited investor test that is “designed with an appropriate level of difficulty such that an individual with financial
sophistication would be unlikely to fail” but capable of demonstrating competency on the following topics: different
types of securities, federal disclosure requirements, corporate governance, financial statements, and the risk of
investing in private companies and private funds. H.R. 3339 listed the following as examples of private asset risks:
limited liquidity, limited disclosures, subjectivity and variability in valuations, information asymmetry, leverage,
concentration risk, longer investment horizons, and conflicts of interest. H.R. 3339 passed the House unanimously.
61
The IAC does not endorse a competing financial sophistication proposal that would treat investors as
accredited if they receive investment advice or individualized investment recommendations from a registered
investment professional. Registered firms and professionals have strong financial incentives to recommend private
market assets, which can compromise the quality of their advice. See, e.g., Remarks of Phil Bak, Craig McCann &
Professor Benjamin Edwards, IAC Panel Discussion: Mainstreaming of Alternative Assets to Retail Investors (Dec.
10, 2024). Investors who lack financial sophistication may not be aware of or understand how these conflicts of interest
could harm them, as observed in private market cases like GBP Capital and Woodbridge. See, e.g., Private Equity
Exec Sentenced to Prison for $1.6B GPB Capital Fraud, FA Magazine (May 14, 2025).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
17
access to the private markets or no access at all. The IAC agrees that this all-or-nothing approach
is flawed. It is important, however, to avoid going from “no access” to “full access.”
If the Commission determines that expanded direct access for retail investors is warranted,
we propose the following prudential limit, which we term “basic access.”
62
“Basic access” could
generally be defined as: “the ability for retail investors who do not meet a sophistication test or the
income or wealth criteria set forth in Rule 501(a)(5) and (6) to directly invest the greater of:
(a) on an annual basis, up to 10% of last year’s individual or joint spousal income;
(b) in the aggregate, up to 10% of individual or joint spousal net worth, exclusive of
personal residence and automobiles; or
(c) in the aggregate, up to 10% of the value of the investor’s securities investments.”
63
The Committee discussed which wealth categories to use (income versus net worth versus
investable assets) and the need for inflationary adjustments. No particular wealth category emerged
as distinctly superior to the others so the Committee is opting for a flexible approach that would
allow investors to qualify using any of the categories.
64
In considering whether the financial
thresholds used in the income and wealth tests should be adjusted for inflation (bearing in mind
that those thresholds have not been adjusted since 1982), the Committee took note of competing
industry and consumer views. Panelists representing certain consumer groups have advocated for
a full inflationary adjustment retroactive to 1982, while panelists representing industry groups have
62
Sitting Commissioners Uyeda and Peirce have both discussed this approach. See, e.g., Commissioner Mark
Uyeda, Remarks at the “Going Public in the 2020s” Conference: Columbia Law School/Business School Program in
the Law and Economics of Capital Markets (Mar. 3, 2023), (“To provide investment exposure to growth-stage
companies for Main Street investors, consideration should be given to allowing an individual to invest a certain
percentage of his or her income or net worth in one or more private companies during a year.”); Commissioner Hester
Peirce, Capital On-Ramps: Remarks at the SEC’s 42nd Annual Small Business Forum – Exploring the Early-Stage
Landscape: Trends and Strategies in Capital Raising (Apr. 24, 2023) (potential options to expand access “include
allowing anyone to invest some percentage of her investment portfolio in private companies—a technique already
used in the crowdfunding rules”).
63
The Committee selected 10% as the allocation figure because it is a recurring feature of private market access
proposals and because it is the investment limit found in two existing JOBS Act exemptions – Regulation
Crowdfunding (applying 5% and 10% limitations) and Regulation A+ (10% limitation for non-accredited investors).
Regulation A limits the amount non-accredited investors can purchase to no more than 10% of the greater of their
annual income or their net worth. 17 CFR 230.251(d)(2)(i)(C). Regulation Crowdfunding limits the amount Individual
investors can invest in all Regulation Crowdfunding offerings over the course of a 12-month period to: (a) the greater
of $2,200 or 5% for investors with annual income or net worth less than $107,000 or (b) 10% of the lesser of the
investor’s annual income or net worth for investors whose annual income and net worth are equal to or more than
$107,000. 17 CFR 227.100(a)(2). The Committee expects that the Commission would solicit comment on this
approach as part of the rulemaking process.
64
This approach is similar to a legislative proposal, entitled the Investment Opportunity Expansion Act, which
was included in several bills considered by the House during the 118
th
Congress. The proposal was incorporated into
Division C, Title II, of H.R. 2799, the Expanding Access to Capital Act. H.R. 2799, which passed the House. That
bill proposed a new qualification path for accredited investors that would allow natural persons to invest up to 10%
of the individual's net assets or 10% of the individual's annual income, whichever is greater, in the aggregate for private
offerings.
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
18
consistently opposed that approach. The Committee is opting for the least-disruptive option, which
would be to index the thresholds on a going-forward basis.
65
Looking ahead, indexing for inflation would help ensure that the thresholds retain their
utility as an imperfect but still-relevant proxy for an investor’s ability to withstand loss. When
initially adopted in 1982, the definition applied narrowly to the wealthiest 1.8% of American
households. As noted above, the unadjusted thresholds in the definition covered approximately
19% of American households in 2022. Without indexing for inflation on a going-forward basis,
that percentage is estimated to grow to nearly half (49.2%) of all American households by 2042,
if not earlier.
66
Indexation would ensure that the income and net worth metrics continue to serve
as meaningful proxies for an investor’s capacity for loss.
Special Consideration: Retirement Assets
Another idea that generated significant discussion in previous IAC panels is the exclusion
of retirement assets (or a portion thereof) from the calculations used in the wealth test. While the
Committee would like to see the accredited investor definition calibrated to help Americans save
for retirement, it did not have enough information to conclude whether that would be best
accomplished by including or excluding retirement assets from the wealth test.
As of 2022, nearly one-third of all “accredited” American households, 4.84 million of the
16.44 million total, relied on retirement assets to qualify as accredited investors.
67
According to
one commentator, “[f] or many families, the assets held in IRAs and [defined contribution] plans
(typically associated with either a current job or a past job) are among the most important
components of their net worth and are a key determinant of their future retirement security.”
68
In
previous IAC panels, some panelists cautioned that too many older investors, even accredited ones,
have lost too much of their retirement savings in the private markets and opined that retirement
assets should be specially protected and excluded from the wealth test.
69
Other IAC panelists,
however, have noted the investment performance and diversification benefits of private market
assets, which could maximize retirement savings under the right circumstances.
70
The Committee
65
This is consistent with the approach utilized in H.R.3394 - Fair Investment Opportunities for Professional
Experts Act, which passed the House on June 23, 2025.
66
Commission’s 2023 Review of Accredited Investor Definition, supra note 51.
67
See id, at 21-23.
68
Aditya Aladangady et al., Changes in U.S. Family Finances from 2019 to 2022: Evidence from the Survey of
Consumer Finances. Washington: Board of Governors of the Federal Reserve System, at 17 (Oct. 2023), available at
https://doi.org/10.17016/8799).
69
See, e.g., Written Statement of Amanda Senn and Written Statement of Michael J. Canning, IAC Panel
Discussion Regarding Exempt Offerings Under Regulation D Rule 506 (Sept. 21, 2023).
70
See, e.g., Written Remarks of Rajib Chanda: What Do Retail Investors Want When Allocating to Private
Markets?, IAC Panel Discussion: Mainstreaming of Alternative Assets to Retail Investors (Dec. 10, 2024)
(presentation available at sec-panel-stb-slides-chanda.pdf); Steven Neil Kaplan Presentation, IAC Panel Discussion
Examining the Growth of Private Markets Relative to the Public Markets: Drivers and Implications (March 2, 2023).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
19
recommends that the Commission study this important topic and report on its findings to confirm
that any change that the Commission makes to the accredited investor definition does not harm
retirees.
71
B. Form D Policy and Practice
The guardrails proposed in this Part are intended to ensure that any expansion of direct
access fits with the core architecture of the federal securities laws. Ever since Congress enacted
the federal securities laws in the 1930s, the basic rule underlying the regulatory scheme has held
that any offer or sale of securities must be registered with the Commission, unless it qualifies for
a recognized exemption. For over 90 years, this registration requirement has served to ensure that
investors and markets receive full and fair disclosure of material information to promote securities
price accuracy, investor decision-making, and investor oversight.
72
The US Supreme Court, in SEC v. Ralston Purina, established the criteria for claiming an
exemption from registration under Section 4(a)(2) of the Securities Act.
73
The Court allowed the
exemption where the persons participating in the offering do not need the protections provided by
SEC registration, because they “have access to the kind of information which registration would
disclose.”
74
A subsequent Fifth Circuit decision elaborated that if investors “did not possess the
information requisite for a registration statement, they could not bring their sophisticated
knowledge of business affairs to bear” in deciding whether to invest, meaning that an information-
lacking offering could not be exempt.
75
Viewed from today’s vantage point, this highlights that
sophistication without information is of limited use in navigating the private markets.
In 1982, the SEC adopted Regulation D to allow issuers to offer and sell their securities
offerings in limited private offerings without the need to register with the SEC.
76
Regulation D
71
The Commission could study the impact that accredited investor reforms would have on retiree households
through: (a) routine examination of investment firms, by reviewing firm policies and procedures to ascertain the
criteria that firms subject to fiduciary and best interest standards use to approve and monitor the sales of private
offerings to accredited investors and by reviewing anonymized customer account data of accredited investors who
indicate their accounts are being used for retirement savings, comparing and contrasting complaint and account
performance data for concentrations below, at, and above various allocations; (b) assessment of victim profiles in its
own complaint files and in regulatory actions (brought by the Commission, FINRA, and state securities regulators)
that involve a private offering to gauge the involvement of and impact on older, retired investors versus other investor
populations. Publicly reporting these findings would provide valuable private market data and insights for the
Commission and other policymakers and stakeholders whose priorities are to educate and protect older American
investors.
72
See Commission’s 2023 Review of the “Accredited Investor” Definition, supra note 51, at 5.
73
346 U.S. 119, 127 (1953).
74
See Commission’s 2023 Review of the “Accredited Investor” Definition, supra note 51, at 7.
75
Hill York Corp. v. American International Franchises, Inc., 448 F.2d 680, 690 (5th Cir. 1971).
76
See Federal Register Vol. 47, No. 51 at 11251,17 CFR Parts 230 and 239 [Release No. 33-6389] at 11251-
11261 9, including the chart at 11259-60.
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
20
was meant to encourage capital raising by small businesses,
77
and contains two relevant
information provisions:
• Form D: Issuers relying on Regulation D are required to file “Form D” with the
Commission within 15 calendar days after the first sale of securities in a Regulation D
offering.
78
The form collects basic information, including the issuer’s identity and
address, names and titles of executive officers and promoters, amount and type of
securities offered and sold, use of proceeds, number and type of investors, and sales
commissions and finders’ fees. Since 2008, this filing must occur via the EDGAR
system, making it easily available to investors, state securities regulators, and other
interested parties.
• Rule 502(b) of Reg. D: When any investors who are not “accredited investors”
participate in a Rule 506(b) offering, the issuer must provide specific information,
including financial statements (audited if the offering exceeds $20 million), a
description of the securities, use of proceeds, management and business details, risk
factors. The issuer is not required to provide any of this information when only
“accredited investors” participate in the offering.
One point regarding the original Regulation D is worth emphasizing. Regulation D was
clearly intended to provide a narrow exception, including from the overall scheme that the
Supreme Court put in place in Ralston Purina. The limited scope of the private markets at the time
naturally limited the reach of exempt offerings. The registration requirements contained in Section
12(g) of the Exchange Act limited the shareholder base of non-public companies to fewer than 500
shareholders.
79
Finally, the conservative income and wealth thresholds set by Congress in 1982
resulted in less than 2% of U.S. households qualifying as accredited investors.
80
Since 1982, private markets have grown considerably due to a number of factors, and this
growth has been particularly pronounced since 2012, when Congress enacted the JOBS Act.
81
As
shown in Figure 1 below, in 2013, there were only 43 U.S.-based “unicorns” (start-ups with an
implied valuation of at least $1billion); by 2024, the number of unicorns had risen to 693 and their
implied valuation exceeded $2.6 billion.
77
The “accredited investor” concept was created by Congress (and not the SEC), pursuant to the Small Business
Incentive Act of 1980. See Revision of Certain Exemptions From Registration for Transactions Involving Limited
Offers and Sales, Release No. 33–6389 (Mar. 8, 1982), 47 Fed. Reg. 11,251.
78
17 C.F.R. § 230.503 (Regulation D Rule 503).
79
This threshold was subsequently raised by the 2012 JOBS Act. See Exchange Act §12(g)(1)(A), 15 U.S.C.
§ 78l(g)(1)(A) (2012).
80
The $1 million net worth threshold from 1982 translates into $3.1 million today; the $200,000 individual
income/$300,000 joint income thresholds translate into $615,000/$920,000 today.
81
The JOBS Act included provisions beneficial to the growth of private markets, such as increasing the number
of allowed shareholders of record for private companies. See supra note 79.
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
21
Despite the exponential growth of private markets, the SEC has not taken steps to
modernize the information requirements contained in Regulation D. The outdated nature of
Regulation D taken as a whole has prompted regular critiques from investor representatives, SEC
commissioners, legislators, and think tanks.
