Wall St Regulator to Unveil New Retail Investor Proposals for Private Assets

U.S. Securities and Exchange Commission is working on new rule proposals to provide retail investors access to private-market assets that were once only accessible to high-net-worth or professional investors.

Those proposals, which are scheduled for discussion on Wednesday, are part of a larger push by the Trump administration and SEC Chairman Paul Atkins to broaden access to private markets and keep investor protections intact. The agency's proposals address private equity, private credit, real estate and venture capital investments.

Another potential change would give investment advisers more opportunities to collect performance fees on investor returns. Currently, advisers can only do so with what are known as qualified clients-who meet certain assets or wealth requirements. The SEC says relaxing the requirements might incentivize advisers to make private-asset funds more available to retail investors.

The SEC will also evaluate the impact of proposed changes that involve closed-end funds, which also raise a specific amount of money and buy less-liquid assets. The changes could affect existing rules related to redemption features and the kinds of shares such funds can offer, providing new opportunities for retail investors to access private markets.

Another suggestion would be to assess whether professional designation and credentials could be used to determine who is an accredited investor. Currently, accredited investors are able to access more investments under this new category based on earnings and net worth criteria or specific professional licenses.

The SEC also targets increasing retail access to private markets as a proposal under its rulemaking agenda. The regulator said the reforms would help open access through registered investment companies and update the performance-fee rule.

But, the proposals could also leave individual investors worse off. Private assets can be challenging to value, sometimes lack liquidity and involve intricate fee arrangements. Advisers have expressed concerns that performance-based fees could provide incentive for them to recommend riskier investments.

The SEC says it wants private-market participation to be easier to access but to have the right protections. It plans to seek public notice and comment on a number of its proposals, before adopting final rules.

The fight over ETF access symbolizes a broader trend in U.S. capital markets, where private companies and private investment funds have proliferated dramatically but still are not as available to retail investors as stocks and bonds traded on the stock market. SEC's proposals could change that, but will depend on the details of the rules and their protections.