SEC Proposes Amendments to Expand Responsible Retailization of Private Markets

The U.S. Securities and Exchange Commission (SEC) has voted to propose rule amendments that would expand retail investor choices and encourage innovation in regulated fund structures, while maintaining suitable investor protections. The Commission is soliciting public comments regarding these proposed changes.

The SEC Chairman, Paul S. Atkins, emphasized the increasing demand from individual investors for private market opportunities. His aim is to explore ways to enable these investors to participate in private markets, while simultaneously safeguarding them from fraud and malicious actors.

One of the key aspects of the proposed amendments is the ability for private fund advisers to employ performance-based compensation structures. Traditionally, such arrangements have been restricted to a select group of investors. By allowing these incentives to be granted to advisers of regulated funds, more investors may have access to private market strategies.

The proposed amendments also include the potential designation of an accredited investor exam developed by the Financial Industry Regulatory Authority (FINRA) as an additional method for investors to become accredited. This exam would serve as a non-financial means for investors to prove their financial and business acumen, allowing them to evaluate private market investments more effectively.

The SEC is also seeking feedback on the possibility of designating certain professional certifications or licenses as a means for individuals to qualify as accredited investors. Such designations could include specific titles or credentials.

The public comment period for these proposed amendments will be open for 60 days after their publication in the Federal Register.