82
These issues have also been the focus of extensive
82
See, e.g., Caroline A. Crenshaw, Comm’r, SEC, Remarks at Symposium on Private Firms: Reporting,
Financing, and the Aggregate Economy at the University of Chicago Booth School of Business (Apr. 14, 2022);
Caroline A. Crenshaw, Comm’r, SEC, Big “Issues” in the Small Business Safe Harbor: Remarks at the 50th Annual
Securities Regulation Institute (Jan. 30, 2023); Allison Herren Lee, Comm’r, SEC, Going Dark: The Growth of Private
Markets and the Impact on Investors and the Economy (Oct. 12, 2021); Hester M. Peirce, Comm’r, SEC, Bridging the
Gap: Remarks before the Northwest Securities Institute (May 30, 2025); Mark T. Uyeda, Comm’r, SEC, Remarks at
the 51st Annual Securities Regulation Institute (Jan. 22, 2024); Center for American Progress, How Exemptions From
Securities Laws Put Investors and the Economy at Risk (March 22, 2023); Hearing, House Committee on Financial
Services, The Future of American Capital: Strengthening Public and Private Markets by Increasing Investor Access
and Facilitating Capital Formation (Feb. 26, 2025); Healthy Markets Association, In the Public Interest: Why
Policymakers and Regulators Must Restore the Public Capital Markets (2022).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
22
academic commentary.
83
The IAC has also drawn attention to these issues and urged the
Commission to act.
84
The IAC’s March 2023 panel summarized the various drawbacks for individual retail
investors, including those who qualify as accredited investors.
85
These include:
86
• Lack of Available Information: If information is provided at all, it need not be uniform
in content, making comparisons between companies difficult, and the information need
not be updated as circumstances change. Voluntary disclosures are prone to greater
error and can be influenced by overly optimistic assumptions about future prospects.
87
• Information asymmetry: Issuers in Rule 506 exempt offerings are not required to
provide any information to accredited investors, and even when they do provide such
information, what information and to whom they provide it is determined by the issuer
or is subject to negotiation and agreement by the investor and the issuer, leaving smaller
and more vulnerable investors in a position where they are unlikely to have access to
unbiased and important information.
88
• Inability to perform adequate due diligence: In the absence of mandatory disclosure,
investors in the private market are expected to conduct their own due diligence to
determine a fair price for a security. Depending on the circumstances, conducting such
due diligence is prohibitively expensive, extremely difficult, and/or practically
impossible for a retail investor who can only make a relatively small investment.
• Inability to negotiate favorable terms: In the exempt market, larger or well-known
investors can—and often do—receive more favorable terms, and the best deals may
83
See, e.g., Elisabeth de Fontenay, The Deregulation of Private Capital and the Decline of the Public Company,
68 H
ASTINGS L.J. 445 (2017); Jennifer S. Fan, Regulating Unicorns: Disclosure and the New Private Economy, 57
B.C.
L. REV. 583 (2016); Renee M. Jones, The Unicorn Governance Trap, 166 U. PA . L. REV. ONLINE 165 (2017);
George S. Georgiev, The Breakdown of the Public–Private Divide in Securities Law: Causes, Consequences, and
Reforms, 18 N.Y.U. J.L.
& BUS. 221 (2021); Matthew Wansley, Taming Unicorns, 97 IND. L.J. 1203 (2021); Elizabeth
Pollman, Private Company Lies, 109 G
EO. L.J. 353 (2020); Verity Winship, Private Company Fraud, 54 U.C. DAV I S
L. REV. 663 (2020); Anat Alon-Beck & John Livingstone, Mythical Unicorns and How to Find Them: The Disclosure
Revolution, 2023 C
OLUM. BUS. L. REV. 1 (2023); George S. Georgiev, Is “Public Company” Still a Viable Regulatory
Category?, 13 H
A RV. BUS. L. REV. 1 (2023).
84
See supra note 2 (listing prior IAC panels and recommendations).
85
Panel Discussion Examining the Growth of Private Markets relative to the Public Markets: Drivers and
Implications (Mar. 2, 2023).
86
While many panelists spoke to these drawbacks, they were summarized well by Faith Anderson of the
Washington Securities Division, and her remarks are used to frame this issue.
87
See also George S. Georgiev, The Breakdown of the Public–Private Divide in Securities Law: Causes,
Consequences, and Reforms, 18 N.Y.U. J.L.
& BUS. 221, 284-86 (2021); George S. Georgiev, Is “Public Company”
Still a Viable Regulatory Category?, 13 H
A RV. BUS. L. REV. 1 (2023).
88
Previous proposals to expand the private markets have cited the ‘increasing availability of information’ as a
general reason to ease private market restrictions. While there certainly is more information than ever, it remains the
case that the most salient investment information about most private companies is kept out of public view and is
difficult for less influential investors to access.
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
23
only be available to the largest and most influential investors. Realistically, retail
investors cannot negotiate for such advantages and therefore may enter into private
investments at a severe disadvantage.
In sum, while the Commission, state regulators and investor advocates all agree that retail
investors deserve access to high-quality investment options, the obsolete informational framework
pertaining to the private markets leaves investors in a vulnerable position. In the private markets,
small retail investors are often unable to obtain access to important information, face prohibitive
costs for the necessary level of due diligence, typically receive less favorable terms than larger
investors, lack the resources to lower risk through diversification, and are exposed to higher levels
of fraud.
89
Expanding information requirements will not be as burdensome as it might first appear,
because many issuers are already in possession of the information that investors need, which is
generated in the course of the preparation of audited financials and in order to maintain internal
controls and procedures over financial reporting.
Guardrail #3: The SEC should enforce the already-existing Form D filing requirement
The SEC should strictly enforce the existing requirement that issuers relying on Regulation
D submit Form D within 15 calendar days of closing the first offering. Under existing Rule 507,
issuers who do not comply with the Form D filing requirement may lose their ability to rely on
Regulation D upon the completion of certain procedural steps. In the interest of judicial efficiency,
the SEC should condition the availability of Reg D exemptions on the filing of Form D and
adopting a clear penalty for such failure. For example, failure to file a Form D with the SEC could
result in the loss of the ability to rely on Reg D exemptions for a 12-month period. Penalties should
also be considered for failure to file any required amendments.
We note that Form D is not burdensome: Form D calls for the provision of very minimal
information, none of which should be commercially sensitive; it is to be completed online, and,
according to the SEC’s own estimates under the Paperwork Reduction Act, the average time burden
per filing is 4 hours.
90
In addition, the SEC should require an explanation when an issuer uses the “decline to
disclose” options on Form D. Certain fields, including revenue range and number of employees,
allow the issuer to check a “decline to disclose” box on Form D. The SEC should revise Form D
to require an explanation for the issuer’s unwillingness to disclose. While the IAC believes that
89
Written Testimony of Elisabeth de Fontenay, Professor of Law, Duke University, Before the United States
House of Representatives Committee on Financial Services Subcommittee on Investor Protection, Entrepreneurship,
and Capital Markets, “Examining Private Market Exemptions as a Barrier to IPOs and Retail Investment” at 8-10
(Sept. 11, 2019). See also sources cited in note 83 supra.
90
See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for
Regulation D (Form D) (2024). The estimated annual cost to the federal government of processing Form D is also
minimal ($15,000). See Supporting Statement for the Paperwork Reduction Act Information Collection Submission
for Form D (2016).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
24
there may be circumstances where such non-disclosure could be warranted, in the vast majority of
cases the information would already be available through other sources, and issuers should be
encouraged to complete Form D as fulsomely as possible.
Guardrail #4: The SEC should mandate information parity among investors and the filing of a
Form D amendment at closing; it should also consider expanding Form D through notice-and-
comment rulemaking
Assuming that the SEC proceeds with expanding direct access, the Committee supports the
expansion of Form D information requirements. Importantly, the Committee believes that the
precise contours of the new information requirements should be determined through notice-and-
comment rulemaking. We note that the expanded information requirement can be calibrated to
apply to issuers of a certain size or securities issuances above a particular dollar threshold or issuers
of above a particular size, as measured by assets and/or revenues. Such scaled approaches are
already in place in other contexts.
91
In particular, the Committee recommends that the SEC consider the following categories
of information: (1) Legal counsel representing the issuer, if any; (2) The issuer’s accountants or
auditors, if any; (3) A brief description of the issuer’s general solicitation plans, if any; (4) A brief
description of the issuer’s existing and proposed business, including products or services offered
or intended to be offered; (5) A listing of any officers or directors with greater than a 5% equity
interest in the issuer; (6) Expansion of current information in Item 16, Use of Proceeds; (7)
Disclosure of any findings of securities fraud, pending and concluded enforcement actions, and/or
non-compliance with the securities laws by the issuer or any Related Persons; (8) Disclosure of
material risks and conflicts of interests including details regarding any fees, costs, or charges
assessed to investors. We note that this list of items is intended to be a starting point and that the
feedback of investors and market participants may reveal that, in some or all offerings, some of
these information categories are unnecessary or that others may be necessary.
To give those investors and the Commission a complete picture of the offering, including
the amount of capital that is actually raised, the issuer should file a closing amendment to Form D,
as previously proposed by the Commission in 2013.
92
Without such a filing, neither the SEC nor
the issuer’s investors have reliable information about the volume of capital actually raised in the
offering.
The SEC should require that issuers provide copies of any information provided to one
investor to all other investors to ensure consistency of information disclosure across all investors.
In multi-stage funding rounds, new investors must receive all information provided to other
91
See, e.g., Jeff Schwartz, The Law and Economics of Scaled Equity Market Regulation, 39 J. CORP. L. 347
(2014).
92
See U.S. Sec. & Exch. Comm’n, Proposed Amendments to Regulation D, Form D, and Rule 156, SEC Rel.
No. 33-9416 (July 10, 2013).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
25
investors in the preceding 90 days to ensure that any new investor has access to the same
information as prior and existing investors.
The IAC recognizes that there may be special circumstances whereby an information parity
requirement may be unworkable or cumbersome or where an investor requests information for its
own compliance purposes due to its specific regulatory profile. The Committee recommends that
the SEC consider appropriate exceptions for information that clearly fits those criteria and develop
a mechanism whereby an issuer may apply for a waiver of the information parity requirement.
Special Consideration: Ongoing disclosure of basic information by large private firms
Assuming that the SEC proceeds with expanding direct access, the Committee
recommends that the SEC study whether it is necessary to require ongoing reporting of basic
information by large, private issuers, where the information required would be similar to the
information required to be provided on Form D. The IAC believes that such a requirement may be
needed to level the playing field for investors in what is a large and rapidly growing secondary
trading market for securities that were initially sold based upon an exemption from the registration
requirement. We preliminarily suggest that the SEC examine whether to create the category of
“large private issuer” and define it as any company with a valuation of at least $700 million
(excluding the value of shares held by affiliates) and more than 1,000 beneficial equity owners, or
any company with a valuation of at least $700 million that is an affiliate of a registered broker-
dealer, investment adviser, or bank.
93
IV. CONCLUSION
The Committee appreciates the Commission’s consideration of the foregoing
Recommendations to calibrate retail investor access to private market assets. As noted throughout,
in the Committee’s view, the optimal way for retail investors to access private market assets is
through registered funds, which allow retail investors to invest in broadly diversified funds that
benefit from Commission review, audited financials, professional fund management, various levels
of liquidity, and the protections of the Investment Company Act. To improve the suitability of such
investments for investors, the Commission should implement the recommendations discussed in
Part II. If there were to be an expansion of direct access to private market assets, this expansion
should be accompanied by the basic investor protection guardrails discussed in Part III.
While this Recommendations has sought to address traditional private market assets
specifically, the Committee believes that this careful weighing and balancing of competing
industry and investor interests should be applied in equal measure to all corners of the U.S. capital
markets. Retail access to private market assets has historically been limited precisely because those
93
See, e.g., S. 4857, Private Markets Transparency and Accountability Act, 117th Congress (2021–22)
(introduced Sept. 15, 2022) (proposing one potential approach).
RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS
DRAFT
26
assets are less transparent and riskier than public market assets. As the Commission considers
revamping private market access requirements and introducing guardrails, the Commission should
consider how policy choices in that context can be reconciled with its investor access and investor
protection policies for other similarly-situated asset types that are unregulated or exempt, that
provide the same (or lower) levels of transparency, and that have equal (or greater) risk. OCR text (100,326c · tika · 95% conf)
TO BE DISCUSSED AT THE SEPT. 18, 2025 MEETING OF THE SEC INVESTOR ADVISORY COMMITTEE DRAFT: SEPT. 18, 2025 Recommendations of the Investor as Owner and Market Structure Subcommittees of the SEC Investor Advisory Committee: RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS EXECUTIVE SUMMARY The private capital markets have grown at a rapid pace in recent years. Given their current size and the investment opportunities they contain, the question of facilitating retail investor access has been raised with increased frequency by investors, market participants, legislators and policymakers. The SEC Investor Advisory Committee (“IAC” or “Committee”) finds that this development necessitates a recalibration of the existing regulatory framework, which was designed for a world in which the public markets encompassed the vast majority of all investment opportunities. Importantly, the Committee believes that this recalibration should not undermine any of the three pillars of the SEC’s mission: protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. In the Committee’s view, the optimal way for retail investors to access private market assets is through registered funds, which allow retail investors to invest in broadly diversified funds that contain private market assets, often alongside public market assets. The investor protections embedded in the registered funds framework include Commission review, audited financials, professional fund management, diversification, various levels of liquidity, and the protections of the Investment Company Act. The Committee therefore recommends changes to Staff Interpretations and/or rules under the Investment Company Act of 1940 to allow registered funds to better facilitate investing in private market assets. The Committee does not take a position on the desirability of expanding retail investors’ access to private market assets in direct ways, but, if the SEC were to determine that such an expansion is warranted, the Committee firmly believes that it should be accompanied by certain basic investor protection guardrails. These include an expanded focus on investor sophistication (rather than income or wealth) when determining accredited investor status; prudential limits on the amount that can be invested by retail investors who do not meet sophistication or wealth criteria; the enhancement of certain filing requirements and strict enforcement of certain already-existing requirements; and improved disclosure and transparency to facilitate investor decision-making. The Committee also recommends various improvements to the registered fund regulatory framework as part of any expansion that enables retail investors to more easily invest in private market assets. These improvements include: providing clarity and transparency on valuations throughout the lifecycle of a fund; enhancing liquidity disclosures and making them more prominent; and providing for certain additional investor protections that specifically address the increased participation of retail investors. RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 2 I. INTRODUCTION The private markets have grown at a rapid pace in recent years, with U.S. private funds managing over $28 trillion in assets and U.S. private companies directly raising $623 billion in 2024.1 Notably, most retail investors do not have direct access to these private assets. Indirect access is available but occurs in limited ways through registered funds or through separately managed accounts that, in turn, invest in private companies or private funds. Given the size of the private markets and the investment opportunities they contain, the question of facilitating retail investor access has been raised with increased frequency by investors, market participants, legislators and policymakers. There is widespread agreement that changing the status quo entails a host of difficult policy questions. Accordingly, the Investor Advisory Committee (“IAC” or “Committee”) has held multiple panels and issued multiple recommendations pertaining to these matters,2 in line with its statutory mission to advise the U.S. Securities and Exchange Commission (“SEC” or “Commission”) on regulatory priorities, initiatives to protect investors, and initiatives to promote investor confidence and the integrity of the securities marketplace.3 As an initial matter, the Committee finds that the rise of private markets necessitates a recalibration of the existing regulatory framework, which was designed for a world in which the public markets encompassed the vast majority of all investment opportunities. Importantly, the Committee believes that this recalibration should not undermine any of the three pillars of the 1 The Commission’s Office of the Advocate for Small Business Capital Formation produces an annual report that provides key private market data, including estimates of the accredited investor pool. See, e.g., 2024 Annual Report at 14-15, https://www.sec.gov/files/2024-oasb-annual-report-print.pdf. Data on capital raised by private companies excludes pooled funds, which raise capital under applicable exemptions and, in turn, invest it in private companies. 2 Previous IAC Recommendations discussing retail investor access to the private market include: Recommendation of the Investor Advisory Committee Regarding SEC Rulemaking to Lift the Ban on General Solicitation and Advertising in Rule 506 Offerings: Efficiently Balancing Investor Protection, Capital Formation, and Market Integrity (Oct. 12, 2012), https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-general- solicitation-advertising-recommendations.pdf; Recommendation of the Investment Advisory Committee: Accredited Investor Definition (October 9, 2014), https://www.sec.gov/spotlight/investor-advisory-committee-2012/investment- advisor-accredited-definition.pdf. The IAC has discussed retail investor access in the context of the private markets in the following panel discussions (recordings available for each by accessing webcast archives linked to each meeting as marked): Discussion Regarding Capital Formation, Smaller Companies, and the Declining Number of Initial Public Offerings (June 22, 2017); Overview of Certain Provisions of the Financial CHOICE Act of 2017 Relating to the SEC (June 22, 2017); Discussion Regarding the SEC’s Concept Release on Harmonization of Securities Offering Exemptions (Nov. 7, 2019); Panel Discussion Regarding Minority Community Investor Inclusion (Sept. 24, 2020); Panel Discussion Examining the Growth of Private Markets relative to the Public Markets: Drivers and Implications (Mar. 2, 2023); Panel Discussion of Private Funds/Markets and Outbound Investments in Countries of Concern (June 22, 2023); Panel Discussion Regarding Exempt Offerings under Regulation D Rule 506 (Sept. 21, 2023); Panel Discussion Regarding Accredited Investors (Sept. 21, 2023); and Panel Discussion regarding Mainstreaming of Alternative Assets to Retail Investors (Dec. 10, 2024). 3 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 911, 124 Stat. 1376, 1883 (2010). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.sec.gov/files/2024-oasb-annual-report-print.pdf https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-general-solicitation-advertising-recommendations.pdf https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac-general-solicitation-advertising-recommendations.pdf https://www.sec.gov/spotlight/investor-advisory-committee-2012/investment-advisor-accredited-definition.pdf https://www.sec.gov/spotlight/investor-advisory-committee-2012/investment-advisor-accredited-definition.pdf RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 3 SEC’s mission: “protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.”4 In the Committee’s view, the optimal way for retail investors to access private market assets is through registered funds, which allow retail investors to invest in broadly diversified funds that contain private market assets, often alongside public market assets. Registered funds include closed-end investment companies, interval funds, tender offer funds, exchange traded funds, and mutual funds; over $35 trillion is currently managed by registered funds.5 These funds offer a practical and more transparent vehicle for expanding retail access to private assets than one of the main alternatives—unregistered or exempt offerings—because registered funds were developed specifically for retail use and offer numerous protections that are not found in non-public offerings. Those protections include Commission review, audited financials, professional fund management, diversification, various levels of liquidity, and the protections of the Investment Company Act. Improving the regulatory framework that enables retail investor access to registered funds is the primary focus of Part II. Recommended improvements include: providing clarity and transparency on valuations throughout the lifecycle of a fund; enhancing liquidity disclosures and making them more prominent; and providing for certain additional investor protections that specifically address the increased participation of retail investors. In addition, the Committee has discussed at length the advantages and disadvantages of expanding retail investors’ access to private market assets in direct ways, through, for example, changes to the definition of “accredited investor” under Regulation D or guaranteeing some form of limited “basic access” to private markets. We do not take a position on the desirability of these and other proposals. We appreciate, of course, that legislative or executive actions may require the SEC to pursue certain policies that expand direct access, or that the SEC itself may determine, through notice and comment rulemaking, that such an expansion of direct access is warranted. The IAC believes firmly that if there were to be an expansion of direct access to private market assets, this expansion should be accompanied by certain basic investor protection guardrails. These include an expanded focus on investor sophistication (rather than income or wealth) when determining accredited investor status; prudential limits on the amount that can be invested by retail investors who do not meet sophistication or wealth criteria; the enhancement of certain filing requirements and strict enforcement of certain already-existing requirements; and improved disclosure and transparency to facilitate investor decision-making. These potential guardrails are the focus of Part III. These Recommendations are the result of work done by all four IAC Subcommittees, which in turn drew on the extensive evidence presented at past IAC panels.6 The Committee carefully weighed the differing perspectives of different market participants. On the one hand, 4 U.S. Securities & Exchange Commission, Mission (Jan. 23, 2025), https://www.sec.gov/about/mission. 5 See supra note 1, at 15 (comparing asset holdings in private versus registered funds in the United States). 6 See supra note 2 (listing prior IAC panels). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.sec.gov/about/mission RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 4 those that support expanding retail access to private market assets believe that this could allocate more capital to small businesses and give more Americans the ability to invest in a dynamic part of the U.S. capital markets.7 On the other hand, state regulators, some investor advocates, and others have highlighted risks to both investor protection and the health of the public markets that stem from proposals for expanding retail access to private market assets.8 Notably, the Committee found that panelists from both perspectives acknowledged that information asymmetries, illiquidity, valuation, reduced regulatory oversight, fraud, and loss are all risks that will need to be managed if the Commission expands retail investor access to the private market, directly or indirectly. We return to our starting point: market changes along multiple dimensions require the recalibration of the existing regulatory framework. It is our hope that these Recommendations will serve as useful guidance for the Commission. We also encourage the Commission to engage with consumer stakeholders and market participants and to proactively solicit comments from the public at large as it considers its next steps in this area. II. TARGETED REFORMS TO REGISTERED FUND REGULATION Since the 1990s, a greater share of American companies has remained private or been taken private as the number of public companies has contracted, with the latter dropping from over 8,000 in 1996 to only 3,700 in 2024.9 Of the remaining public companies, concerns have been raised about a number of prominent indexes being increasingly correlated to some of the most popular but volatile companies. For example, major indexes such as the S&P 500 and the Nasdaq 100 commonly hold concentrated positions in the “Magnificent Seven,” which include the shares of Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla.10 For this and other reasons, 7 See, e.g., December 10, 2024 IAC Panel Remarks of Professor Neal Newman (Texas A&M School of Law); Melody Wang (Director at BlackRock); Rajib Chandra (Partner at Simpson Thacher & Bartlett LLP); September 21, 2023 IAC Panel remarks of Kenisha Nicholson (Commission Office of Small Business Policy), Marguerite Pressley Davis (CEO of Finance Savvy), Pat Gouhin (CEO of Angel Capital Association), and Professor Usha Rodrigues (University of Georgia School of Law); March 2, 2023 IAC Panel remarks of Professor Steven Neil Kaplan (University of Chicago Polsky Center for Entrepreneurship and Innvoation); November 19, 2019 IAC Panel remarks of Sara Hanks (CEO of CrowdCheck, Inc.) and Catherine Mott (CEO of BlueTree Capital Group). 8 See, e.g., December 10, 2024 IAC Panel Remarks of Phil Bak (CEO of Armada ETFs), Craig McCann (Principal at SLCG Economic Consulting), and Professor Benjamin Edwards (University of Nevada (Las Vegas) School of Law); September 21, 2023 IAC Panel remarks of Craig McCann, PhD (Principal of SLCG Economic Consulting); Amanda Senn (Director of Alabama Securities Commission); Alexandra Thornton (Senior Director at The Center for American Progress); Michael Canning (CEO of LXR Group); March 2, 2023 IAC Panel remarks of Elisabeth de Fontenay (Duke University), Tyler Gellasch (Executive Director of Healthy Markets Association), and Faith Anderson (Washington Department of Financial Institutions); November 19, 2019 IAC Panel remarks of Tyler Gellasch (Executive Director of Healthy Markets Association), Professor Renee Jones (Boston College Law School), and Andrea Seidt (Ohio Securities Commissioner). 9 Remarks of Professor Neal Newman during IAC Panel Discussion regarding Mainstreaming of Alternative Assets to Retail Investors (Dec 10, 2024) (presentation available at sec.gov/files/newman-sec-advisory-panel- presentation-riape.pdf). 10 Stephanie Hill, A Closer Look at Magnificent Seven Stocks, MELLON INVESTMENTS CORP. (Feb. 2024). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.sec.gov/files/newman-sec-advisory-panel-presentation-riape.pdf https://www.sec.gov/files/newman-sec-advisory-panel-presentation-riape.pdf https://www.mellon.com/insights/insights-articles/a-closer-look-at-magnificent-seven-stocks.html RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 5 there have been calls to expand retail access to private market assets.11 One strategy for accomplishing that expansion would be for the Commission to amend its “accredited investor” definition. That definition acts as a pivotal gateway to the private markets because it determines who is and is not eligible to invest in Regulation D private offerings, by far the most common form of private offering.12 The IAC has considered issues regarding expanded retail access to private assets at roundtables and in prior recommendations. However, the most recent amendments to the “accredited investor” definition did not materially revise the foundational components of the definition, most notably the financial thresholds underpinning the definitional wealth tests. The way that most retail investors access private assets today is indirect, through an investment in a registered fund that includes some private assets. Registered funds are potentially a safer and more prudent way for retail investors to access these assets because these products have the benefit of Commission registration and regulation, diversification and professional management. These benefits are crucial safeguards for retail investors given the complex, opaque, and illiquid nature of private assets. Yet, some registered funds are limited in how much they can allocate to private assets and must contend with other restrictions that discourage fund managers from including more private assets in their retail offerings. By revising those requirements, the Commission could expand retail access to the private market through safer, registered vehicles. While relaxing restrictions on registered funds investing in private markets may address some of the pent-up retail demand for those assets, like other strategies that seek to increase retail exposure to alternative investments, the changes do not come without risk. Fundraising from institutional investors has slowed significantly in the alternatives marketplace13 and some of the largest institutional investors have been looking to sell their stakes for the first time in the secondary market.14 Existing institutional investors in a number of private funds have seen their distributions drop to historically low levels,15 leading some investors to sell stakes in these funds into a secondary market.16 Some funds have attempted to sell some of those hard-to-sell assets into continuation funds where funds from an existing fund are sold into a new fund managed by the 11 Jennifer Banzaca, Apex: Retail Investors See Private Markets As a ‘Safer’ Haven, PRIVATE FUNDS CFO (May 6, 2025). 12 Craig McCann et al., Regulation D Offerings: Issuers, Investors, and Intermediaries, SLCG ECONOMIC CONSULTING (Feb 9, 2024). 13 Karl Angelo Vidal & Neel Hiteshbhai Bharucha, Global Private Equity Fundraising Sinks for 3rd Straight Year, S&P GLOBAL MARKET INTELLIGENCE (Jan. 16, 2025). There is concern that some assets being funneled into retail vehicles may be hard-to-sell assets that funds geared to institutional funds are unwilling to retain or are interested in selling. Moody’s Ratings, Private Market Retail to Fuel Opportunity But Intensify Liquidity, Asset Quality Risks, Moodys.com (Jun 10, 2025). Of course, the safeguards proposed in this Recommendation will do little to protect retail investors if they are essentially investing in hard-to-sell assets that have been rejected by institutional investors. 14 Allison McNeely et al., Yale’s Private Equity Sale Spurs Reckoning Over Endowment Model At Elite Schools, BLOOMBERG NEWS (Jun. 6, 2025). 15 Abdulla Zaid et al., MSCI, Private Capital in Focus: Depressed Distributions: No End in Sight, S&P GLOBAL MARKET INTELLIGENCE (May 22, 2025). 16 Dylan Thomas & Shambhavi Gupta, Private Equity Secondaries Fundraising Struggles to Keep Pace With Demand, S&P GLOBAL MARKET INTELLIGENCE (Jun. 26, 2025). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.privatefundscfo.com/apex-retail-investors-see-private-markets-as-a-safer-haven/ https://www.slcg.com/files/research-papers/Reg_D_Offering.pdf https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/1/global-private-equity-fundraising-sinks-for-3rd-straight-year-87110906 https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/1/global-private-equity-fundraising-sinks-for-3rd-straight-year-87110906 https://www.moodys.com/web/en/us/insights/credit-risk/private-credit/private-market-retail-to-fuel-opportunity.html https://www.bloomberg.com/news/articles/2025-06-06/yale-s-private-equity-sale-spurs-reckoning-over-endowment-model-at-elite-schools https://www.bloomberg.com/news/articles/2025-06-06/yale-s-private-equity-sale-spurs-reckoning-over-endowment-model-at-elite-schools https://www.msci.com/research-and-insights/blog-post/private-capital-in-focus-depressed-distributions-no-end-in-sight https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/6/private-equity-secondaries-fundraising-struggles-to-keep-pace-with-demand-90991932 https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/6/private-equity-secondaries-fundraising-struggles-to-keep-pace-with-demand-90991932 RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 6 same adviser.17 However, industry estimates show that 85% to 92% of institutional investors are opting to sell rather than move into the continuation fund.18 Some market participants have suggested that an increase in retail participation in the private markets through registered funds, could accelerate the growth of secondaries.19 In addition, some market observers are questioning whether and how the higher returns touted on the institutional side of the private market will translate over to the retail side, given the additional fees imposed on retail shares.20 Other market observers also question how registered retail funds will be able to navigate illiquidity challenges as private asset allocations increase.21 Since the IAC held its “Mainstreaming of Alternative Assets to Retail Investors” panel in December 2024, applications for a number of registered funds such as Exchange Traded Funds and interval funds have been filed with the Commission.22 These products offer retail investors opportunities to invest into alternative assets without being an accredited investor and with minimum investments of $1,000 versus the $2,500 to $10,000 in most other such funds.23 These developments further suggest that the Commission should consider additional safeguards given the potential adverse implications for retail investors who may have a significant percentage of their savings and retirement assets tied up in such products but may need to access those funds due to planned or sudden life events.24 There is a difference between investors losing money due to an affirmative choice to take excessive risk and a loss due to a failure to understand the features and mechanics of funds invested in illiquid private market assets.25 Unfortunately, most retail investors do not engage with traditional disclosures,26 a reality that underpins the IAC’s 17 Antoine Gara & Ivan Levingston, Private Equity Firms Flip Assets to Themselves in Record Numbers, FINANCIAL TIMES (Jul. 23, 2025). 18 Alexandra Heal & Antoine Gara, Private Equity Backers Refuse to Roll Over Investments As Returns Dwindle, FINANCIAL TIMES (Jul. 27, 2025). (“Between 85 and 92 per cent of investors have this year chosen to sell rather than remain invested when private equity groups transfer a portfolio company to a so-called continuation vehicle rather than exiting through a traditional sale or initial public offering – up from 75-80 per cent last year, according to investment bank Houlihan Lokey.”), 19 Jeffrey Diehl et al., 2025 Global Investor Survey: Navigating Private Markets, ADAMS STREET PARTNERS (Mar. 21, 2025), (“A concerted push to attract more retail capital – supported by the rise of evergreen vehicles, such as funds registered under the Investment Company Act of 1940 – could accelerate the growth of secondaries.”). 20 Jason Zweig, The Fees on These Funds Will Leave You High and Dry, WALL STREET JOURNAL (Jul. 26, 2024). 21 Carrie McCabe, Retail Investors Into Private Equity Watch The Hidden Costs, FORBES (May 16, 2025) (“As Cliff Asness at AQR has argued, the true economic value of private holdings almost certainly declines too – even if reported marks lag behind.”). 22 Such funds include but are not limited to Blackstone’s Private Multi-Asset Credit and Income Fund (prospectus available at BMACX | Blackstone Private Multi-Asset Credit and Income Fund) and Capital Group KKR Core Plus and Multi-Sector Plus (prospectus available at Prospectus Express - Prospectus). 23 See id.; see also Niket Nishant, KKR and Capital Group Launch Funds Targeting Mix of Private, Public Credit, REUTERS (Apr. 29, 2025). 24 David Isenberg, With Funds Increasing Retail Private Access, New Disclosure Standards May Follow, FINANCIAL TIMES IGNITES (Jun. 6, 2025). 25 Matt Wirz, Moody’s Sounds Alarm on Private Funds for Individuals, WALL STREET JOURNAL (Jun 10, 2025). 26 Recommendation of the SEC Investor Advisory Committee on Disclosure Effectiveness (May 21, 2020), https://www.sec.gov/spotlight/investor-advisory-committee-2012/disclosure-effectiveness.pdf. https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.ft.com/content/88a4e3e3-cefb-48d8-ab81-75cf85039b83 https://www.ft.com/content/02c4c5b2-f65a-4359-af6c-5e3d1d997617 https://www.ft.com/content/02c4c5b2-f65a-4359-af6c-5e3d1d997617 https://www.adamsstreetpartners.com/insights/2025-global-investor-survey/ https://www.wsj.com/finance/investing/the-fees-on-these-funds-will-leave-you-high-and-dry-4b556475?gaa_at=eafs&gaa_n=ASWzDAgvuijhKuVu_wCfCdu05MOznxFN6vVTAsrdjqQyiwndg2-ylJas6tOW&gaa_ts=68461b4f&gaa_sig=NUfF7kdh5gLM0p4fnhmC7gIpSSKdojoCsxMlw_xiZf2ZKRzXiio6h0Qo4_jgXPn7FDhm2JFC4-lO3pvx1XzKWQ%3D%3D https://www.forbes.com/sites/carriemccabe/2025/05/16/retail-investors-enter-private-equity-watch-out-for-hidden-costs/ https://www.bmacx.com/ https://capitalgroup.prospectus-express.com/summary.asp?doctype=pros&cid=capgroup&fid=14022E104 https://www.reuters.com/business/finance/kkr-capital-group-launch-funds-targeting-blend-private-public-credit-2025-04-29/ https://www.reuters.com/business/finance/kkr-capital-group-launch-funds-targeting-blend-private-public-credit-2025-04-29/ https://www.ignites.com/c/4879904/666834 https://www.wsj.com/finance/investing/moodys-sounds-alarm-on-private-funds-for-individuals-8cd268c5?st=yfvTf6 https://www.sec.gov/spotlight/investor-advisory-committee-2012/disclosure-effectiveness.pdf RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 7 recommendations to the Commission. It is essential, therefore, that registered funds investing in private market assets establish robust investor protections and disclosures from the outset, recognizing the diverse set of retail investors with varying levels of financial sophistication. Summary of Part II Recommendations: 1. Provide clarity and transparency on valuations throughout the lifecycle of a fund; 2. Consider changes to Staff Interpretations and/or rules under the Investment Company Act of 1940 to allow registered funds to better facilitate investing in private market assets; 3. Enhance and make liquidity disclosures more prominent; 4. Provide for additional investor protections specifically addressing greater participation of retail investors; 5. Open a request for comment process to solicit additional views and perspectives on these and other critical issues. 1. Provide clarity and transparency on valuations throughout the lifecycle of a fund The IAC recommends that the Commission require funds to disclose additional information to retail investors to better understand how the values of portfolio assets that do not actively trade are determined. Such additional information should include: • Disclosing when fund sponsors reject or replace third party appraisals, and • Requiring fund directors, who have a fiduciary duty to protect shareholder interests and manage potential conflicts of interest,27 to require funds they oversee to disclose more details as to how valuations are determined, ensuring consistency across various investment vehicles. The inherent lack of daily market prices for many private market assets raises the need for the Commission to establish standards for an impartial party to determine the valuation of the underlying assets, especially as fees are charged to investors typically based on the value of assets, which would be even higher if the fund is using leverage.28Those standards become especially important as some Exchange Traded Funds (ETFs) have been offering retail investors daily liquidity to invest in private market assets which in turn necessitates having to estimate the value of all of the ETFs underlying assets daily while those assets themselves may trade infrequently.29 Among several Business Development Companies (BDCs), which are largely owned by retail investors and are primarily invested in private credit corporate loans, there have been notable 27 INVESTMENT COMPANY INSTITUTE, UNDERSTANDING THE ROLE OF MUTUAL FUND DIRECTORS (Jun. 7, 2002). 28 Jason Zweig, The Fees on These Funds Will Leave You High and Dry, WALL STREET JOURNAL (Jul 26, 2024). 29 One such example is State Street’s SSGA IG Public & Private Credit ETF (PRIV), the prospectus for which can be found at https://www.ssga.com/us/en/intermediary/etfs/spdr-ssga-ig-public-private-credit-etf-priv. See also Jason Zweig, The Fees on These Funds Will Leave You High and Dry, WALL STREET JOURNAL (Jul. 25, 2024). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.ici.org/doc-server/pdf%3Abro_mf_directors.pdf https://www.wsj.com/finance/investing/the-fees-on-these-funds-will-leave-you-high-and-dry-4b556475?gaa_at=eafs&gaa_n=ASWzDAgvuijhKuVu_wCfCdu05MOznxFN6vVTAsrdjqQyiwndg2-ylJas6tOW&gaa_ts=68461b4f&gaa_sig=NUfF7kdh5gLM0p4fnhmC7gIpSSKdojoCsxMlw_xiZf2ZKRzXiio6h0Qo4_jgXPn7FDhm2JFC4-lO3pvx1XzKWQ%3D%3D https://www.ssga.com/us/en/intermediary/etfs/spdr-ssga-ig-public-private-credit-etf-priv https://www.wsj.com/finance/investing/the-fees-on-these-funds-will-leave-you-high-and-dry-4b556475?gaa_at=eafs&gaa_n=ASWzDAgvuijhKuVu_wCfCdu05MOznxFN6vVTAsrdjqQyiwndg2-ylJas6tOW&gaa_ts=68461b4f&gaa_sig=NUfF7kdh5gLM0p4fnhmC7gIpSSKdojoCsxMlw_xiZf2ZKRzXiio6h0Qo4_jgXPn7FDhm2JFC4-lO3pvx1XzKWQ%3D%3D RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 8 valuation discrepancies across different BDCs holding stakes in the same loans.30 As one popular retail fund states in its prospectus: NAV calculations are not governed by governmental or independent securities, financial or accounting rules and standards… We calculate and publish NAV solely for purposes of establishing the price at which we sell and repurchase shares of our common stock, and you should not view our NAV as a measure of our historical or future financial condition or performance.31 In other instances, fund advisers may engage in practices that immediately inflate the NAV (“NAV squeezing”) with no immediate increase in the value of the underlying assets. One such fund, whose adviser purchased private equity fund stakes in the secondaries market at a discount, immediately marked up the value in its own NAV, ignoring the competitive market price the fund adviser itself just set.32 Given the growing use of private investments in fund portfolios the Commission should emphasize the valuation responsibilities currently delegated to fund directors under Rule 2a-5 under the Investment Company Act of 1940 with a view to providing greater investor protection. This focus is especially critical considering the wide range of investor sophistication and engagement levels, which may complicate the handling of potential valuation discrepancies.33 It should be emphasized that fund directors are responsible for: • Requiring the fund adviser to establish a methodology for valuations; • Testing the appropriateness and accuracy of valuations and challenging them if necessary; and • Overseeing the fund adviser’s use of third-party valuations. The IAC recommends the Commission require fund advisers report on a periodic basis to fund directors any rejections or replacements of any third-party valuations.34 Fund advisers should also disclose to investors the circumstances or conditions that would lead them to override third- party valuations. Such a process is especially important for retail facing funds as many make investment decisions on the valuations presented to them and with little recourse to assessing the assumptions and inputs behind them. 30 Silas Brown et al., How Private Credit Market Boom Is Hiding Valuation Problems, BLOOMBERG NEWS (Feb. 28, 2024). 31 Phil Bak, The Big Bad BREIT Post, BAKSTACK (Jun. 18, 2024). 32 Jason Zweig, The Future Ain’t What It Used to Be for These Funds, WALL STREET JOURNAL (Jun 6, 2025). 33 Some contractual language to address discrepancies in valuation can be seen in Net Asset Value credit facilities but exclusively involve institutional investors. See Mayer Brown, NAV Facilities: Appraisal and Valuation Challenge Rights, MAYER BROWN INSIGHTS (Aug. 13, 2024). 34 Gibson Dunn & Crutcher LLP, Private Fund Advisers and Universities Should Assess Valuation Protocols and Disclosures in Case the SEC Comes Knocking, GIBSONDUNN.COM, (Jul 9, 2025). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.bloomberg.com/news/articles/2024-02-28/how-private-credit-market-boom-is-hiding-potential-valuation-problems https://philbak.substack.com/p/the-big-bad-breit-post https://www.wsj.com/finance/investing/hamilton-lane-private-assets-alternative-funds-8862f32e?gaa_at=eafs&gaa_n=ASWzDAgvE5kCE7RTWNL4qpPenXIstca_cRjxHxUN17nzTYLwhmYvZISJsf0t&gaa_ts=6854e238&gaa_sig=U7xyDceRZyE5ER6LMVQpFe9kOnJmPTS2ovFiuolubzCqh7ha5b66m9yYFwzEx97uFWrCq75DE87jLlWcUXP2WQ%3D%3D https://www.mayerbrown.com/en/insights/publications/2024/08/nav-facilities-appraisal-and-valuation-challenge-rights https://www.mayerbrown.com/en/insights/publications/2024/08/nav-facilities-appraisal-and-valuation-challenge-rights https://www.gibsondunn.com/private-fund-advisers-and-universities-should-assess-valuation-protocols-and-disclosures-in-case-the-sec-comes-knocking/ https://www.gibsondunn.com/private-fund-advisers-and-universities-should-assess-valuation-protocols-and-disclosures-in-case-the-sec-comes-knocking/ RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 9 Given that it is likely that a number of registered funds, including those offering daily liquidity, will own a number of illiquid assets that are also held in institutional portfolios, we also recommend the Commission offer clarity as to what levels of discrepancies are acceptable in the normal course of business between the valuations used in publicly traded funds and those held in private portfolios managed by the same fund adviser, especially during volatile markets where such discrepancies between the funds may become noticeably greater. The IAC recommends that the Commission’s Examinations Division make reviewing valuations of funds with significant investments in liquid assets a focus area. The Commission’s Division of Examinations should also examine performance figures used in marketing materials as retail investors will often make investment decisions based on those numbers.35 2. Consider changes to Staff Interpretations and/or rules under the Investment Company Act of 1940 to allow registered funds to better facilitate investing in private market assets The Commission should facilitate expanding retail investors’ ability to gain exposure to private market assets through registered funds (e.g. closed-end funds, interval funds and tender offer funds) without sacrificing the protections of the Investment Company Act. We believe the Commission should consider the following interpretive or rule changes under the Investment Company Act: a. Allow more flexibility to invest in private funds. Closed-end funds are highly suitable for providing retail investors access to less liquid investments. However, until recently the Staff has prohibited a closed-end fund from investing more than 15% of net assets in privately offered funds, unless the fund’s shares are available only to accredited investors who make minimum initial investments of at least $25,000. We support the recent change in Staff position as recommended by Chair Atkins who urged that this long-time Staff position be reconsidered.36 Decisions to make investments in private funds should be determined by a fund’s Board of Directors and a fund’s investment adviser. This change would provide investors the opportunity to obtain exposure to investments otherwise available to affluent investors. Over time, fund advisers and directors should be able to land on the optimal percentage of closed-end funds invested in private market assets. The European Commission in its updated rules for European Long-Term Investment Funds (ELTIFs) lowered the 35 Bill Myers, Marketing Rule Key to Valuations Enforcement, REGULATORY COMPLIANCE WATCH (Apr. 21, 2023). 36 See, e.g., Paul Atkins, SEC Chairman, Prepared Remarks Before SEC Speaks (May 19, 2025) (“I intend to have the Commission address this situation and reconsider this 23-year old practice concerning investments by closed- end funds in private funds.”); see also Views of SEC Division of Investment Management, ADI 2025-16 - Registered Closed-End Funds of Private Funds ( August 15, 2025). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.regcompliancewatch.com/marketing-rule-key-to-valuations-enforcement/ https://www.sec.gov/newsroom/speeches-statements/atkins-prepared-remarks-sec-speaks-051925 https://www.sec.gov/about/divisions-offices/division-investment-management/fund-disclosure-glance/accounting-disclosure-information/adi-2025-16-registered-closed-end-funds-private-funds https://www.sec.gov/about/divisions-offices/division-investment-management/fund-disclosure-glance/accounting-disclosure-information/adi-2025-16-registered-closed-end-funds-private-funds RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 10 minimum investment in eligible illiquid assets to 55% of the fund’s capital37 from an original 70% of capital in 2015 to better allow fund advisers to better manage their liquidity and redemption requests.38 While the European approach under ELTIF differs significantly, those recent changes underscore how larger allocations to private assets exacerbate liquidity challenges for fund advisers. b. Provide flexibility for co-investments under Section 17(d) and Rule 17d-1 under the Investment Company Act. Section 17(d) and Rule 17d-1 thereunder are designed to prevent overreaching in connection with joint transactions involving a fund and its affiliated persons. The SEC has issued numerous exemption orders permitting a closed- end fund and one or more other funds and their affiliates to enter into co-investment transactions, subject to certain conditions. The SEC should consider codifying and simplifying co-investment relief including for funds other than closed-end funds. This would facilitate greater ability for funds to co-invest in private investment opportunities providing benefits to retail investors. c. Provide greater repurchase opportunities for investors. Rule 23c-3 under the Investment Company Act provides for quarterly repurchases of securities by interval funds. The SEC has granted exemptive orders permitting interval funds to conduct monthly repurchases subject to certain conditions. Amending Rule 23c-3 to permit monthly repurchases would eliminate the costs and need for funds to apply for individual exemptive orders. d. Allow closed-end funds to offer multiple classes of shares. Open-end funds are permitted under Rule 18f-3 to issue two or more classes of shares representing interests in the same portfolio. The SEC routinely grants exemptive orders to continuously offer closed-end funds to offer multiple classes of shares. Codifying this relief in a rule would eliminate the costs and need for these funds to obtain individual exemptive orders. e. Allow interval funds and tender offer funds to operate as series funds. Open-end funds have the flexibility to operate as “series investment companies”. This allows a cluster of individual investment companies to be organized under a single set of organizational governing documents. Each series offers a separate portfolio of securities with separate investment objectives, policies and risks. Interval funds and tender offer funds should be permitted to operate as series investment companies which would allow these funds to save the time and expense associated with organizing separate registrants. 37 Arthur Cox LLP, ELTIF – The Next Generation, ARTHURCOX.COM (Jan. 17, 2025). 38 See, e.g., AFG & Morgan Lewis, Practical Guide to ELTIF 2.0 (Jan. 2025) (“The reduction in this minimum amount invested in illiquid assets should enable managers of ELTIFs to better manage the liquidity of ELTIFs and in particular, to honour redemption requests for open-ended or semi-open ended ELTIFs in strategies that do not generally involve liquidity tools.”). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.arthurcox.com/knowledge/eltif-the-next-generation-jan-2025/ https://www.afg.asso.fr/app/uploads/2024/10/AFG-Guide-ELTIF-EN-MAJ-2025.pdf RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 11 3. Enhance and make liquidity disclosures more prominent The IAC also recommends the Commission provide investors with a clear understanding of the major differences of retail funds invested in alternative assets where they may be subject to longer redemption timelines and lockups. Such considerations are especially important since retail investors may need to redeem money to meet both normal and emergency expenses and do not have the same access to inexpensive, alternative financing that institutional investors do.39 • Simplify risk disclosures for retail investors with an immediate view to understanding the basic features of the fund in a clear and concise manner. The most important features of the fund primarily invested in alternative assets should be very clearly and succinctly presented, including: (1) redemption interval; (2) what percentage can be redeemed in a given interval; (3) the potential for lockup; (4) exceptional circumstances that qualify for off-interval or additional distributions; (5) any previous lockups of the fund; and (6) valuation uncertainty. • Use layered disclosure formats such as summary dashboards or visual risk indicators40 to make key risks more digestible.41 • Require standardized language across fund documents to reduce confusion and improve comparability.42 4. Provide for additional investor protections specifically addressing greater participation of retail investors The Commission should strongly consider additional investor protections for retail focused funds invested in alternative assets given many of the safeguards in place are primarily for institutional investors and do not take into account an influx of this different set of investors. More specifically, the Commission should: • Work with the Financial Industry Regulatory Authority (FINRA) and state securities regulators to provide guidelines on when investments in private market assets are in an investor’s best interest; 39 See, e.g., Charles Hayes, Harvard and Yale’s Endowment Sales: A Liquidity Crisis or Strategic Move?, AINVEST (Apr. 30, 2025) (“With 83% of its $55.2 billion endowment allocated to private equity and hedge funds – the school risks being trapped in a ‘liquidity crunch’ … To bridge the gap, Harvard issued $1.2 billion in municipal bonds in early 2025.”) 40 For example, in leveraged ETFs a simple long term performance visual shows a clear divergence between a 2x leveraged ETF versus the underlying stock shows clearly a hidden cost of “volatility drag.” Brian Jacobs. Leveraged ETFs: The Hidden Costs of Volatility Drag, Aptus Capital Advisors (Feb. 10, 2025). 41 Carl Ayers, Second in a Series: Disclosure Examples for New Ad Rule, REGULATORY COMPLIANCE WATCH (Jul. 21, 2022). 42 To be sure, standardization should not result in generic, boilerplate language that does not convey useful information to investors. https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.ainvest.com/news/harvard-yale-endowment-sales-liquidity-crisis-strategic-move-2505/ https://aptuscapitaladvisors.com/leveraged-etfs-the-hidden-costs-of-volatility-drag/ https://aptuscapitaladvisors.com/leveraged-etfs-the-hidden-costs-of-volatility-drag/ https://www.regcompliancewatch.com/second-in-a-series-disclosure-examples-for-new-ad-rule/ RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 12 • Ensure proper disclosure of potential conflicts arising from sales compensation, servicing fees, and revenue sharing agreements; • Continue to rigorously enforce rules and regulations governing deceptive marketing and false claims to investors; and • Prohibit clearly conflicted transactions without the approval of a fund’s directors. The IAC recommends the Commission work with FINRA and state securities regulators to monitor broker-dealers and investment advisers for their compliance with Regulation Best Interest43 and the Investment Advisers Act of 194044 when they offer and sell funds invested in alternative assets to their clients. Financial incentive conflicts arising from sales compensation, servicing fees, and revenue- sharing arrangements that are common features of alternative products need to be properly disclosed and mitigated.45 The Commission should study the impact that these financial incentives have on retail investors, in contrast to the experience of institutional investors who have historically avoided them or been able to negotiate preferrable terms. The Commission should also explicitly limit fund advisers from engaging in conflicted transactions without the approval of its fund directors. Examples of such conflicted transactions include (1) fund advisers/sponsors charging multiple layers of fees to the fund, and (2) fund advisers/sponsors failing to negotiate contracts and service arrangements with their portfolio companies on an arms-length basis. 46 Additionally, advisers should not engage in deceptive advertising of funds primarily invested in illiquid assets and market them as more liquid or less risky than they are in reality.47 The SEC’s Division of Examinations has previously issued Risk Alerts due to private fund advisers failing to act consistently with disclosures and use misleading disclosures surrounding performance48 and the Division of Examinations should issue further Risk Alerts if the Staff see 43 Financial Industry Regulatory Authority (FINRA), SEC Regulation Best Interest (Reg BI) (2025). 44 Jacko Law Group PLC, Fiduciary Duties of Investment Advisers and the recent SEC Treatment of Hedge Clauses (Mar. 30, 2022) (“An adviser’s fiduciary duties cannot be waived and are enforceable through section 206 of the Advisers Act.”). 45 See, e.g., Brander Richmond, Alternative Investments: Promises and Pitfalls, FULCRUM CAPITAL LLC (Jun. 27, 2025) (“Many financial advisors receive higher compensation for selling alternative investments compared to traditional assets, shifting their focus from client outcomes to revenue generation.”). 46 Remarks of Rajib Chanda (Simpson Thacher & Bartlett LLP) during IAC Panel Discussion Regarding Mainstreaming of Alternative Assets to Retail Investors (Dec. 10, 2024) (presentation available at sec-panel-stb-slides- chanda.pdf). 47 The SEC has previously brought enforcement action against investment advisers to retail investors for violations of the Marketing Rule under the Investment Advisers Act. See Commission Press Release, SEC Charges Five Investment Advisers for Marketing Rule Violations (Apr 12, 2024). 48 SEC Division of Examinations Risk Alert, Observations from Examinations of Private Fund Advisers (Jan. 27, 2022). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.finra.org/rules-guidance/key-topics/regulation-best-interest https://jackolg.com/insights/fiduciary-duties-of-investment-advisers-and-the-recent-sec-treatment-of-hedge-clauses/ https://jackolg.com/insights/fiduciary-duties-of-investment-advisers-and-the-recent-sec-treatment-of-hedge-clauses/ https://www.fulcrumcapllc.com/alternative-investments-promises-and-pitfalls/ https://www.sec.gov/files/sec-panel-stb-slides-chanda.pdf https://www.sec.gov/files/sec-panel-stb-slides-chanda.pdf https://www.sec.gov/newsroom/press-releases/2024-46 https://www.sec.gov/newsroom/press-releases/2024-46 https://www.sec.gov/files/private-fund-risk-alert-pt-2.pdf RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 13 recurring issues and prioritize examinations of private funds being sold primarily to retail investors.49 5. Open a Request for Comment process to solicit additional views and ideas and other critical issues While the IAC has extensively discussed and thought through many of these recommendations, given the importance, challenges, and consequential impact of opening private market assets to retail investors, the Committee also recommends that the Commission open a Request for Comment process to obtain input on various matters. These include, inter alia, (1) additional methods investment managers can use to effectively facilitate private market investments to retail investors; (2) other impediments retail investors may have in safely accessing private market investments; (3) the approaches other jurisdictions have taken to facilitate retail investments in private markets; (4) how to expand retail investor access to private markets while maintaining an appropriate level of investor protection; and (5) systemic risks of the growth in the private markets.50 III. DIRECT ACCESS: APPROACHES AND GUARDRAILS We note once again that the Committee has discussed at length the advantages and disadvantages of expanding retail investors’ access to private market assets in direct ways. These include, for example, changes to the definition of “accredited investor” under Regulation D or guaranteeing some form of limited “basic access” to private markets directly. We do not take a position on the desirability of these and other proposals. We also appreciate that legislative or executive actions may require the SEC to pursue certain policies that expand direct access, or that the SEC itself may determine, through notice and comment rulemaking, that such an expansion of direct access is warranted. With those possibilities in mind, the IAC finds that if there were to be an expansion of direct access to private market assets, this expansion ought to be accompanied by certain basic investor protection guardrails. These include: (1) an expanded focus on investor sophistication (rather than income or wealth) when determining accredited investor status; (2) prudential limits on the amount that can be invested by retail investors who do not meet sophistication or wealth criteria (as discussed in Part III.A below); (3) strict enforcement of certain already-existing requirements; and (4) enhancements to certain filing requirements to facilitate investor decision- making (as discussed in Part III.B below). 49 SEC Division of Examinations, FY2025 Division of Examinations Examination Priorities (Oct 16, 2024). 50 For one discussion of such systemic risks, see Moody’s Ratings, Private Market Retail to Fuel Opportunity But Intensify Liquidity, Asset Quality Risks, Moodys.com (Jun 10, 2025). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.sec.gov/files/2025-exam-priorities.pdf https://www.moodys.com/web/en/us/insights/credit-risk/private-credit/private-market-retail-to-fuel-opportunity.html https://www.moodys.com/web/en/us/insights/credit-risk/private-credit/private-market-retail-to-fuel-opportunity.html RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 14 A. The Accredited Investor Definition One strategy that is frequently featured in private market access proposals is to expand the definition of “accredited investor,” which serves to determine who is and is not eligible to invest in a Regulation D offering, which is by far the most popular form of private offering.51 Notably, the accredited investor definition has long been viewed as problematic by both proponents and opponents of expanding direct retail investor access.52 The panels held by the IAC over the years suggest that the definition is outdated and that it is simultaneously overinclusive and underinclusive. The IAC therefore puts forward the following considerations for improvement. Under the existing framework, most investors that qualify as “accredited” do so based on income (individual annual income exceeding $200,000 or joint annual income exceeding $300,000 in the past two years) or wealth (net worth exceeding $1 million and excluding one’s primary residence).53 Except in limited circumstances, investors who do not qualify as accredited do not have direct access to the private markets. Once an investor is qualified as accredited, however, there is no definitional limit to how much that investor can invest in the market. Assuming the investor is not qualified to be an accredited investor under a different test, this technically means that an investor with net worth of $999,999 – just short of the wealth threshold – can directly invest $0 in the private market, but an investor worth just $1.01 more could directly invest their entire net worth. In 2014, the IAC discussed the challenges associated with the SEC’s reliance on wealth and income tests and recommended that the SEC move toward alternate approaches that would qualify an individual based on financial sophistication.54 Recognizing how difficult it might be for the SEC to shift away from a set of criteria that are deeply entrenched in regulatory policy and market practice and taking into account concerns that alternative proposals might unnecessarily shrink the pool of eligible investors, the IAC also recommended that the SEC consider an alternative: limiting the share of an investor’s total assets that can be invested in private offerings.55 In 2020, the SEC added passing one of three securities licensing exams to its list of professional credentials that qualify an individual as an accredited investor under Rule 501(a)(10).56 While this represented a positive step in relying on financial sophistication rather than income or wealth, it is 51 See U.S. Sec. & Exch. Comm’n, Review of the “Accredited Investor” Definition under the Dodd-Frank Act (Dec. 14, 2023) at 9 (hereinafter “Commission’s 2023 Review of the “Accredited Investor” Definition”). 52 Supra notes 7 and 8 (comparing competing stakeholder views). 53 Rule 501(a), 17 CFR 230.501(a). 54 Recommendation of the Investment Advisory Committee: Accredited Investor Definition (Oct. 9, 2014). 55 Id. 56 These include FINRA’s General Securities Representative (Series 7), NASAA’s Investment Adviser Representative (Series 65), and FINRA’s Private Securities Offering Representative (Series 82). See U.S. Sec. & Exch. Comm’n, Order Designating Certain Professional Licenses as Qualifying Natural Persons for Accredited Investor Status Pursuant to Rule 501(a)(10) under the Securities Act of 1933, Release No. 33–10823 (Aug. 26, 2020) [85 FR 64234 (Oct. 9, 2020)]; see also Commission’s 2023 Review of the “Accredited Investor” Definition, supra note 51, at 10, 49-50. https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.sec.gov/files/review-definition-accredited-investor-2023.pdf https://www.sec.gov/spotlight/investor-advisory-committee-2012/investment-advisor-accredited-definition.pdf https://www.sec.gov/files/rules/other/2020/33-10823.pdf https://www.sec.gov/files/rules/other/2020/33-10823.pdf https://www.sec.gov/files/review-definition-accredited-investor-2023.pdf RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 15 not clear whether the 2020 additions materially increased the number of accredited investors because many may have already qualified as accredited based on the income or wealth test. The IAC finds that any initiative to expand direct access to retail investors should seek to address the overinclusive and underinclusive nature of the existing definition. Specifically, the current definition places no limits on sales to unsophisticated investors who have a limited time horizon and limited capacity for loss (e.g., older investors who qualify based on retirement assets they cannot afford to lose). At the same time, the current definition prohibits sales to sophisticated investors who do not meet the income or wealth criteria, even if they have longer time horizons and a willingness to assume the requisite risk of loss (e.g., younger professionals and entrepreneurs who are eager to explore the markets and may have decades to save and recover from any potential losses). Recommended Guardrail #1: Emphasize investor sophistication (rather than income or wealth) as part of any potential expansion of direct access Rule 501(a)(10) of Regulation D gives the SEC the power to publish by order, after notice and public comment, a list of credentials or designations that it believes demonstrate “sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of a prospective investment.” As noted, the SEC relied on this authority in 2020 to qualify investors who pass the Series 7, 63, and 82 securities licensing exams, irrespective of income or net worth. The IAC reviewed private market access proposals seeking to add additional credentials to the Rule 501(a)(10) list: we found that some appear to be appropriate, but, importantly, that others were not. We based our determination on criteria such as requiring rigorous competency examinations, setting minimum education and professional practice requirements, and imposing continuing education requirements, similar to the securities licensing exams that the Commission has already accepted. Indeed, most of the credentials listed below serve as a regulatory substitute for one or more state securities licensure exams in many jurisdictions.57 The IAC believes that the following credentials could be appropriate additions to the existing list: (1) Chartered Financial Analysts, (2) Certified Financial Planners, (3) Certified Public Accountants, (4) Chartered Financial Consultants, (5) Personal Financial Specialists, (6) Certified Investment Management Analysts; and (7) Certified Private Wealth Advisors.58 57 For a helpful discussion of these credentials and other financial professional designations, please review FINRA’s database of professional designations, available at Professional Designations | FINRA.org, and the following investor bulletin jointly produced by FINRA, the Commission’s Office of Investor Education and Advocacy, and the North American Securities Administrators Association: Investor Bulletin: Making Sense of Financial Professional Designations | FINRA.org (June 20, 2025). 58 This is consistent with two legislative proposals introduced in the House this year: (1) H.R.3394 - Fair Investment Opportunities for Professional Experts Act, which passed the House on June 23, 2025, and (2) H.R. 3348 - Accredited Investor Definition Review Act, which was introduced on May 20, 2025. H.R. 3394 directs the Commission to undertake rulemaking that would allow any natural person to become accredited based on https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.finra.org/investors/professional-designations https://www.finra.org/investors/insights/making-sense-professional-designations https://www.finra.org/investors/insights/making-sense-professional-designations https://www.congress.gov/bill/119th-congress/house-bill/3394/text https://www.congress.gov/bill/119th-congress/house-bill/3394/text https://www.congress.gov/bill/119th-congress/house-bill/3348/text https://www.congress.gov/bill/119th-congress/house-bill/3348/text RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 16 The IAC also supports, in principle, the notion of creating an accredited investor test, provided that it (i) adequately probes the examinee’s ability to understand the unique features and risks of making private market investments, including the importance of diversification;59 and (ii) is developed by the Commission in consultation with other federal and state regulators as well as industry and investor stakeholder groups.60 The Commission could delegate administration of the test to FINRA, given FINRA’s extensive experience administering competency examinations, or a body that commonly support retail investors. An accredited investor test, coupled with Commission approval of the designations above, is, in the Committee’s view, a reasonable way to remove the private market barrier for sophisticated investors who understand and are willing to take on the risk of private market investment.61 Recommended Guardrail #2: Place prudential limits on the amount that can be invested by retail investors who do not meet sophistication or wealth criteria and index the existing income and wealth thresholds for inflation on going-forward basis As noted above, one of the chief criticisms of the existing accredited investor definition is the perception that it unfairly divides the U.S. population into segments that either get unlimited “demonstrable education or job experience to qualify such person as having professional knowledge of a subject related to a particular investment, and whose education or job experience is verified by a self-regulatory organization (as defined in section 3(a) of the Securities Exchange Act of 1934).” H.R. 3347 directs the Commission to update Rule 501(a)(10) to include the list of certifications, designations, and credentials that were approved by Commission order in 2020 as described above; add other designations that are “substantially similar in measuring financial sophistication, knowledge, and experience in financial matters;” and periodically review and adjust the Commission’s list at least once every five years moving forward. 59 The SEC’s own website speaks about the “magic of diversification,” which is described as “[t]he practice of spreading money among different investments to reduce risk is known as diversification. By picking the right group of investments, you may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gain.” See U.S. Sec. & Exch. Comm’n, Beginners’ Guide to Asset Allocation, Diversification, and Rebalancing (Aug. 27, 2009). 60 This is consistent with the approach advanced in H.R.3339 - Equal Opportunity for All Investors Act of 2025, which passed the House on July 21, 2025. H.R. 3339 directs the Commission to undertake rulemaking that creates an accredited investor test that is “designed with an appropriate level of difficulty such that an individual with financial sophistication would be unlikely to fail” but capable of demonstrating competency on the following topics: different types of securities, federal disclosure requirements, corporate governance, financial statements, and the risk of investing in private companies and private funds. H.R. 3339 listed the following as examples of private asset risks: limited liquidity, limited disclosures, subjectivity and variability in valuations, information asymmetry, leverage, concentration risk, longer investment horizons, and conflicts of interest. H.R. 3339 passed the House unanimously. 61 The IAC does not endorse a competing financial sophistication proposal that would treat investors as accredited if they receive investment advice or individualized investment recommendations from a registered investment professional. Registered firms and professionals have strong financial incentives to recommend private market assets, which can compromise the quality of their advice. See, e.g., Remarks of Phil Bak, Craig McCann & Professor Benjamin Edwards, IAC Panel Discussion: Mainstreaming of Alternative Assets to Retail Investors (Dec. 10, 2024). Investors who lack financial sophistication may not be aware of or understand how these conflicts of interest could harm them, as observed in private market cases like GBP Capital and Woodbridge. See, e.g., Private Equity Exec Sentenced to Prison for $1.6B GPB Capital Fraud, FA Magazine (May 14, 2025). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.sec.gov/about/reports-publications/investorpubsassetallocationhtm https://www.sec.gov/about/reports-publications/investorpubsassetallocationhtm https://www.congress.gov/bill/119th-congress/house-bill/3339 https://www.fa-mag.com/news/two-new-york-private-equity-execs-sentenced-in--1-6b-funds-scheme-82495.html https://www.fa-mag.com/news/two-new-york-private-equity-execs-sentenced-in--1-6b-funds-scheme-82495.html RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 17 access to the private markets or no access at all. The IAC agrees that this all-or-nothing approach is flawed. It is important, however, to avoid going from “no access” to “full access.” If the Commission determines that expanded direct access for retail investors is warranted, we propose the following prudential limit, which we term “basic access.”62 “Basic access” could generally be defined as: “the ability for retail investors who do not meet a sophistication test or the income or wealth criteria set forth in Rule 501(a)(5) and (6) to directly invest the greater of: (a) on an annual basis, up to 10% of last year’s individual or joint spousal income; (b) in the aggregate, up to 10% of individual or joint spousal net worth, exclusive of personal residence and automobiles; or (c) in the aggregate, up to 10% of the value of the investor’s securities investments.”63 The Committee discussed which wealth categories to use (income versus net worth versus investable assets) and the need for inflationary adjustments. No particular wealth category emerged as distinctly superior to the others so the Committee is opting for a flexible approach that would allow investors to qualify using any of the categories.64 In considering whether the financial thresholds used in the income and wealth tests should be adjusted for inflation (bearing in mind that those thresholds have not been adjusted since 1982), the Committee took note of competing industry and consumer views. Panelists representing certain consumer groups have advocated for a full inflationary adjustment retroactive to 1982, while panelists representing industry groups have 62 Sitting Commissioners Uyeda and Peirce have both discussed this approach. See, e.g., Commissioner Mark Uyeda, Remarks at the “Going Public in the 2020s” Conference: Columbia Law School/Business School Program in the Law and Economics of Capital Markets (Mar. 3, 2023), (“To provide investment exposure to growth-stage companies for Main Street investors, consideration should be given to allowing an individual to invest a certain percentage of his or her income or net worth in one or more private companies during a year.”); Commissioner Hester Peirce, Capital On-Ramps: Remarks at the SEC’s 42nd Annual Small Business Forum – Exploring the Early-Stage Landscape: Trends and Strategies in Capital Raising (Apr. 24, 2023) (potential options to expand access “include allowing anyone to invest some percentage of her investment portfolio in private companies—a technique already used in the crowdfunding rules”). 63 The Committee selected 10% as the allocation figure because it is a recurring feature of private market access proposals and because it is the investment limit found in two existing JOBS Act exemptions – Regulation Crowdfunding (applying 5% and 10% limitations) and Regulation A+ (10% limitation for non-accredited investors). Regulation A limits the amount non-accredited investors can purchase to no more than 10% of the greater of their annual income or their net worth. 17 CFR 230.251(d)(2)(i)(C). Regulation Crowdfunding limits the amount Individual investors can invest in all Regulation Crowdfunding offerings over the course of a 12-month period to: (a) the greater of $2,200 or 5% for investors with annual income or net worth less than $107,000 or (b) 10% of the lesser of the investor’s annual income or net worth for investors whose annual income and net worth are equal to or more than $107,000. 17 CFR 227.100(a)(2). The Committee expects that the Commission would solicit comment on this approach as part of the rulemaking process. 64 This approach is similar to a legislative proposal, entitled the Investment Opportunity Expansion Act, which was included in several bills considered by the House during the 118th Congress. The proposal was incorporated into Division C, Title II, of H.R. 2799, the Expanding Access to Capital Act. H.R. 2799, which passed the House. That bill proposed a new qualification path for accredited investors that would allow natural persons to invest up to 10% of the individual's net assets or 10% of the individual's annual income, whichever is greater, in the aggregate for private offerings. https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.sec.gov/news/speech/uyeda-remarks-going-public-conference-030323 https://www.sec.gov/news/speech/uyeda-remarks-going-public-conference-030323 https://www.sec.gov/news/speech/peirce-capital-ramps-04-24-2023 https://www.sec.gov/news/speech/peirce-capital-ramps-04-24-2023 https://www.congress.gov/118/bills/hr2799/BILLS-118hr2799rfs.pdf RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 18 consistently opposed that approach. The Committee is opting for the least-disruptive option, which would be to index the thresholds on a going-forward basis.65 Looking ahead, indexing for inflation would help ensure that the thresholds retain their utility as an imperfect but still-relevant proxy for an investor’s ability to withstand loss. When initially adopted in 1982, the definition applied narrowly to the wealthiest 1.8% of American households. As noted above, the unadjusted thresholds in the definition covered approximately 19% of American households in 2022. Without indexing for inflation on a going-forward basis, that percentage is estimated to grow to nearly half (49.2%) of all American households by 2042, if not earlier.66 Indexation would ensure that the income and net worth metrics continue to serve as meaningful proxies for an investor’s capacity for loss. Special Consideration: Retirement Assets Another idea that generated significant discussion in previous IAC panels is the exclusion of retirement assets (or a portion thereof) from the calculations used in the wealth test. While the Committee would like to see the accredited investor definition calibrated to help Americans save for retirement, it did not have enough information to conclude whether that would be best accomplished by including or excluding retirement assets from the wealth test. As of 2022, nearly one-third of all “accredited” American households, 4.84 million of the 16.44 million total, relied on retirement assets to qualify as accredited investors.67 According to one commentator, “[f]or many families, the assets held in IRAs and [defined contribution] plans (typically associated with either a current job or a past job) are among the most important components of their net worth and are a key determinant of their future retirement security.”68 In previous IAC panels, some panelists cautioned that too many older investors, even accredited ones, have lost too much of their retirement savings in the private markets and opined that retirement assets should be specially protected and excluded from the wealth test.69 Other IAC panelists, however, have noted the investment performance and diversification benefits of private market assets, which could maximize retirement savings under the right circumstances.70 The Committee 65 This is consistent with the approach utilized in H.R.3394 - Fair Investment Opportunities for Professional Experts Act, which passed the House on June 23, 2025. 66 Commission’s 2023 Review of Accredited Investor Definition, supra note 51. 67 See id, at 21-23. 68 Aditya Aladangady et al., Changes in U.S. Family Finances from 2019 to 2022: Evidence from the Survey of Consumer Finances. Washington: Board of Governors of the Federal Reserve System, at 17 (Oct. 2023), available at https://doi.org/10.17016/8799). 69 See, e.g., Written Statement of Amanda Senn and Written Statement of Michael J. Canning, IAC Panel Discussion Regarding Exempt Offerings Under Regulation D Rule 506 (Sept. 21, 2023). 70 See, e.g., Written Remarks of Rajib Chanda: What Do Retail Investors Want When Allocating to Private Markets?, IAC Panel Discussion: Mainstreaming of Alternative Assets to Retail Investors (Dec. 10, 2024) (presentation available at sec-panel-stb-slides-chanda.pdf); Steven Neil Kaplan Presentation, IAC Panel Discussion Examining the Growth of Private Markets Relative to the Public Markets: Drivers and Implications (March 2, 2023). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.congress.gov/bill/119th-congress/house-bill/3394/text https://www.congress.gov/bill/119th-congress/house-bill/3394/text https://www.sec.gov/files/review-definition-accredited-investor-2023.pdf https://doi.org/10.17016/8799 https://www.sec.gov/files/amanda-senn-written-statement-iac-092123.pdf https://www.sec.gov/files/written-statement-mike-canning-iac-092123.pdf https://www.sec.gov/files/sec-panel-stb-slides-chanda.pdf https://www.sec.gov/files/kaplan-iac-presentation.pdf RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 19 recommends that the Commission study this important topic and report on its findings to confirm that any change that the Commission makes to the accredited investor definition does not harm retirees.71 B. Form D Policy and Practice The guardrails proposed in this Part are intended to ensure that any expansion of direct access fits with the core architecture of the federal securities laws. Ever since Congress enacted the federal securities laws in the 1930s, the basic rule underlying the regulatory scheme has held that any offer or sale of securities must be registered with the Commission, unless it qualifies for a recognized exemption. For over 90 years, this registration requirement has served to ensure that investors and markets receive full and fair disclosure of material information to promote securities price accuracy, investor decision-making, and investor oversight.72 The US Supreme Court, in SEC v. Ralston Purina, established the criteria for claiming an exemption from registration under Section 4(a)(2) of the Securities Act.73 The Court allowed the exemption where the persons participating in the offering do not need the protections provided by SEC registration, because they “have access to the kind of information which registration would disclose.”74 A subsequent Fifth Circuit decision elaborated that if investors “did not possess the information requisite for a registration statement, they could not bring their sophisticated knowledge of business affairs to bear” in deciding whether to invest, meaning that an information- lacking offering could not be exempt.75 Viewed from today’s vantage point, this highlights that sophistication without information is of limited use in navigating the private markets. In 1982, the SEC adopted Regulation D to allow issuers to offer and sell their securities offerings in limited private offerings without the need to register with the SEC.76 Regulation D 71 The Commission could study the impact that accredited investor reforms would have on retiree households through: (a) routine examination of investment firms, by reviewing firm policies and procedures to ascertain the criteria that firms subject to fiduciary and best interest standards use to approve and monitor the sales of private offerings to accredited investors and by reviewing anonymized customer account data of accredited investors who indicate their accounts are being used for retirement savings, comparing and contrasting complaint and account performance data for concentrations below, at, and above various allocations; (b) assessment of victim profiles in its own complaint files and in regulatory actions (brought by the Commission, FINRA, and state securities regulators) that involve a private offering to gauge the involvement of and impact on older, retired investors versus other investor populations. Publicly reporting these findings would provide valuable private market data and insights for the Commission and other policymakers and stakeholders whose priorities are to educate and protect older American investors. 72 See Commission’s 2023 Review of the “Accredited Investor” Definition, supra note 51, at 5. 73 346 U.S. 119, 127 (1953). 74 See Commission’s 2023 Review of the “Accredited Investor” Definition, supra note 51, at 7. 75 Hill York Corp. v. American International Franchises, Inc., 448 F.2d 680, 690 (5th Cir. 1971). 76 See Federal Register Vol. 47, No. 51 at 11251,17 CFR Parts 230 and 239 [Release No. 33-6389] at 11251- 11261 9, including the chart at 11259-60. https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.sec.gov/files/review-definition-accredited-investor-2023.pdf https://www.sec.gov/files/review-definition-accredited-investor-2023.pdf RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 20 was meant to encourage capital raising by small businesses,77 and contains two relevant information provisions: • Form D: Issuers relying on Regulation D are required to file “Form D” with the Commission within 15 calendar days after the first sale of securities in a Regulation D offering.78 The form collects basic information, including the issuer’s identity and address, names and titles of executive officers and promoters, amount and type of securities offered and sold, use of proceeds, number and type of investors, and sales commissions and finders’ fees. Since 2008, this filing must occur via the EDGAR system, making it easily available to investors, state securities regulators, and other interested parties. • Rule 502(b) of Reg. D: When any investors who are not “accredited investors” participate in a Rule 506(b) offering, the issuer must provide specific information, including financial statements (audited if the offering exceeds $20 million), a description of the securities, use of proceeds, management and business details, risk factors. The issuer is not required to provide any of this information when only “accredited investors” participate in the offering. One point regarding the original Regulation D is worth emphasizing. Regulation D was clearly intended to provide a narrow exception, including from the overall scheme that the Supreme Court put in place in Ralston Purina. The limited scope of the private markets at the time naturally limited the reach of exempt offerings. The registration requirements contained in Section 12(g) of the Exchange Act limited the shareholder base of non-public companies to fewer than 500 shareholders.79 Finally, the conservative income and wealth thresholds set by Congress in 1982 resulted in less than 2% of U.S. households qualifying as accredited investors.80 Since 1982, private markets have grown considerably due to a number of factors, and this growth has been particularly pronounced since 2012, when Congress enacted the JOBS Act.81 As shown in Figure 1 below, in 2013, there were only 43 U.S.-based “unicorns” (start-ups with an implied valuation of at least $1billion); by 2024, the number of unicorns had risen to 693 and their implied valuation exceeded $2.6 billion. 77 The “accredited investor” concept was created by Congress (and not the SEC), pursuant to the Small Business Incentive Act of 1980. See Revision of Certain Exemptions From Registration for Transactions Involving Limited Offers and Sales, Release No. 33–6389 (Mar. 8, 1982), 47 Fed. Reg. 11,251. 78 17 C.F.R. § 230.503 (Regulation D Rule 503). 79 This threshold was subsequently raised by the 2012 JOBS Act. See Exchange Act §12(g)(1)(A), 15 U.S.C. § 78l(g)(1)(A) (2012). 80 The $1 million net worth threshold from 1982 translates into $3.1 million today; the $200,000 individual income/$300,000 joint income thresholds translate into $615,000/$920,000 today. 81 The JOBS Act included provisions beneficial to the growth of private markets, such as increasing the number of allowed shareholders of record for private companies. See supra note 79. https://www.sec.gov/spotlight/investor-advisory-committee.shtml RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 21 Despite the exponential growth of private markets, the SEC has not taken steps to modernize the information requirements contained in Regulation D. The outdated nature of Regulation D taken as a whole has prompted regular critiques from investor representatives, SEC commissioners, legislators, and think tanks.82 These issues have also been the focus of extensive 82 See, e.g., Caroline A. Crenshaw, Comm’r, SEC, Remarks at Symposium on Private Firms: Reporting, Financing, and the Aggregate Economy at the University of Chicago Booth School of Business (Apr. 14, 2022); Caroline A. Crenshaw, Comm’r, SEC, Big “Issues” in the Small Business Safe Harbor: Remarks at the 50th Annual Securities Regulation Institute (Jan. 30, 2023); Allison Herren Lee, Comm’r, SEC, Going Dark: The Growth of Private Markets and the Impact on Investors and the Economy (Oct. 12, 2021); Hester M. Peirce, Comm’r, SEC, Bridging the Gap: Remarks before the Northwest Securities Institute (May 30, 2025); Mark T. Uyeda, Comm’r, SEC, Remarks at the 51st Annual Securities Regulation Institute (Jan. 22, 2024); Center for American Progress, How Exemptions From Securities Laws Put Investors and the Economy at Risk (March 22, 2023); Hearing, House Committee on Financial Services, The Future of American Capital: Strengthening Public and Private Markets by Increasing Investor Access and Facilitating Capital Formation (Feb. 26, 2025); Healthy Markets Association, In the Public Interest: Why Policymakers and Regulators Must Restore the Public Capital Markets (2022). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.sec.gov/newsroom/speeches-statements/crenshaw-remarks-symposium-private-firms-041422 https://www.sec.gov/newsroom/speeches-statements/crenshaw-remarks-symposium-private-firms-041422 https://www.sec.gov/newsroom/speeches-statements/crenshaw-remarks-securities-regulation-institute-013023 https://www.sec.gov/newsroom/speeches-statements/crenshaw-remarks-securities-regulation-institute-013023 https://www.sec.gov/newsroom/speeches-statements/lee-sec-speaks-2021-10-12 https://www.sec.gov/newsroom/speeches-statements/lee-sec-speaks-2021-10-12 https://www.sec.gov/newsroom/speeches-statements/peirce-remarks-northwest-securities-institute-053025 https://www.sec.gov/newsroom/speeches-statements/peirce-remarks-northwest-securities-institute-053025 https://www.sec.gov/newsroom/speeches-statements/uyeda-remarks-securities-regulation-institute-012224 https://www.sec.gov/newsroom/speeches-statements/uyeda-remarks-securities-regulation-institute-012224 https://www.americanprogress.org/article/how-exemptions-from-securities-laws-put-investors-and-the-economy-at-risk/ https://www.americanprogress.org/article/how-exemptions-from-securities-laws-put-investors-and-the-economy-at-risk/ https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=409469 https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=409469 https://healthymarkets.org/product/public-vs-private-markets-a-special-report https://healthymarkets.org/product/public-vs-private-markets-a-special-report RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 22 academic commentary.83 The IAC has also drawn attention to these issues and urged the Commission to act.84 The IAC’s March 2023 panel summarized the various drawbacks for individual retail investors, including those who qualify as accredited investors.85 These include:86 • Lack of Available Information: If information is provided at all, it need not be uniform in content, making comparisons between companies difficult, and the information need not be updated as circumstances change. Voluntary disclosures are prone to greater error and can be influenced by overly optimistic assumptions about future prospects.87 • Information asymmetry: Issuers in Rule 506 exempt offerings are not required to provide any information to accredited investors, and even when they do provide such information, what information and to whom they provide it is determined by the issuer or is subject to negotiation and agreement by the investor and the issuer, leaving smaller and more vulnerable investors in a position where they are unlikely to have access to unbiased and important information.88 • Inability to perform adequate due diligence: In the absence of mandatory disclosure, investors in the private market are expected to conduct their own due diligence to determine a fair price for a security. Depending on the circumstances, conducting such due diligence is prohibitively expensive, extremely difficult, and/or practically impossible for a retail investor who can only make a relatively small investment. • Inability to negotiate favorable terms: In the exempt market, larger or well-known investors can—and often do—receive more favorable terms, and the best deals may 83 See, e.g., Elisabeth de Fontenay, The Deregulation of Private Capital and the Decline of the Public Company, 68 HASTINGS L.J. 445 (2017); Jennifer S. Fan, Regulating Unicorns: Disclosure and the New Private Economy, 57 B.C. L. REV. 583 (2016); Renee M. Jones, The Unicorn Governance Trap, 166 U. PA. L. REV. ONLINE 165 (2017); George S. Georgiev, The Breakdown of the Public–Private Divide in Securities Law: Causes, Consequences, and Reforms, 18 N.Y.U. J.L. & BUS. 221 (2021); Matthew Wansley, Taming Unicorns, 97 IND. L.J. 1203 (2021); Elizabeth Pollman, Private Company Lies, 109 GEO. L.J. 353 (2020); Verity Winship, Private Company Fraud, 54 U.C. DAVIS L. REV. 663 (2020); Anat Alon-Beck & John Livingstone, Mythical Unicorns and How to Find Them: The Disclosure Revolution, 2023 COLUM. BUS. L. REV. 1 (2023); George S. Georgiev, Is “Public Company” Still a Viable Regulatory Category?, 13 HARV. BUS. L. REV. 1 (2023). 84 See supra note 2 (listing prior IAC panels and recommendations). 85 Panel Discussion Examining the Growth of Private Markets relative to the Public Markets: Drivers and Implications (Mar. 2, 2023). 86 While many panelists spoke to these drawbacks, they were summarized well by Faith Anderson of the Washington Securities Division, and her remarks are used to frame this issue. 87 See also George S. Georgiev, The Breakdown of the Public–Private Divide in Securities Law: Causes, Consequences, and Reforms, 18 N.Y.U. J.L. & BUS. 221, 284-86 (2021); George S. Georgiev, Is “Public Company” Still a Viable Regulatory Category?, 13 HARV. BUS. L. REV. 1 (2023). 88 Previous proposals to expand the private markets have cited the ‘increasing availability of information’ as a general reason to ease private market restrictions. While there certainly is more information than ever, it remains the case that the most salient investment information about most private companies is kept out of public view and is difficult for less influential investors to access. https://www.sec.gov/spotlight/investor-advisory-committee.shtml RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 23 only be available to the largest and most influential investors. Realistically, retail investors cannot negotiate for such advantages and therefore may enter into private investments at a severe disadvantage. In sum, while the Commission, state regulators and investor advocates all agree that retail investors deserve access to high-quality investment options, the obsolete informational framework pertaining to the private markets leaves investors in a vulnerable position. In the private markets, small retail investors are often unable to obtain access to important information, face prohibitive costs for the necessary level of due diligence, typically receive less favorable terms than larger investors, lack the resources to lower risk through diversification, and are exposed to higher levels of fraud.89 Expanding information requirements will not be as burdensome as it might first appear, because many issuers are already in possession of the information that investors need, which is generated in the course of the preparation of audited financials and in order to maintain internal controls and procedures over financial reporting. Guardrail #3: The SEC should enforce the already-existing Form D filing requirement The SEC should strictly enforce the existing requirement that issuers relying on Regulation D submit Form D within 15 calendar days of closing the first offering. Under existing Rule 507, issuers who do not comply with the Form D filing requirement may lose their ability to rely on Regulation D upon the completion of certain procedural steps. In the interest of judicial efficiency, the SEC should condition the availability of Reg D exemptions on the filing of Form D and adopting a clear penalty for such failure. For example, failure to file a Form D with the SEC could result in the loss of the ability to rely on Reg D exemptions for a 12-month period. Penalties should also be considered for failure to file any required amendments. We note that Form D is not burdensome: Form D calls for the provision of very minimal information, none of which should be commercially sensitive; it is to be completed online, and, according to the SEC’s own estimates under the Paperwork Reduction Act, the average time burden per filing is 4 hours.90 In addition, the SEC should require an explanation when an issuer uses the “decline to disclose” options on Form D. Certain fields, including revenue range and number of employees, allow the issuer to check a “decline to disclose” box on Form D. The SEC should revise Form D to require an explanation for the issuer’s unwillingness to disclose. While the IAC believes that 89 Written Testimony of Elisabeth de Fontenay, Professor of Law, Duke University, Before the United States House of Representatives Committee on Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, “Examining Private Market Exemptions as a Barrier to IPOs and Retail Investment” at 8-10 (Sept. 11, 2019). See also sources cited in note 83 supra. 90 See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Regulation D (Form D) (2024). The estimated annual cost to the federal government of processing Form D is also minimal ($15,000). See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Form D (2016). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://law.duke.edu/sites/default/files/news/written-testimony-de-fontenay.pdf https://www.reginfo.gov/public/do/DownloadDocument?objectID=142878901 https://www.reginfo.gov/public/do/DownloadDocument?objectID=142878901 https://www.reginfo.gov/public/do/DownloadDocument?objectID=67437401 https://www.reginfo.gov/public/do/DownloadDocument?objectID=67437401 RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 24 there may be circumstances where such non-disclosure could be warranted, in the vast majority of cases the information would already be available through other sources, and issuers should be encouraged to complete Form D as fulsomely as possible. Guardrail #4: The SEC should mandate information parity among investors and the filing of a Form D amendment at closing; it should also consider expanding Form D through notice-and- comment rulemaking Assuming that the SEC proceeds with expanding direct access, the Committee supports the expansion of Form D information requirements. Importantly, the Committee believes that the precise contours of the new information requirements should be determined through notice-and- comment rulemaking. We note that the expanded information requirement can be calibrated to apply to issuers of a certain size or securities issuances above a particular dollar threshold or issuers of above a particular size, as measured by assets and/or revenues. Such scaled approaches are already in place in other contexts.91 In particular, the Committee recommends that the SEC consider the following categories of information: (1) Legal counsel representing the issuer, if any; (2) The issuer’s accountants or auditors, if any; (3) A brief description of the issuer’s general solicitation plans, if any; (4) A brief description of the issuer’s existing and proposed business, including products or services offered or intended to be offered; (5) A listing of any officers or directors with greater than a 5% equity interest in the issuer; (6) Expansion of current information in Item 16, Use of Proceeds; (7) Disclosure of any findings of securities fraud, pending and concluded enforcement actions, and/or non-compliance with the securities laws by the issuer or any Related Persons; (8) Disclosure of material risks and conflicts of interests including details regarding any fees, costs, or charges assessed to investors. We note that this list of items is intended to be a starting point and that the feedback of investors and market participants may reveal that, in some or all offerings, some of these information categories are unnecessary or that others may be necessary. To give those investors and the Commission a complete picture of the offering, including the amount of capital that is actually raised, the issuer should file a closing amendment to Form D, as previously proposed by the Commission in 2013.92 Without such a filing, neither the SEC nor the issuer’s investors have reliable information about the volume of capital actually raised in the offering. The SEC should require that issuers provide copies of any information provided to one investor to all other investors to ensure consistency of information disclosure across all investors. In multi-stage funding rounds, new investors must receive all information provided to other 91 See, e.g., Jeff Schwartz, The Law and Economics of Scaled Equity Market Regulation, 39 J. CORP. L. 347 (2014). 92 See U.S. Sec. & Exch. Comm’n, Proposed Amendments to Regulation D, Form D, and Rule 156, SEC Rel. No. 33-9416 (July 10, 2013). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.sec.gov/files/rules/proposed/2013/33-9416.pdf RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 25 investors in the preceding 90 days to ensure that any new investor has access to the same information as prior and existing investors. The IAC recognizes that there may be special circumstances whereby an information parity requirement may be unworkable or cumbersome or where an investor requests information for its own compliance purposes due to its specific regulatory profile. The Committee recommends that the SEC consider appropriate exceptions for information that clearly fits those criteria and develop a mechanism whereby an issuer may apply for a waiver of the information parity requirement. Special Consideration: Ongoing disclosure of basic information by large private firms Assuming that the SEC proceeds with expanding direct access, the Committee recommends that the SEC study whether it is necessary to require ongoing reporting of basic information by large, private issuers, where the information required would be similar to the information required to be provided on Form D. The IAC believes that such a requirement may be needed to level the playing field for investors in what is a large and rapidly growing secondary trading market for securities that were initially sold based upon an exemption from the registration requirement. We preliminarily suggest that the SEC examine whether to create the category of “large private issuer” and define it as any company with a valuation of at least $700 million (excluding the value of shares held by affiliates) and more than 1,000 beneficial equity owners, or any company with a valuation of at least $700 million that is an affiliate of a registered broker- dealer, investment adviser, or bank.93 IV. CONCLUSION The Committee appreciates the Commission’s consideration of the foregoing Recommendations to calibrate retail investor access to private market assets. As noted throughout, in the Committee’s view, the optimal way for retail investors to access private market assets is through registered funds, which allow retail investors to invest in broadly diversified funds that benefit from Commission review, audited financials, professional fund management, various levels of liquidity, and the protections of the Investment Company Act. To improve the suitability of such investments for investors, the Commission should implement the recommendations discussed in Part II. If there were to be an expansion of direct access to private market assets, this expansion should be accompanied by the basic investor protection guardrails discussed in Part III. While this Recommendations has sought to address traditional private market assets specifically, the Committee believes that this careful weighing and balancing of competing industry and investor interests should be applied in equal measure to all corners of the U.S. capital markets. Retail access to private market assets has historically been limited precisely because those 93 See, e.g., S. 4857, Private Markets Transparency and Accountability Act, 117th Congress (2021–22) (introduced Sept. 15, 2022) (proposing one potential approach). https://www.sec.gov/spotlight/investor-advisory-committee.shtml https://www.congress.gov/bill/117th-congress/senate-bill/4857/text RETAIL INVESTOR ACCESS TO PRIVATE MARKET ASSETS DRAFT 26 assets are less transparent and riskier than public market assets. As the Commission considers revamping private market access requirements and introducing guardrails, the Commission should consider how policy choices in that context can be reconciled with its investor access and investor protection policies for other similarly-situated asset types that are unregulated or exempt, that provide the same (or lower) levels of transparency, and that have equal (or greater) risk. https://www.sec.gov/spotlight/investor-advisory-committee.shtml